— U.S. Winter Edition —
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Your quarterly pulse on hotel development trends and LE news
U.S. Hotel Construction Pipeline Finishes 2019 Trending Upward
At the close of 2019, analysts at Lodging Econometrics (LE) report that the total U.S. construction pipeline continues to grow with 5,748 projects/708,898 rooms, up 4% by projects and 6% by rooms year-over-year (YOY). The pipeline has now completed its eighth consecutive year of growth. These robust year-end counts are a mere 135 projects/76,649 rooms shy of the all-time high of 5,883 projects/785,547 rooms reached in the second quarter of 2008.
Projects under construction continue to rise reaching an all-time high of 1,768 projects with 237,362 rooms, up 7% by projects and 10% by rooms, YOY. Projects scheduled to start construction in the next 12 months stand at 2,283 projects/265,161 rooms. Projects in the early planning stage are at 1,697 projects/206,375 rooms.
In 2019, the U.S. had 1,017 new hotels/118,674 rooms open, a 2.2% growth in new supply, bringing the total U.S. census to 57,903 hotels/5,486,909 rooms. The LE forecast for new hotel openings in 2020 anticipates a 2.3% supply growth rate with 1,127 new hotels/127,896 rooms expected to open. In 2021, the forecast for new hotel openings rises slightly to 1,162 new hotels/135,228 rooms, a 2.4% growth rate.
The hotel construction pipeline outlook in the U.S. should continue to remain optimistic through 2020 and through the early part of the new decade. The financial markets are strong, a partial trade agreement between the U.S. and China has been reached, and interest rates could very well go unchanged in 2020. Overall, the economy is in a good place, and the concerns of a possible recession have eased. Lenders continue to be cautious, but lending at attractive rates is still accessible to developers and should continue to drive development.
68% of the Projects in the Total Pipeline Derive from Three Companies
In the Lodging Econometrics (LE) year-end report for 2019, analysts detailed the leading franchise companies and their brands in the construction pipeline. Marriott International tops the list, at an all-time high, with 1,579 projects/207,906 rooms, followed by Hilton Worldwide with 1,370 projects/152,832 rooms, and InterContinental Hotels Group (IHG) with 943 projects/96,725 rooms. Sixty-eight percent of the projects in the total pipeline derive from these three franchise companies.
The leading brands by project count for these three companies continue to be Hilton’s Home2 Suites by Hilton with 408 projects/42,346 rooms, IHG’s Holiday Inn Express with 379 projects/39,644 rooms, and Marriott’s Fairfield Inn with 322 projects/31,119 rooms. These three brands dominate the total pipeline and combined claim 19% of the projects. These brands also had the highest number of new openings in 2019. Hilton’s Home2 Suites opened 90 new hotels, IHG’s Holiday Inn Express opened 85 and Marriott’s Fairfield Inn opened 64.
Other notable brands in the pipeline for each of these parent companies are: Hampton by Hilton with 308 projects/31,373 rooms and Hilton’s Tru by Hilton with 300 projects/29,065 rooms; Marriott’s TownePlace Suites with 218 projects/22,075 rooms and Residence Inn with 214 projects/26,199 rooms; and IHG’s Avid Hotel with 189 projects/17,157 rooms and Staybridge Suites with 150 projects/15,728 rooms.
In 2019, 1,017 new hotels/118,674 rooms opened, a 7% increase from 2018’s 954 new hotels/112,329 rooms. Of the 1,017 new hotels that opened, 28% are Marriott branded, 27% are Hilton branded, and 16% are IHG branded.
For the Second Consecutive Quarter, Los Angeles Leads in U.S. Hotel Construction Pipeline
At the close of 2019, analysts at Lodging Econometrics (LE) report that the top five U.S. markets with the largest total hotel construction pipelines are: Los Angeles, at a cyclical high, with 168 projects/28,501 rooms; Dallas with 160 projects/19,787 rooms; New York City with 158 projects/25,825 rooms; Atlanta, also at a cyclical high, with 143 projects/19,660 rooms; and Houston with 136 projects/14,114 rooms.
Under construction project counts are at an all-time high with 1,768 projects with 237,362 rooms. Markets with the greatest number of projects already in the ground are New York with 107 projects/17,268 rooms, Dallas with 47 projects/5,894 rooms, Los Angeles with 46 projects/7,064 rooms, Atlanta with 46 projects/5,643 rooms, and Nashville with 37 projects/6,634 rooms. These five markets collectively account for 16% of the total number of projects currently under construction in the U.S.
In the fourth quarter, Denver had the highest number of new projects announced into the pipeline with 19 projects/2,372 rooms. Following Denver is Atlanta with 18 projects/2,613 rooms, Phoenix with 14 projects/1,907 rooms, Orlando with 14 projects/1,855 rooms, and then Dallas with 13 projects/1,467 rooms.
Reflecting the strong cyclical highs in the pipeline, LE’s forecast for new hotel openings in the U.S. will continue to rise in 2020 and 2021, having a 2.3% and 2.4% growth rate, respectively. In 2020, the markets topping the forecast are New York City with 66 new hotels expected to open/8,424 rooms, Dallas with 34 projects/4,073 rooms, Atlanta with 27 projects/3,162 rooms, Houston with 27 projects/2,585 rooms, and Nashville with 23 projects/3,001 rooms. In the 2021 forecast, Dallas tops the list with the highest number of new hotels expected to open with 39 projects/4,381 rooms followed by Houston with 34 projects/3,313 rooms and New York City with 33 projects/5,680 rooms.