Despite RevPAR growth slowdown, U.S. hotels continue to be built

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In its fall report, buoyed by a steady consumer-driven economy, analysts at Lodging Econometrics reported that the total United States construction pipeline stood at 5,704 projects with 700,496 rooms at the end of the third quarter. That represents a 6 percent increase by projects and an 8 percent gain in terms of rooms year over year. Pipeline totals continue to climb closer to the all-time high of 5,883 projects with 785,547 rooms reached in the second quarter of 2008, and are just 179 projects shy.

In its eighth consecutive quarter of growth, projects under construction stand at 1,729 hotels with 235,278 rooms, the highest count recorded since the second quarter of 2008. Projects scheduled to start construction in the next 12 months, currently 44 percent of all pipeline projects, total 2,479 projects with 286,125 rooms, extremely close to the all-time high set in 2009. These figures are up 16 percent in projects and 13 percent in rooms, YOY. Projects in the early planning stage stand at 1,496 projects with 179,093 rooms.

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However, as a result of declines in commercial investment due to the indecision caused by the global slowdown and the prolonged tariff imbroglio, Q3 2019 is the second quarter in a row where construction starts have declined, an indicator that pipeline growth could top out in late 2020 or 2021, according to LE.

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Through the end of the third quarter, 704 new hotels with 81,111 rooms opened across the U.S. with another 299 projects with 33,059 rooms expected to open by year-end. New openings in the LE forecast for 2020 stand at 1,112 new hotels with 122,702 rooms followed by 1,126 new hotels with 130,447 rooms scheduled to open in 2021.

The third quarter was the first time this cycle where supply growth, at 2 percent, has risen and drawn even with demand growth, which has fallen to 2 percent. In 2019, 16 of the top 25 markets show occupancy declines YOY, while 11 markets show revenue-per-available-room declines.

Related Story: Where the largest U.S. hotel deals traded in Q3

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