At the end of the second quarter, analysts at Lodging Econometrics (LE) reported that the total U.S. construction pipeline stands at 5,312 projects/634,501 rooms, up 7 percent from 2017’s 4,973 projects/598,371 rooms. The pipeline has been growing moderately and incrementally each quarter and should continue its upward growth trend as long as the economy remains strong, LE analysts say. However, pipeline totals are still significantly below the all-time high of 5,883 projects/785,547 rooms reached in 2008.
In Q2, the number of projects scheduled to start construction in the next 12 months changed minimally year-over-year (YOY) and now stands at 2,291 projects/266,878 rooms. Projects currently under construction are at 1,594 projects/208,509 rooms, the highest recorded since 2007. This also marks the fourth consecutive quarter that the number of rooms under construction has been over 200,000 units.
Early planning with 1,427 projects/159,114 rooms, saw a 25 percent increase in projects and 18 percent increase in rooms YOY. This increase in early planning is typical late cycle activity where developers are anxious to move from the drawing board into the permitting phase prior to any economic slowdown, analysts say. Many are larger projects that wait for peak operating performance in their markets before seeking financing.
Both the increase in projects under construction and those in the early planning stage are reflective of the urgency developers currently have before the economy softens and/or interest rates further accelerate.