U.S. construction pipeline 4% shy of all-time high

At the end of 2019’s first quarter, the U.S. construction pipeline stood 4 percent, or 236 projects, below the all-time high reached in the second quarter of 2008, according to analysts at Lodging Econometrics. The hotel intelligence provider predicts that the record will be broken later this year.

Pipeline projects and rooms, at 5,647 and 687,941 respectively, rose 7 and 8 percent year-over-year. Of those projects, about 30 percent, 1,709, are under construction. A little over 43 percent, or 2,429 projects, are scheduled to begin construction in the next 12 months.

The upscale, upper-midscale and midscale chain scales recorded record high numbers of projects and rooms in the pipeline. Of the total 5,647 projects in various stages of development, about two-thirds were upscale or upper-midscale.

Annualized construction starts are at their highest since 2008. For the year, Lodging Econometrics is forecasting a 2.2 percent supply growth rate with 1,038 new hotels and 118,385 rooms expected to open. In 2020, the company predicts an additional 1,174 hotels and 128,598 rooms.

In terms of occupancy, only seven of the top 25 marks increased occupancy quarter-over-quarter and 11 increased revenue per available room. Though U.S. demand growth climbed 2.4 percent and supply rose 2 percent, Lodging Econometrics noted an opposite trend in numerous major cities. In the first quarter, supply growth exceeded demand growth in 18 of the top 25 markets, up from 12 at the end of the fourth quarter of 2018.

Leading Markets

Lodging Econometrics also provided data on the top markets during the first quarter. The top five cities in terms of largest hotel construction project pipeline were:

1. New York City – 170 projects
2. Dallas – 163 projects
3. Los Angeles – 158 projects
4. Houston – 151 projects
5. Nashville – 116 projects

The top cities by number of projects already under construction were:

1. New York City – 119 projects
2. Dallas – 48 projects
3. Los Angeles – 42 projects
4. Houston – 36 projects
5. Nashville/Austin, Texas/San Jose, Calif. – 34 projects

Looking at new hotel openings, Lodging Econometrics expects 2019’s top cities will be:

1. New York City – 63 projects
2. Dallas – 30 projects
3. Houston – 28 projects
4. Austin – 25 projects
5. Nashville – 23 projects

In 2020, the company predicts the top cities will be:

1. New York City – 44 projects
2. Los Angeles – 35 projects
3. Dallas – 33 projects