STR: Hotel Pipeline Swells

The hotel pipeline–rooms in the planning and construction phases–grew nearly 20 percent year-over-year, reported STR, Hendersonville, Tenn.

The company’s May Pipeline Report showed 509,626 rooms in 4,151 projects under contract in the United States. “Under contract” includes projects in the construction, planning and final planning stages.

STR reported 164,860 guest rooms in the in-construction phase, a 27.3 percent jump year over year. The largest 26 markets account for nearly half of that construction activity.

“Even further than the top 26 markets, we are seeing a substantial portion of activity centralized in just a handful of markets,” said STR Senior Vice President for Operations Bobby Bowers. “If you look strictly at the five markets at the top of the in-construction list, you have more than 34,000 rooms–roughly one-fifth of all U.S. construction activity.”

Among the fastest-growing markets, New York reported the most rooms under contract (29,961 rooms) and most rooms in construction (15,193 rooms), Bowers said. Other markets with more than 10,000 rooms under contract in May included Houston (17,149 rooms), Dallas (15,926 rooms), Los Angeles/Long Beach (13,733 rooms), Miami/Hialeah (11,735 rooms) and Nashville, Tenn (11,191).

“It will be interesting to track how all of this new supply affects the top markets,” Bowers said. “Two good examples of markets already affected are New York and Houston.” He said trailing 12-month supply growth for New York equaled 4 percent while demand grew by 4.2 percent, yielding occupancy growth of just 0.2 percent. In Houston, supply growth over the same period reached 3.5 percent while demand fell by 2.9 percent, yielding a 6.2 percent occupancy decline.

Meanwhile, U.S. hotel revenues continue to increase faster than expenses, but at a slowing rate, reported CBRE Hotels, Atlanta. Its Trends in the Hotel Industry report said after five years of strong increases in occupancy, average daily rate and profits, hotels reached the top of the current business cycle last year. Hotel gross operating profits increased 6.3 percent in 2015 while earnings before interest, taxes, depreciation and amortization grew 3.6 percent.

CBRE forecast continued revenue per available room growth in the near-term, which it said should lead to “persistent, albeit modest,” profit gains.