According to the 2023 year-end U.S. Construction Pipeline Trend Report from Lodging Econometrics (LE), the pipeline stands at 5,964 projects/693,963 rooms. The pipeline hit record project counts at Q4, with the addition of 260 hotel construction projects and 21,287 rooms over last quarter, and a 9% increase by projects and a 7% increase by rooms year-over-year (YOY). The previous project count high was Q2 2008 with 5,883 projects.
At the close of 2023’s fourth quarter, there are 1,118 projects/141,768 rooms under construction, up 11% by projects and 5% by rooms YOY. Hotel projects scheduled to start within the next 12 months stand at 2,259 projects/261,582 rooms, up 9% by projects and 11% by rooms YOY. Projects and rooms in the early planning stage hit all-time highs at Q4, standing at 2,587 projects/290,613 rooms, and up 9% by projects and 4% by rooms YOY.
RELATED CONTENT:
Notably, the number of combined hotel renovations and brand conversion projects in the U.S. continued its upward growth trend through the end of 2023, closing the year with record project and room counts of 2,028 projects/303,330 rooms.
The upper midscale segment has the highest project count of all chain scales in the total U.S. hotel construction pipeline at the Q4 close, reaching an all-time high of 2,245 projects/218,112 rooms. The second largest is the upscale category, which has 1,445 projects/177,999 rooms. Together, these two chain scales comprise 62% of all projects in the country’s total pipeline at the Q4 close.
Rate cuts point to positive but cautious outlook for hotel construction
The recent Federal Reserve signaling of three 25-basis-point interest rate cuts in 2024 and additional cuts in 2025 sends a positive but cautious outlook for U.S. hotel development in the year ahead. With the anticipation of multiple rate cuts in 2024, hotel development seems poised for constructive growth well beyond 2024. The primary reason lies in less expensive borrowing costs, providing long-awaited relief on interest rates. This is expected to have a favorable impact not only on new construction but acquisitions, renovations, and conversions as well.
Despite the positive outlook, lenders continue to be vigilant, and many investors continue with a “wait and see” attitude; holding out hope for potentially deeper rate cuts. We expect this cautious, yet optimistic approach will continue through 2024, however, we expect to see investors re-engaging, which, as we can tell by the pipeline numbers and record-high project counts, has already begun. We expect lending volume to increase slowly in the first half of 2024 and then gradually pick up the pace in the second half of the year.
In 2023, the U.S. had 474 new hotels/60,436 rooms open, a 1.1% growth rate in new supply, bringing the total U.S. census to 59,636 hotels/5,655,356 rooms. In 2024, LE analysts expect the existing supply of hotels in the U.S. to increase 1.4% with the opening of 677 new hotels and 79,518 rooms. The LE forecast for new hotel openings shows this growth trajectory will continue through 2025, with another 799 new hotels/85,654 rooms forecast to open by year-end 2025 and further growth anticipated for 2026 and beyond.
Related Stories
Giants 400 | Aug 20, 2022
Top 180 Architecture Firms for 2022
Gensler, Perkins and Will, HKS, and Perkins Eastman top the rankings of the nation's largest architecture firms for nonresidential and multifamily buildings work, as reported in Building Design+Construction's 2022 Giants 400 Report.
Giants 400 | Aug 19, 2022
2022 Giants 400 Report: Tracking the nation's largest architecture, engineering, and construction firms
Now 46 years running, Building Design+Construction's 2022 Giants 400 Report rankings the largest architecture, engineering, and construction firms in the U.S. This year a record 519 AEC firms participated in BD+C's Giants 400 report. The final report includes more than 130 rankings across 25 building sectors and specialty categories.
Hotel Facilities | Aug 12, 2022
Denver builds the nation’s first carbon-positive hotel
Touted as the nation’s first carbon-positive hotel, Populus recently broke ground in downtown Denver.
Hotel Facilities | Jul 28, 2022
As travel returns, U.S. hotel construction pipeline growth follows
According to the recently released United States Construction Pipeline Trend Report from Lodging Econometrics (LE), the total U.S. construction pipeline stands at 5,220 projects/621,268 rooms at the close of 2022’s second quarter, up 9% Year-Over-Year (YOY) by projects and 4% YOY by rooms.
Hotel Facilities | May 31, 2022
Checking out: Tips for converting hotels to housing
Many building owners are considering repositioning their hotels into another property type, such as senior living communities and rental apartments. Here's advice for getting started.
Sponsored | Multifamily Housing | May 8, 2022
Choosing the right paver system for rooftop amenity spaces
This AIA course by Hoffmann Architects offers best practices for choosing the right paver system for rooftop amenity spaces in multifamily buildings.
Sponsored | BD+C University Course | May 3, 2022
For glass openings, how big is too big?
Advances in glazing materials and glass building systems offer a seemingly unlimited horizon for not only glass performance, but also for the size and extent of these light, transparent forms. Both for enclosures and for indoor environments, novel products and assemblies allow for more glass and less opaque structure—often in places that previously limited their use.
Hotel Facilities | Apr 25, 2022
U.S. hotel construction pipeline up 2%, with 5,090 projects in the works
The total U.S. hotel construction pipeline stands at 5,090 projects and 606,302 rooms at the end of the first quarter of 2022, up 2% by projects, but down 3% by rooms, according to the Q1 2022 Construction Pipeline Trend Report for the United States from Lodging Econometrics (LE).
Market Data | Apr 14, 2022
FMI 2022 construction spending forecast: 7% growth despite economic turmoil
Growth will be offset by inflation, supply chain snarls, a shortage of workers, project delays, and economic turmoil caused by international events such as the Russia-Ukraine war.
Hotel Facilities | Apr 12, 2022
A virtual hotel to open in the metaverse
A brand of affordable luxury hotels that launched in 2008, citizenM has announced it will purchase a digital land site in The Sandbox, a virtual game world owned by Animoca Brands.
