The US construction pipeline for hotels continues to grow, with 5,545 projects and 658,207 rooms as of Q1 2023, according to the latest report from Lodging Econometrics (LE). This marks a 9% increase in both projects and rooms year-on-year, putting the project totals at Q1 ’23 just 338 projects (5.7%) shy of the all-time high of 5,883 projects recorded in Q2 2008.
Projects currently under construction stand at 1,051 projects and 140,365 rooms, each showing 9% growth year-on-year, while projects scheduled to begin construction in the next 12 months are at 2,060 projects and 241,568 rooms, each up 8% year-on-year. The report also highlights that projects in the early planning stage account for 44% of all projects in the US construction pipeline, reaching an all-time high of 2,434 projects and 276,274 rooms, indicating a 10% year-on-year increase.
U.S. hotel industry poised for steady growth with strong demand from consumers:
The steady growth trend can be attributed to an increase in consumer confidence and spending activity, as well as a robust recovery of travel demand. As developers anticipate more favorable financing conditions in the coming quarters, they are motivated to sign new projects. Meanwhile, existing hotel owners are eager to complete brand conversion and renovation projects that have been ongoing for some time.
Despite the modest growth expected in the pipeline through 2023, there are ample opportunities for vendors, suppliers, and third-party management companies. The pipeline is back loaded, indicating a steady flow of projects in the coming years.
At the end of Q1, the majority of projects in the pipeline (62%) are concentrated within the upscale and upper midscale chain scales, demonstrating a continued dominance of these segments in the market. This trend is expected to persist in the near future.
In early 2023, there was a surge in renovation and conversion projects, with a record number of 1,953 hotels and 253,533 rooms undergoing this process. This represents a significant 38% increase in projects and 37% increase in rooms compared to the previous year. This trend is expected to continue throughout the year as hotel owners strive to update their properties to meet current brand standards or explore new brand options.
In the first quarter of 2023, 103 new hotels with 11,762 rooms opened in the U.S. and an additional 493 new hotel projects with 59,355 rooms are forecasted to open throughout the year, resulting in a supply growth rate of 1.3%. Analysts expect this upward trend in new hotel openings to persist, with another 699 new hotel projects and 81,574 rooms anticipated to open in 2024, leading to a supply increase of 1.4%. This growth in new hotel openings represents an opportunity for suppliers and third-party management companies to tap into the expanding U.S. hospitality market.