U.S. Hotel Construction Pipeline at Highest Level Since 2008, Says Lodging Econometrics

by Scott Reid

PORTSMOUTH, N.H. — The U.S. hotel construction pipeline ended 2015 at its highest year-end total since 2008, with 4,413 projects and 546,135 rooms in the pipeline, according to Lodging Econometrics (LE). Still, this total was below the 2007 cyclical high of 5,438 projects and 718,387 rooms.

The Portsmouth-based hotel research and consulting firm defines the construction pipeline as a combination of projects currently under construction, projects expected to begin construction within the next 12 months or those that are in the early planning stages.

“On average, it takes about two years for a typical project to open as a new hotel after it has been announced into the construction pipeline,” says Patrick Ford, president of Lodging Econometrics. “The recent pipeline acceleration will not be fully felt for at least another two years.”

According to LE, there were 1,312 projects under construction at the end of 2015, up 226 projects or 21 percent on a year-over-year basis. The total number of projects scheduled to begin construction in the next 12 months increased by 575 to 1,926, up 43 percent year over year.

Projects in the early planning stages totaled 1,175, a decrease of 33 projects, or 3 percent, year over year.

LE forecasts that 872 hotels with 99,279 rooms will open in 2016, up more than 19 percent from 2015, when 731 projects opened with 81,698 rooms. LE also forecasts that 1,091 hotels will open in 2017, featuring 123,391 rooms (see bar chart above).

What’s Getting Built?

A breakdown of the data by market segmentation among hotel chains shows that nearly one-third (32 percent) of all rooms in the construction pipeline at the end of 2015 were classified as upper midscale, followed by the upscale segment (27 percent), and unbranded (21 percent). Economy and luxury hotel rooms accounted for a much smaller piece of the construction pipeline, 3 percent and 2 percent respectively (click pie chart to enlarge).


City Versus Suburbs

By location, the largest number of hotels in the construction pipeline was in the suburbs (2,013 projects totaling 227,909 rooms). In fact, 46 percent of all projects in the construction pipeline were in the suburbs at the end of 2015. By comparison, nearly 1,000 projects in the construction pipeline were located in central business districts (997 hotels with 163,801 rooms), accounting for 22 percent of the total construction pipeline.

Hotel projects located along highways accounted for 23 percent of projects in the total construction pipeline (1,040 hotel projects with 91,034 rooms). The balance of projects in the construction pipeline by location included resorts (5 percent) and airports (4 percent).

Sweet Spot: 200 Rooms or Less

The LE data also analyzes the hotel construction pipeline by hotel size and includes five categories: more than 500 rooms; 301 to 500 rooms; 201 to 300 rooms; 100 to 200 rooms; and less than 100 rooms.

Of the 4,413 hotel projects in the construction pipeline at the end of 2015, some 2,137 projects were 100 to 200 rooms in size. That’s nearly half of all projects (48 percent).

The number of projects less than 100 rooms totaled 1,885, or 43 percent of all projects in the construction pipeline.

In contrast, there were 30 hotels with more than 500 rooms in the construction pipeline at the end of 2015.

— Scott Reid

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