Hotel construction numbers continue upswing; room supply begins to rise

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After years of limited growth, construction on hotels is surging, according to MarketWatch.

The latest Commerce Department data on construction spending show that nonresidential lodging construction in August grew 41 percent from the same period of 2014. That marks the fourth consecutive month the annual pace of lodging construction has surpassed 39 percent.

Separate data compiled by PricewaterhouseCoopers show that the supply of rooms may rise 1.8 percent this year — the first growth above 1 percent since 2009.

It comes amid strengthening demand — lodging occupancy is forecast to hit the strongest rate since 1981, PwC says.

Scott Berman, principal and industry leader for hospitality and leisure at PwC, said the growth is coming around the no-frills hotels. “Hotel developers and hotel operating companies and their partners are a lot smarter around consumer needs and wants,” he said. “The design of today’s hotel is much more efficient and takes into consideration consumer feedback.”

Those hotels — like Courtyard by Marriott, Starwood Hotels’ Aloft, or Hilton Garden Inn — often will not have a restaurant on site, or if there is one, the restaurant will be operated by another company.

More broadly, construction spending continued its brisk pace in August, rising 0.7 percent during the month and gaining 13.7 percent over 12 months, the Commerce Department reported Thursday. Economists polled by MarketWatch expected a 0.6 percent gain.

Residential construction rose 1.3 percent, while nonresidential construction grew 0.3 percent.

Analysts at Oxford Economics pointed out that while multi-family real-estate construction continues to sizzle, there’s also improving single-family activity.

“Single-family spending has risen for five consecutive months, and we believe it will continue to increase supported by increasing demand and low inventories,” the analysts said in a note to clients.

 

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