U.S. hotel construction pipeline continues to see moderate growth

(New York skyline)

The total construction pipeline ended 2016 with 4,960 projects with 598,688 rooms, a 12-percent increase by number of projects and a 10-percent rise in the number of rooms year over year, according to the year-end United States Construction Pipeline Trend Report from Lodging Econometrics.

The fourth quarter of 2016 was the 19th consecutive quarter of pipeline growth since the cyclical bottom of 2,720 projects with 331,129 rooms reported in the first quarter of 2012.

At year-end, there were 1,520 projects with 196,409 rooms under construction, an increase of 208 projects or 16 percent year over year. Meanwhile, projects scheduled to start in the next 12 months (2,392 projects with 268,843 rooms) were up 24 percent. Projects in early planning (1,048 projects with 133,436 rooms) were down 11 percent because some projects are rapidly migrating up the pipeline toward construction in anticipation of future interest rate increases. Construction starts in 2016 (1,166 projects with 142,563 rooms) were at an eight-year high.

New project announcements into the pipeline during 2015-16 were at the highest levels since 2008, while conversions were at a 10-year high. Reflecting a modestly improving economy, overall pipeline growth has been moderately trending up since early 2012. Economic indicators suggest that the pipeline could continue to grow for at least another two years.

Top markets

Lodging Econometrics reports at that at year-end 2016 the five markets with the largest hotel construction pipelines by project count are:

  • New York (192 projects with 30,541 rooms);
  • Houston (169 projects with 18,373 rooms);
  • Dallas (140 projects with 17,291 rooms);
  • Nashville (121 projects with 14,873 rooms); and
  • Los Angeles (111 projects with 18,723 rooms).

Since the fourth quarter of 2011, New York has continuously had the highest project count of any market in the pipeline, while Houston has had the second largest for the past 13 quarters.

Future supply growth should be strong in these five markets for the next few years, particularly New York, Houston and Dallas, which have been consistently among the top five markets with the largest number of new project announcements into the pipeline.