U.S. Hotel Construction Pipeline Continues Modest Growth

In the third quarter of 2018, the total U.S. hotel construction pipeline reached 5,376 projects and a combined 650,576 rooms—up 7 percent from last year, according to analysts at Lodging Econometrics. In 2017, the third quarter pipeline stood at 5,011 projects and 608,837 rooms.

The total pipeline has been growing modestly over the past two years and is expected to continue its ascent at least into the first quarter of 2019. However, these pipeline totals are still distant from the all-time high of 5,883 projects/785,547 rooms, which the industry reached in the second quarter of 2008. According to Lodging Econometrics’ forecast, the industry won’t see those records again this cycle.

When looking at the current pipeline, hotels in the early planning stages stand at 1,594 projects/84,031 rooms—up 31 percent by projects and 23 percent by rooms year-over-year (YOY). Lodging Econometrics’ analysts note that big jumps are typical for the back-end of a hotel real-estate cycle when developers rush to move projects from the drawing board to the pipeline before further interest rate hikes take effect and to avoid the rising cost of building materials and the continued struggle to secure skilled labor.

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The number of hotel projects scheduled to start construction in the next 12 months is near even with the third quarter of 2017, standing at 2,144 projects/253,102 rooms. The number of hotel projects currently under construction stands at 1,638 projects/213,443 rooms. While this is the highest count for this cycle, the number is up only modestly YOY.

The announced renovation and conversion pipeline has expanded significantly. With a total pipeline of 1,767 announced hotel projects totaling 273,443 rooms, it is the largest count that Lodging Econometrics has ever recorded. These numbers show a 30 percent increase by projects and 27 percent increase by rooms YOY. The surge in announced renovation and conversion counts can also be seen quarter-over-quarter with a 25 percent increase in both projects and rooms since the second quarter of 2018.

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