U.S. Hotel Construction Continues Growth Spurt Despite Declining Investment

U.S. hotel construction pipeline

The total U.S. hotel construction pipeline climbed to 5,653 projects totaling 693,207 rooms in the second quarter—up 6 percent by projects and 9 percent by rooms year-over-year, according to Lodging Econometrics (LE). Pipeline totals are just 230 projects shy of the all-time high of 5,883 projects/785,547 rooms reached in the second quarter of 2008.

LE’s trendline analysis suggests that the U.S. hotel construction pipeline is in a topping out formation as new project announcements in the second quarter are at 359 projects/44,895 rooms—their lowest count since the fourth quarter of 2014. Brand-to-brand conversions have also declined over the last year and are at the lowest level since the end of 2016.

The number of projects currently under construction stands at 1,727 projects/233,600 rooms, with those scheduled to start construction in the next 12 months at 2,552 projects/295,989 rooms. Both are at the highest levels since early 2008. Hotel construction projects in the early planning stages stand at 1,374 projects/163,618 rooms.

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In the first half of 2019, the industry opened 456 new hotels totaling 53,427 rooms. An additional 599 projects/66,300 rooms are expected to open by the end of the year. In 2020, LE forecasts that new hotel openings will continue to rise, with 1,161 new hotels totaling 129,531 rooms scheduled to open. In 2021, with a growth rate of 2.5 percent, 1,206 new hotels totaling 139,793 rooms are likely to open as a result of the current robust pipeline. Should all these hotels come to fruition, 2021 will register the highest count for new hotel openings since 2009.

Although government spending and consumer sentiment and spending remain strong, these declines can be attributed to drops in business spending, which have turned negative for the first time since early 2016. According to LE, the declines are due primarily to the uncertainty caused by trade and tariff problems and the slowing global economy.

 


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