According to the Q2 2023 United States Construction Pipeline Trend Report by Lodging Econometrics (LE), at the close of the second quarter, the hotel construction pipeline stands at 5,572 projects/660,061 rooms, with projects up 7% year-over-year (YOY) and rooms up 6% YOY.
The hotel construction pipeline grew incrementally quarter-over-quarter (QOQ), as developers and franchise companies push through short-term challenges while envisioning long-term prospects. Inflation, higher interest, rates and the general “wait and see” attitude of developers have prevailed in the economy in recent months; however, developers continue to believe in the strength of the economy long-term as witnessed by the continued growth in the pipeline.
At the end of Q2, the total pipeline is only 5% from its all-time peak in terms of projects. Certainly, some head winds remain, but hotel developers are locking down prime locations for development now and in the coming months.
A bright spot for the economy and the hotel industry is the increased consumer confidence and sentiment which among other things has led to strong demand for guest rooms. This strong demand is expected to continue through the rest of the summer and into the fall with heavy tourist demand through August and the kick-off of the fall conference season after Labor Day.
Projects under construction have experienced modest QOQ growth over the past year and currently stand at 1,062 projects/141,681 rooms, up 10% and 8% YOY, respectively. Projects scheduled to start construction in the next 12 months saw an 11% increase in projects and 12% increase in rooms YOY, to stand at 2,232 projects/260,595 rooms at the close of the second quarter.
This increase highlights the fact that projects are progressing through the planning process and developers are sourcing funding to get “into the ground”. Year-over-year project counts in the early planning stage changed minimally and ended Q2 ’23 with 2,278 projects/257,785 rooms. The second quarter, however, marks the tenth consecutive quarter that the number of rooms in early planning has been over 200,000.
Upscale, upper-midscale hotel construction projects dominate
Upscale and upper midscale new construction projects dominate the pipeline at Q2, accounting for 62% of the projects and 57% of the rooms in the total U.S. construction pipeline. These two chain scales also represent 63% of the projects and 57% of the rooms anticipated to open through year-end 2023 and are expected to have the highest guest room growth rates through 2025.
Announced renovations and brand conversions, combined, reached record high project counts over the last four quarters, accounting for 1,939 projects/253,473 rooms, with upscale, upper midscale, and economy brands accounting for the majority of these projects at the end of 2023’s second quarter.
Extended-stay hotel projects have also been on the rise in the U.S., increasing consecutively over the last eight quarters. At the Q2 close, there were 2,083 extended-stay projects, with 214,557 rooms in the U.S. hotel construction pipeline. Extended-stay projects account for 32% of projects under construction in the total pipeline, 42% of projects scheduled to start construction in the next 12 months, and 36% of the projects in early planning across the U.S.
In 2022, 130 extended-stay hotels opened, adding 13,647 rooms to the U.S. supply. For 2023, 180 extended-stay projects/18,713 rooms are expected to open. In 2024, 236 projects/24,281 rooms, and in 2025, 319 projects/32,798 rooms are forecast to open in the extended-stay segment. The extended stay segment is growing at 2.5 to 3.5 times the actual and forecasted industry growth rates from 2022-2025.
For the entire U.S., during the first and second quarters, 224 new hotels with 27,194 rooms opened. LE is forecasting another 384 projects/48,607 rooms to open in 2023 for a total of 608 new hotels/75,801 rooms by year-end. This represents a 1.4% increase in new supply for 2023. The total year-end forecast for 2023 represents a 22% YOY increase over the number of new hotels that opened in 2022, which stood at 475 hotels/56,157 rooms.
In 2024, 700 new hotel projects with 79,422 rooms are expected to open, for another 1.4% increase in new supply growth. And announcing for the first time, LE analysts expect 808 projects/87,462 rooms to open in 2025 for a 1.5% increase in new supply.
Related Stories
| Mar 17, 2011
Hospitality industry turns to HTS Texas for ‘do not disturb’ air conditioned comfort
Large resort hotels and hospitality properties throughout the Southwest have been working with local contractors, engineers and HTS Texas for the latest innovations in quiet heating, ventilating and air conditioning (HVAC) equipment. The company has completed 12+ projects throughout Texas and the Southwestern U.S. over the past 18 to 24 months, and is currently working on six more hotel projects throughout the region.
| Mar 11, 2011
Holiday Inn reworked for Downtown Disney Resort
The Orlando, Fla., office of VOA Associates completed a comprehensive interior and exterior renovation of the 14-story Holiday Inn in the Downtown Disney Resort in Lake Buena Vista, Fla. The $25 million project involved rehabbing the hotel’s 332 guest rooms, atrium, swimming pool, restaurant, fitness center, and administrative spaces.
| Mar 11, 2011
Guests can check out hotel’s urban loft design, music selection
MODO, Advaya Hospitality’s affordable new lifestyle hotel brand, will have an urban Bauhaus loft design and target design-, music-, and tech-savvy guest who will have access to thousands of tracks in vinyl, CD, and MP3 formats through a partnership with Downtown Music. Guest can create their own playlists, and each guest room will feature iPod docks and large flat-screen TVs.
| Mar 11, 2011
Texas A&M mixed-use community will focus on green living
HOK, Realty Appreciation, and Texas A&M University are working on the Urban Living Laboratory, a 1.2-million-sf mixed-use project owned by the university. The five-phase, live-work-play project will include offices, retail, multifamily apartments, and two hotels.
| Mar 9, 2011
North Korea resumes construction of 'world's worst' hotel
Is North Korea finally serious about completing construction of Ryu-Gyong Hotel—once called the world’s worst building—after years of neglect and secrecy?
| Mar 9, 2011
Igor Krnajski, SVP with Denihan Hospitality Group, on hotel construction and understanding the industry
Igor Krnajski, SVP for Design and Construction with Denihan Hospitality Group, New York, N.Y., on the state of hotel construction, understanding the hotel operators’ mindset, and where the work is.
| Mar 9, 2011
Fast food franchises are taking the LEED
Starbucks, Arby’s, and McDonald’s are among the top when it comes to fast food franchises implementing sustainability practices. This article takes a look at the green paths these three brands are taking, and how LEED factors into their business and their future.
| Feb 15, 2011
Iconic TWA terminal may reopen as a boutique hotel
The Port Authority of New York and New Jersey hopes to squeeze a hotel with about 150 rooms in the space between the old TWA terminal and the new JetBlue building. The old TWA terminal would serve as an entry to the hotel and hotel lobby, which would also contain restaurants and shops.
| Feb 9, 2011
Hospital Construction in the Age of Obamacare
The recession has hurt even the usually vibrant healthcare segment. Nearly three out of four hospital systems have put the brakes on capital projects. We asked five capital expenditure insiders for their advice on how Building Teams can still succeed in this highly competitive sector.
| Jan 25, 2011
AIA reports: Hotels, retail to lead U.S. construction recovery
U.S. nonresidential construction activity will decline this year but recover in 2012, led by hotel and retail sectors, according to a twice-yearly forecast by the American Institute of Architects. Overall nonresidential construction spending is expected to fall by 2% this year before rising by 5% in 2012, adjusted for inflation. The projected decline marks a deteriorating outlook compared to the prior survey in July 2010, when a 2011 recovery was expected.