Houston Has Second Largest Construction Pipeline

    According to Lodging Econometrics (LE), following New York City, Houston has the second largest pipeline in the country with 169 projects/18,373 rooms. With its pipeline continuing to grow, Houston is likely to top its previous peak of 171 total projects reached in 2008.

    Of all markets, Houston has the most projects scheduled to start construction in the next 12 months with 91 projects/9,792 rooms, 54 percent of its total pipeline. Houston also has the most projects in early planning with 37 projects/3,748 rooms. The remaining 41 projects/4,833 rooms are presently Under Construction.

    With the economic impact of low oil prices, Iranian oil coming online and a decline in demand from China, drilling for oil in Texas has plummeted. As a result, Houston’s economy has been rocked. Some economic improvement is expected in 2017 as a bottoming is thought to have occurred. Consequently, in the last 2 years, occupancy has declined from 71.7 percent to a reported 62.3 percent. ADR fell 3.6 percent in 2016. RevPar declined both years and registered a whooping 12.4 percent year-over-year decline in 2016. New supply growth rose 5.7%. Demand growth fell 3.9 percent while supply growth grew 5.7 percent. Houston has the largest demand/supply imbalance of all the top 25 markets. With a steady stream of new supply forecasted to come online, operating metrics are expected to continue their fall for the next two years.

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