According to the third quarter "Construction Pipeline Trend Report" for the United States from Lodging Econometrics, the U.S. construction pipeline stands at 5,317 hotels with 629,489 rooms, up 10 percent by projects and 6 percent by rooms year over year.
At the close of Q3, there are 987 hotels with 135,050 rooms under construction in the U.S. Projects scheduled to start construction in the next 12 months stand at 2,074 hotels with 236,894 rooms, up 14 percent by projects and 13 percent by rooms year over year, respectively. Project counts in the early planning stage reached record highs in Q3, standing at 2,256 hotels with 257,545 rooms, a 14 percent increase by projects and 7 percent increase in rooms year over year.
The report calls the lodging industry “healthy,” and notes that “many” hotel owners could see record high revenues in 2022. Because lending rates have changed significantly in 2022 due to the Federal Reserve’s rate increases, ownership and management groups are finding that reinvesting in their current portfolios, whether that be renovating or repositioning to another brand, is a better return on investment right now. At the end of Q3, brand conversion room counts reached record highs of 988 hotels with 99,474 rooms. The renovation pipeline remained strong as well, with 893 hotels with 140,440 rooms; some of the highest counts dating back to Q3 2018. Combined, renovation and conversion activity accounts for 1,881 hotels with 239,914 rooms, up 36 percent year over year by projects and 50 percent by rooms year over year.
Travel throughout the U.S., in all segments, saw steady recovery over the summer months. LE expects this to continue into the fall and winter months. New project announcements and construction starts continue to recover from the lows experienced during the COIVD pandemic. The new construction pipeline in the U.S. continues to grow, albeit at a moderate and modest pace, the report claimed, with projects in the early planning stage establishing a new peak for this cycle. This peak signals a favorable outlook by developers for development conditions to improve in the near future.
Chain Scales and Brands
The upper-midscale chain scale continues to have the largest project count of all chain scales in the total U.S. construction pipeline at Q3, standing at 2,127 hotels with 214,473 rooms. Following upper-midscale is upscale, which stands at 1,528 hotels with 202,907 rooms at the close of the quarter. Together, upper-midscale and upscale project counts in the pipeline account for 69 percent of all projects.
The brands with the largest number of projects in the upper-midscale chain scale are Home2 Suites by Hilton with 494 hotels and 50,809 rooms, InterContinental Hotels Group’s Holiday Inn Express with 297 hotels and 28,323 rooms and Marriott International’s TownePlace Suites with 291 hotels and 27,329 rooms. In the upscale chain scale, the top brands are Marriott’s Residence Inn with 234 hotels and 28,659 rooms and its SpringHill Suites brand with 148 hotels and 16,350 rooms, followed by IHG’s Staybridge Suites with 125 hotels and 12,962 rooms.
At the end of Q3, 1,846 hotels with 189,289 rooms in the U.S. construction pipeline are extended-stay projects, accounting for 35 percent of projects in the total U.S. pipeline. Home2 Suites by Hilton currently has the largest extended-stay pipeline with 494 hotels with 50,809 rooms. The brand with the second largest number of projects in the extended-stay pipeline at Q3 2022 is Marriott’s TownePlace Suites with 291 hotels with 27,329 rooms, followed by its Residence Inn brand with 234 hotels with 28,659 rooms.
Thus far, throughout 2022, the U.S. opened 343 new hotels, accounting for 39,772 rooms, with another 182 hotels with 22,261 rooms anticipated to open by the end of the year. This represents a 1.1 percent increase in new hotel supply for 2022. LE analysts expect new hotel openings to increase in 2023 and 2024, representing a 1.3 percent supply increase for 2023 and a 1.4 percent supply increase for 2024.