According to the Q2 2023 United States Construction Pipeline Trend Report by Lodging Econometrics (LE), at the close of the second quarter, the hotel construction pipeline stands at 5,572 projects/660,061 rooms, with projects up 7% year-over-year (YOY) and rooms up 6% YOY.
The hotel construction pipeline grew incrementally quarter-over-quarter (QOQ), as developers and franchise companies push through short-term challenges while envisioning long-term prospects. Inflation, higher interest, rates and the general “wait and see” attitude of developers have prevailed in the economy in recent months; however, developers continue to believe in the strength of the economy long-term as witnessed by the continued growth in the pipeline.
At the end of Q2, the total pipeline is only 5% from its all-time peak in terms of projects. Certainly, some head winds remain, but hotel developers are locking down prime locations for development now and in the coming months.
A bright spot for the economy and the hotel industry is the increased consumer confidence and sentiment which among other things has led to strong demand for guest rooms. This strong demand is expected to continue through the rest of the summer and into the fall with heavy tourist demand through August and the kick-off of the fall conference season after Labor Day.
Projects under construction have experienced modest QOQ growth over the past year and currently stand at 1,062 projects/141,681 rooms, up 10% and 8% YOY, respectively. Projects scheduled to start construction in the next 12 months saw an 11% increase in projects and 12% increase in rooms YOY, to stand at 2,232 projects/260,595 rooms at the close of the second quarter.
This increase highlights the fact that projects are progressing through the planning process and developers are sourcing funding to get “into the ground”. Year-over-year project counts in the early planning stage changed minimally and ended Q2 ’23 with 2,278 projects/257,785 rooms. The second quarter, however, marks the tenth consecutive quarter that the number of rooms in early planning has been over 200,000.
Upscale, upper-midscale hotel construction projects dominate
Upscale and upper midscale new construction projects dominate the pipeline at Q2, accounting for 62% of the projects and 57% of the rooms in the total U.S. construction pipeline. These two chain scales also represent 63% of the projects and 57% of the rooms anticipated to open through year-end 2023 and are expected to have the highest guest room growth rates through 2025.
Announced renovations and brand conversions, combined, reached record high project counts over the last four quarters, accounting for 1,939 projects/253,473 rooms, with upscale, upper midscale, and economy brands accounting for the majority of these projects at the end of 2023’s second quarter.
Extended-stay hotel projects have also been on the rise in the U.S., increasing consecutively over the last eight quarters. At the Q2 close, there were 2,083 extended-stay projects, with 214,557 rooms in the U.S. hotel construction pipeline. Extended-stay projects account for 32% of projects under construction in the total pipeline, 42% of projects scheduled to start construction in the next 12 months, and 36% of the projects in early planning across the U.S.
In 2022, 130 extended-stay hotels opened, adding 13,647 rooms to the U.S. supply. For 2023, 180 extended-stay projects/18,713 rooms are expected to open. In 2024, 236 projects/24,281 rooms, and in 2025, 319 projects/32,798 rooms are forecast to open in the extended-stay segment. The extended stay segment is growing at 2.5 to 3.5 times the actual and forecasted industry growth rates from 2022-2025.
For the entire U.S., during the first and second quarters, 224 new hotels with 27,194 rooms opened. LE is forecasting another 384 projects/48,607 rooms to open in 2023 for a total of 608 new hotels/75,801 rooms by year-end. This represents a 1.4% increase in new supply for 2023. The total year-end forecast for 2023 represents a 22% YOY increase over the number of new hotels that opened in 2022, which stood at 475 hotels/56,157 rooms.
In 2024, 700 new hotel projects with 79,422 rooms are expected to open, for another 1.4% increase in new supply growth. And announcing for the first time, LE analysts expect 808 projects/87,462 rooms to open in 2025 for a 1.5% increase in new supply.
Related Stories
Market Data | Aug 1, 2023
Nonresidential construction spending increases slightly in June
National nonresidential construction spending increased 0.1% in June, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. Spending is up 18% over the past 12 months. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.07 trillion in June.
Adaptive Reuse | Jul 27, 2023
Number of U.S. adaptive reuse projects jumps to 122,000 from 77,000
The number of adaptive reuse projects in the pipeline grew to a record 122,000 in 2023 from 77,000 registered last year, according to RentCafe’s annual Adaptive Reuse Report. Of the 122,000 apartments currently undergoing conversion, 45,000 are the result of office repurposing, representing 37% of the total, followed by hotels (23% of future projects).
Hotel Facilities | Jul 26, 2023
Hospitality building construction costs for 2023
Data from Gordian breaks down the average cost per square foot for 15-story hotels, restaurants, fast food restaurants, and movie theaters across 10 U.S. cities: Boston, Chicago, Las Vegas, Los Angeles, Miami, New Orleans, New York, Phoenix, Seattle, and Washington, D.C.
Market Data | Jul 24, 2023
Leading economists call for 2% increase in building construction spending in 2024
Following a 19.7% surge in spending for commercial, institutional, and industrial buildings in 2023, leading construction industry economists expect spending growth to come back to earth in 2024, according to the July 2023 AIA Consensus Construction Forecast Panel.
Hotel Facilities | Jul 21, 2023
In Phoenix, a former motel transforms into a boutique hotel with a midcentury vibe
The Egyptian Motor Hotel’s 48 guest rooms come with midcentury furnishings ranging from egg chairs to Bluetooth speakers that look like Marshall amplifiers.
Sponsored | Fire and Life Safety | Jul 12, 2023
Fire safety considerations for cantilevered buildings [AIA course]
Bold cantilevered designs are prevalent today, as developers and architects strive to maximize space, views, and natural light in buildings. Cantilevered structures, however, present a host of challenges for building teams, according to José R. Rivera, PE, Associate Principal and Director of Plumbing and Fire Protection with Lilker.
Standards | Jun 26, 2023
New Wi-Fi standard boosts indoor navigation, tracking accuracy in buildings
The recently released Wi-Fi standard, IEEE 802.11az enables more refined and accurate indoor location capabilities. As technology manufacturers incorporate the new standard in various devices, it will enable buildings, including malls, arenas, and stadiums, to provide new wayfinding and tracking features.
Engineers | Jun 14, 2023
The high cost of low maintenance
Walter P Moore’s Javier Balma, PhD, PE, SE, and Webb Wright, PE, identify the primary causes of engineering failures, define proactive versus reactive maintenance, recognize the reasons for deferred maintenance, and identify the financial and safety risks related to deferred maintenance.
Mixed-Use | Jun 12, 2023
Goettsch Partners completes its largest China project to date: a mixed-used, five-tower complex
Chicago-based global architecture firm Goettsch Partners (GP) recently announced the completion of its largest project in China to date: the China Resources Qianhai Center, a mixed-use complex in the Qianhai district of Shenzhen. Developed by CR Land, the project includes five towers totaling almost 472,000 square meters (4.6 million sf).
Architects | Jun 6, 2023
Taking storytelling to a new level in building design, with Gensler's Bob Weis and Andy Cohen
Bob Weis, formerly the head of Disney Imagineering, was recently hired by Gensler as its Global Immersive Experience Design Leader. He joins the firm's co-CEO Andy Cohen to discuss how Gensler will focus on storytelling to connect people to its projects.
