U.S. Hotel Construction Pipeline Held Steady in Q1 Despite COVID-19

construction site

PORTSMOUTH, N.H. — Analysts at Lodging Econometrics (LE) recently reported that the total U.S. hotel construction pipeline continued to expand year-over-year (YOY) at the end of Q1 2020 to 5,731 projects/706,128 rooms—up 1 percent by projects and 3 percent by rooms. However, quarter-over-quarter, the pipeline has contracted slightly less than 1 percent by both project and room counts, down from 5,748 projects/708,898 rooms at the close of 2019. LE noted that COVID-19 did not have a full impact on Q1 2020 U.S. results—only the last 30 days of the quarter were affected.

U.S. hotel projects currently under construction stood at an all-time high of 1,819 projects/243,100 rooms at the end of Q1 2020. Projects scheduled to start construction in the next 12 months totaled 2,284 projects/264,286 rooms. Projects in the early planning stage were up 8 percent by projects (1,628 total) and 11 percent by rooms (198,742 total) YOY.

Developers with projects under construction have generally extended their opening dates by two to four months. For projects scheduled to start construction in the next 12 months, on average, developers have adjusted their construction start and opening dates outwards by four to six months. Additionally, brands have relaxed timelines as the country adjusts to the COVID-19 interruptions. As a result, LE anticipates a stronger count of openings in the second half of 2020, compared to the first half.

Advertisement

In the first quarter of 2020, the U.S. opened 144 new hotels with 16,305 rooms. While the COVID-19 pandemic has slowed development, it has not completely stalled it. There were still 312 new projects with 36,464 rooms announced into the pipeline in the first quarter.

Many open or temporarily closed hotels have already begun or are in the planning stages of renovating and repositioning their assets while occupancy is low or non-existent. At the close of Q1 2020, LE recorded 769 active renovation projects/163,030 rooms and 616 active conversion projects/69,258 rooms throughout the United States.

To date, the largest fiscal relief and stimulus efforts include the unprecedented $2 trillion CARES Act, the Paycheck Protection Program (PPP), and the Paycheck Protection Program Liquidity Facility (PPPLF), with a third phase of relief having been signed by the president last week. This third phase includes nearly $500 billion to further support the small business loan program, as well as provide additional funding needed for hospitals and comprehensive testing. A phase four “CARES Act 2” package is already being discussed.

To support the economy and build liquidity, the Federal Reserve cut interest rates to almost zero; reduced bank reserve requirements to zero; purchased hundreds of billions of dollars in treasury bonds and mortgage-backed securities; bought corporate and municipal debt; and extended emergency credit to non-banks. The Federal Reserve has signaled that it will provide more support to the economy if warranted.

Although there are discussions about opening parts of the country that are beginning to stabilize, it will be measured with phased openings designed to effectively balance a highly desired economic ramp up while following prudent health and safety precautions.

LE added that it is still early to predict COVID-19’s impact on the industry and that its market intelligence department will continue to gather global intelligence on the supply side of the lodging industry and make that information available in the coming months.

 


Subscribe to Lodging Daily News for updates.

SUBSCRIBE