Hotel Pipeline Continues to Grow

Hotel construction continues to grow, sector analysts report.

STR, Hendersonville, Tenn., found 580,068 hotel rooms currently under contract in the U.S., a 13.8 percent increase from one year ago. “Under contract” includes hotels in the in-construction, final planning and planning stages, but does not include projects in the unconfirmed stage.

The U.S. currently has 191,832 hotel rooms the in-construction stage, said STR Senior Vice President for Operations Bobby Bowers. That represents a 16.4 percent increase year-over-year in the number of rooms under construction.

“After two straight months with a decrease, we saw the total number of rooms under construction rise by more than 2,000 from April to May,” Bowers said. “At the same time, year-over-year growth is much lower than last year, so it remains unclear if this is in fact the beginning of a slowing development period.”

Bowers noted that the numbers still indicate “an appetite” for new construction projects, “but it will be interesting to see if that appetite correlates with further slowing in industry performance growth.”

Looking at the sector by property rather than by rooms, Lodging Econometrics, Portsmouth, N.H., reported 5,032 hotel properties currently in the pipeline, up 13 percent year-over-year. It reported 1,511 properties under construction, 2,414 hotels scheduled to start in the next 12 months and 1,107 projects in the early planning stage.

The first quarter represented the 21st consecutive quarter of growth, but the current pipeline falls 851 projects shy of the second-quarter 2008 peak of 5,883 projects, Lodging Econometrics reported. “This moderate pipeline growth can be attributed to the tightening of loan availability, the recent rise of interest rates with the expectation of more increases on the horizon and a slowing economy near full employment,” the firm’s quarterly report said.

The lodging industry started 2017 on a strong note, reported CBRE Hotels, Atlanta. Demand increased 2.8 percent during the first quarter, pushing the hotel occupancy rate to 61.1 percent–the highest first quarter occupancy rate in years.

“Since bottoming out in the fourth quarter of 2009, U.S. lodging demand now has grown for 29 consecutive quarters, and led to the record occupancy levels we currently are observing,” said CBRE Hotels Americas Research Senior Managing Director R. Mark Woodworth. “Given the positive economic outlook for the remainder of the year, we are projecting demand to outpace supply once again in 2017, thus resulting in an eighth successive year of occupancy growth for the U.S. lodging industry.”

Among the largest markets, New York currently has the most rooms under contract at 27,806 rooms as well as the most rooms in construction with 15,473, STR said. Other markets with more than 15,000 rooms under contract in May included Dallas with 18,386 rooms; Houston with 16,613 rooms and Los Angeles/Long Beach with 15,663 rooms under contract.