Hotel Pipeline Swells

The U.S. hotel pipeline increased 10% year-over-year to 5,317 projects underway as of Sept. 30, reported Lodging Econometrics, Portsmouth, N.H.

The LE Third-Quarter Construction Pipeline Trend Report found 629,489 rooms in the pipeline nationwide, up 6 percent year-over-year and an indication developers are favoring smaller hotels.

These top-line figures include properties under construction, projects scheduled to start construction within the next 12 months and hotels in the early planning stage. Looking simply at hotels currently under construction, LE found 987 projects totaling 135,050 rooms underway, up nearly 15 percent from a year ago.

“The lodging industry is healthy, and many hotel owners are expected to experience record-high revenues in 2022,” LE said. “As 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.”

Brand conversion room counts reached a record-high 988 projects with 99,474 room as of Sept. 30, the report noted. The renovation pipeline remained strong as well, with nearly 900 projects totaling 140,440 rooms–some of the highest counts since Q3 2018.

“Travel throughout the United States saw a steady recovery in all segments over the summer months and is expected to continue into the fall and winter months,” LE said. “New project announcements and construction starts continue to recover from the lows experienced during the COVID-19 pandemic. The new construction pipeline in the United States continues to grow, albeit at a moderate, modest pace, 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.”

LE said the upper-midscale chain scale dominates other chain scales in the U.S. construction pipeline, standing at 2,127 projects with 214,473 rooms. The upscale chain scale ranked second with 1,528 projects underway with 202,907 rooms. These two segments account for 69 percent of all projects, the report said.