U.S. hotel construction up 9% in the first quarter of 2023, led by Marriott and Hilton

In the latest United States Construction Pipeline Trend Report from Lodging Econometrics (LE), analysts report that hotel construction pipeline projects in the U.S. continue to increase, standing at 5,545 projects/658,207 rooms at the close of Q1 2023. Up 9% by both projects and rooms year-over-year (YOY); project totals at Q1 ‘23 are just 338 projects, or 5.7%, behind the all-time high of 5,883 projects recorded in Q2 2008.

At the close of the first quarter, projects currently under construction stand at 1,051 projects/140,365 rooms, each showing 9% growth YOY. Projects scheduled to start construction in the next 12 months are at 2,060 projects/241,568 rooms, each up 8% YOY. 

Projects in the early planning stage account for 44% of the projects in the total U.S. construction pipeline at Q1. Early planning projects increased 10% YOY, setting an all-time high of 2,434 projects/276,274 rooms.

This is the fourth consecutive quarter of total pipeline growth for the U.S., which can be, in part, attributed to the robust recovery of travel demand. Increased consumer confidence and spending activity has fueled strong occupancy and rate growth throughout the last twelve months as well. 

Developers are motivated to sign new projects anticipating more favorable financing conditions in the coming quarters. Owners are eager to wrap up existing brand conversion and renovation projects, which have been a substantial focus for many quarters now.

The U.S. hotel construction pipeline is expected to grow modestly or just incrementally through 2023. There are no growth spikes expected this year. The pipeline is back loaded, meaning there is ample opportunity for vendors/suppliers in the industry, and third party management companies.

At the Q1 close, sixty-two percent of projects in the total pipeline are concentrated within the upscale and upper midscale chain scales. These two chain scales continue to dominate the pipeline and that is not expected to change anytime soon.

Renovation and brand conversion activity in the U.S. continues to boom in early 2023, reaching record project counts of 1,953 hotels/253,533 rooms, for a 38% YOY increase by projects and a 37% YOY increase by rooms. LE expects renovation and conversion activity to continue into 2023 as owners spend to bring their hotels into alignment with current brand standards or look elsewhere for new brand identification.

A total of 103 new hotels/11,762 rooms opened in the U.S. in the first quarter. For the remainder of the year, LE forecasts another 493 new hotel projects/59,355 rooms to open, representing a combined 1.3% supply growth rate in 2023. LE analysts expect the upward growth in new hotel openings to continue with an additional 699 new hotel projects/81,574 rooms anticipated to open in 2024, for a 1.4% supply increase.

Marriott, Hilton, IHG Continue to Dominate the U.S. Hotel Construction Pipeline

Marriott International (Marriott) tops the charts with the greatest number of projects in the U.S. hotel construction pipeline, at Q1 2023, with 1,499 projects/181,377 rooms, followed closely by Hilton Worldwide (Hilton), with a record-high count of 1,436 projects/161,359 rooms, and then InterContinental Hotels Group (IHG) with 809 projects/80,679 rooms. Combined, these three franchise companies comprise 68% of the projects in the total U.S. pipeline.

Marriott also has the most projects and room counts in each stage of the pipeline at Q1, with 279 projects/38,156 rooms currently under construction, 763 projects/90,038 rooms scheduled to start construction in the next 12 months, and 457 projects/53,183 rooms in early planning.

The leading brands by project count for the three companies with the largest pipelines in the U.S. at Q1 are Home2 Suites by Hilton with all-time highs by projects and rooms of 546 projects/56,001 rooms, Marriott’s TownePlace Suites, also reaching all-time highs by projects and rooms at Q1, with 333 projects/31,068 rooms, and IHG’s Holiday Inn Express brand with 301 projects/28,371 rooms. These three brands collectively represent 21% of the projects in the total U.S. hotel construction pipeline at the close of Q1 2023.

LE recorded record-high conversion pipeline totals of 1,079 projects/110,084 rooms for the U.S. in the first quarter of 2023. Of these conversion totals, Hilton had the most conversion projects and room totals ever recorded by LE with 105 projects/14,456 rooms, similarly, Marriott had a record 100 conversion projects, accounting for 13,465 rooms, and IHG had 52 conversion projects/6,2543 rooms. These three franchise companies account for 31% of all the rooms in the conversion pipeline across the country.

The franchise companies with the greatest number of new project announcements in the first quarter were: Hilton with 110 projects/11,790 rooms, Marriott with 61 projects/6,730 rooms, and IHG with 33 projects/3,103 rooms. These companies represent 60% of all new projects announced in the U.S. in Q1 2023.

In Q1 2023, Marriott opened 33 new hotels with 3,711 rooms. Hilton opened 24 new hotels with 2,781 rooms, and IHG opened 6 new hotels with 629 rooms. The LE forecast for new hotel openings in 2023 anticipates that Marriott will open a total of 152 new hotel projects/19,064 rooms by year-end, Hilton is forecasted to open 141 new hotel projects/16,980 rooms in 2023, and IHG is expected to open 88 new hotel projects/9,975 rooms. These three franchise companies collectively account for 64% and 65%, respectively, of new hotel projects and rooms forecast to open in 2023.