Analysts at Lodging Econometrics recently reported the top five markets with the largest hotel construction pipelines for the third quarter of 2018. The number of hotel projects that are already under construction or scheduled to start construction in the next 12 months total 3,782 projects and 213,798 rooms—a high for the cycle. Reflecting the strong cyclical highs in the pipeline, Lodging Econometrics’ forecast for new hotel openings will continue to rise in 2018 through 2020.
With the exception of New York City and Houston, the other markets show that supply growth has begun to surpass demand. According to analysts at Lodging Econometrics, the variances in 2018 year-to-date are small but are certain to widen in the next two years, given the strength of these pipelines. All in all, 10 of the top 25 markets show supply growth minimally exceeding demand growth in 2018.
1New York City
The current total hotel construction pipeline for New York City is 170 projects and 29,630 rooms—the largest in the country. New York is also the market with the greatest number of projects already in the ground and scheduled to start in the next 12 months, totaling 145 hotel projects and 24,675 rooms. The city announced 12 new hotel projects totaling 1,857 rooms in the third quarter. In 2018, New York City is also expected to top the list for new hotel openings with 29 new hotels expected to open and 5,351 rooms.
In the third quarter, Dallas’ hotel construction pipeline stands at 157 projects/18,954 rooms. Dallas is second to New York for the most projects in the ground or scheduled to start in the next 12 months (112 projects/13,854 rooms). Following Los Angeles and Detroit, Dallas announced the third highest number of hotel projects in the third quarter—14 projects/1,529 rooms. Dallas is also expected to have the second highest number of new hotel openings in 2018, with 29 hotels totaling 3,187 rooms.
With 150 projects/16,473 rooms, Houston has the third largest hotel construction pipeline among U.S. cities in the third quarter. Houston also has the third highest number of projects in the ground or scheduled to start in the next 12 months (103 projects/11,562 rooms). The city is expected to have the third highest number of hotel openings in 2018, with 27 projects and 3,259 rooms.
With 141 projects/24,129 rooms, Los Angeles’ hotel construction pipeline is one of the largest in the country. The number of projects in the ground or scheduled to start in the next 12 months in Los Angeles stands at 92 projects and 14,249 rooms. Los Angeles added the most projects in the third quarter out of any U.S. city, announcing 22 new hotels totaling 6,457 rooms. Out of all U.S. cities, Los Angeles is expected to have the fifth highest number of hotel openings in 2018—12 projects/2,152 rooms.
Nashville currently has 115 hotel construction projects/15,179 rooms in its pipeline. The city has 88 hotel projects and 12,322 rooms that are already in the ground or scheduled to start in the next 12 months. Nashville is expected to have the fourth highest number of hotel openings in 2018 among U.S. cities—with 22 projects/3,018 rooms.
Additional Leading Markets
In the third quarter, Detroit had the second highest number of new hotel projects added to its pipeline (18 hotels totaling 1,937 rooms ), while Atlanta had the fifth highest number of new hotel projects added to its pipeline (12 projects/1,354 rooms).
What to Expect in 2019 and 2020
In 2019, New York is expected to lead with the highest number of new hotel openings (59 projects/8,964 rooms), followed by Houston with 31 projects/3,098 rooms, and Dallas with 30 projects/3,379 rooms. In 2020, Dallas is forecast to take the lead for new hotel openings with 41 projects/4,809 rooms expected to open, followed by New York with 36 projects/5,978 rooms, and Los Angeles with 33 projects/4,292 rooms expected to open.