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
| Mar 29, 2013
Detroit's historic Whitney Building to be renovated for hotel, apartments
Detroit's David Whitney Building, a 19-story landmark erected in 1915, will be renovated for an Aloft hotel and apartments.
| Mar 29, 2013
Cuningham Group acquires NTD's healthcare practice, expands into key markets
The international design firm Cuningham Group Architecture, Inc. has announced that NTD Healthcare has the joined the company in a strategic expansion. A practice of NTD Architecture, NTD Healthcare joins Cuningham Group with three principals: Wayne Hunter, AIA, NCARB, ACHA and Phillip T. Soule, III, AIA, ACHA in San Diego, along with Maha Abou-Haidar, AIA in Phoenix.
| Mar 15, 2013
7 most endangered buildings in Chicago
The Chicago Preservation Society released its annual list of the buildings at high risk for demolition.
| Mar 14, 2013
25 cities with the most Energy Star certified buildings
Los Angeles, Washington, D.C., and Chicago top EPA's list of the U.S. cities with the greatest number of Energy Star certified buildings in 2012.
| Mar 7, 2013
Vegas rebound: Genting Group acquires assets of stalled Vegas casino-resort
International hospitality giant Genting Group has announced a deal with Boyd Gaming Corp. to purchase the land and assets, including partially built structures, of the stalled Echelon casino-resort in Las Vegas.
| Mar 6, 2013
Hospital project pioneers BIM/VDC-based integrated project delivery
The Marlborough (Mass.) Hospital Cancer Pavilion is one of the first healthcare projects to use BIM/VDC-based integrated project delivery.
| Mar 4, 2013
Gehry unveils design for Santa Monica hotel-condo tower
If all goes as planned, Frank Gehry will design the first building in his hometown in some 25 years.
| Mar 3, 2013
Hines acquires Archstone's interest in $700 million CityCenterDC project
The Washington D.C. office of Hines, the international real estate firm, announced the acquisition of the ownership interest of their partner, Archstone, in the mixed-use CityCenterDC project that is currently under construction in downtown Washington, D.C.
| Feb 25, 2013
10 U.S. cities with the best urban forests
Charlotte, Denver, and Milwaukee are among 10 U.S. cities ranked recently by the conservation organization American Forests for having quality urban forest programs.
| Feb 18, 2013
Top 10 kitchen and bath design trends for 2013
Gray color schemes and transitional styles are among the top trends identified by more than 300 kitchen and bath design experts surveyed by the National Kitchen & Bath Association (NKBA).