Despite prevailing economic challenges, the United States’ hotel construction pipeline saw robust growth in Q2 2023, with a 7% year-over-year (YOY) increase in projects and a 6% rise in rooms.
The trend report released by Lodging Econometrics (LE) shows an overall optimistic outlook for the industry, backed by strong consumer confidence and demand.
With inflation, higher interest rates, and developers adopting a “wait and see” attitude, the pipeline’s growth, up 5% from its peak, indicates developers’ long-term faith in the economy. They are securing prime locations for future hotel developments despite some ongoing economic headwinds.
LE’s report highlighted strong demand for guest rooms fuelled by increased consumer confidence and sentiment, a trend likely to continue with the tourist season through August and the fall conference season starting after Labor Day.
Projects under construction saw modest quarter-over-quarter (QOQ) growth, up 10% in projects and 8% in rooms YOY, standing at 1,062 projects with 141,681 rooms. Furthermore, projects slated to start construction in the next 12 months marked an 11% increase in projects and 12% rise in rooms YOY.
The hotel construction pipeline is dominated by upscale and upper midscale new construction projects, making up 62% of projects and 57% of rooms. These two categories also represent 63% of projects and 57% of rooms projected to open by the end of 2023 and are anticipated to have the highest guest room growth rates through 2025.
Announced renovations and brand conversions reached record highs over the last four quarters, accounting for 1,939 projects with 253,473 rooms. Extended-stay hotel projects are also gaining popularity, with 2,083 projects featuring 214,557 rooms in the pipeline.
In total, LE forecasts 608 new hotels with 75,801 rooms to open by the end of 2023, representing a 1.4% increase in new supply and a 22% YOY increase over new hotels opened in 2022. For 2024 and 2025, LE anticipates 700 and 808 new hotel projects to open, respectively. These trends signal a steady growth trajectory for the US hotel industry.
