According to the 2023 year-end U.S. Construction Pipeline Trend Report from Lodging Econometrics (LE), the pipeline stands at 5,964 projects/693,963 rooms. The pipeline hit record project counts at Q4, with the addition of 260 hotel construction projects and 21,287 rooms over last quarter, and a 9% increase by projects and a 7% increase by rooms year-over-year (YOY). The previous project count high was Q2 2008 with 5,883 projects.
At the close of 2023’s fourth quarter, there are 1,118 projects/141,768 rooms under construction, up 11% by projects and 5% by rooms YOY. Hotel projects scheduled to start within the next 12 months stand at 2,259 projects/261,582 rooms, up 9% by projects and 11% by rooms YOY. Projects and rooms in the early planning stage hit all-time highs at Q4, standing at 2,587 projects/290,613 rooms, and up 9% by projects and 4% by rooms YOY.
RELATED CONTENT:
Notably, the number of combined hotel renovations and brand conversion projects in the U.S. continued its upward growth trend through the end of 2023, closing the year with record project and room counts of 2,028 projects/303,330 rooms.
The upper midscale segment has the highest project count of all chain scales in the total U.S. hotel construction pipeline at the Q4 close, reaching an all-time high of 2,245 projects/218,112 rooms. The second largest is the upscale category, which has 1,445 projects/177,999 rooms. Together, these two chain scales comprise 62% of all projects in the country’s total pipeline at the Q4 close.
Rate cuts point to positive but cautious outlook for hotel construction
The recent Federal Reserve signaling of three 25-basis-point interest rate cuts in 2024 and additional cuts in 2025 sends a positive but cautious outlook for U.S. hotel development in the year ahead. With the anticipation of multiple rate cuts in 2024, hotel development seems poised for constructive growth well beyond 2024. The primary reason lies in less expensive borrowing costs, providing long-awaited relief on interest rates. This is expected to have a favorable impact not only on new construction but acquisitions, renovations, and conversions as well.
Despite the positive outlook, lenders continue to be vigilant, and many investors continue with a “wait and see” attitude; holding out hope for potentially deeper rate cuts. We expect this cautious, yet optimistic approach will continue through 2024, however, we expect to see investors re-engaging, which, as we can tell by the pipeline numbers and record-high project counts, has already begun. We expect lending volume to increase slowly in the first half of 2024 and then gradually pick up the pace in the second half of the year.
In 2023, the U.S. had 474 new hotels/60,436 rooms open, a 1.1% growth rate in new supply, bringing the total U.S. census to 59,636 hotels/5,655,356 rooms. In 2024, LE analysts expect the existing supply of hotels in the U.S. to increase 1.4% with the opening of 677 new hotels and 79,518 rooms. The LE forecast for new hotel openings shows this growth trajectory will continue through 2025, with another 799 new hotels/85,654 rooms forecast to open by year-end 2025 and further growth anticipated for 2026 and beyond.
Related Stories
Hotel Facilities | Jul 28, 2017
Achieve hospitality architecture that impresses – Multigenerational appeal, local connections
Did guests get the experience that they paid for? This question has long haunted hotel operators.
Hotel Facilities | Jul 27, 2017
Hilton’s ‘Five Feet to Fitness’ suites turn hotel rooms into gyms
Over 11 different fitness equipment and accessory options are available in each suite.
Hotel Facilities | Jul 17, 2017
This space hotel design from MIT won NASA’s graduate design competition
The project team consisted of MIT graduate students across five departments.
Mixed-Use | Jul 7, 2017
ZHA’s Mandarin Oriental hotel and residences employs ‘stacked vases’ design approach
The mixed-use tower will rise 185 meters and be located in Melbourne's Central Business District.
Hotel Facilities | Jul 5, 2017
It only took 26 days to complete construction on the Crowne Plaza Changi Airport hotel extension
PPVC techniques allowed the project to save time and manpower.
Hotel Facilities | Jun 29, 2017
Luxury, plant-covered hotel unveiled for site near the River Seine
Kengo Kuma is designing the hotel, which will feature a large garden and a plant-covered façade.
Hotel Facilities | Jun 28, 2017
This floating hotel in Sweden freezes in place during the winter
The hotel will feature a cold bath and be in a good location for viewing the northern lights.
Hotel Facilities | Jun 14, 2017
Finalists selected for Radical Innovation award
Original hospitality design concepts lean on enhancing traveler comfort and mobility.
Hotel Facilities | May 19, 2017
Beyond market niches: Designing hotels that can flex
There’s a shift from accommodating to specific market niches towards places that can adapt to changing moods and activities.
Hotel Facilities | May 18, 2017
Manchester modular hotel is constructed of shipping containers
The 220-room Holiday Inn Express hopes to be completed in less than 12 months.