The U.S. construction pipeline remains robust through the first half of 2020, despite pandemic

Analysts at Lodging Econometrics (LE) report that at the close of the second quarter of 2020, the total U.S. hotel construction pipeline stands at 5,582 projects/687,801 rooms, down a mere 1% by projects and rooms, Year-Over-Year (YOY). Remarkably, despite some project cancelations, postponements, and delays, there has been minimal impact on the U.S. construction pipeline. Contrary to what is being experienced with hotel operations, the pipeline remains robust as interest rates are at all-time lows.

Projects currently under construction stand at 1,771 projects/235,467 rooms, up 3% and 1% respectively, YOY. Projects scheduled to start construction in the next 12 months total 2,389 projects/276,247 rooms. Projects in the early planning stage stand at 1,422 projects/176,087 rooms. As expected, developers with projects under construction are still experiencing some opening delays. However, projects continue to move forward, albeit with extended timelines. As was the case at the end of the first quarter, developers with projects scheduled to start construction in the next 12 months continue to monitor current events and make adjustments to their construction start and opening dates.

In the first half of 2020, the U.S. opened 313 new hotels with 36,992 rooms. Additionally, there were 481 new projects with 56,823 rooms announced into the pipeline in the first half of 2020. Of those totals, 169 new project announcements with 20,359 rooms occurred in the second quarter. With franchise development staff largely working from home, non-essential travel halted, and with the on-going pandemic, the ability to get a new development deal signed has slowed. This has resulted in a 53% decrease in new project announcements compared to the second quarter of 2019 when 359 projects/44,895 rooms were recorded.

With the arrival of summer, the country has begun to see an uptick in domestic leisure travel. As a result, more and more hotels are re-opening, and many others have begun to move-up renovation plans and/or are repositioning their property with a brand conversion. In the first half of 2020, LE recorded 1,465 active renovation projects/314,043 rooms and 1,196 active conversion projects/136,110 rooms throughout the United States.

The Architectural Billings Index measures the general sentiment of U.S. architecture firms about the health of the construction market by measuring 1) design billings and 2) design contracts. Any score above 50 means that, among the architecture firms surveyed, more firms than not reported seeing increases in design work vs. the previous month.