U.S. Hotel Pipeline Expands but Cost Concerns Mount

The number of U.S. hotel construction projects in the development pipeline at the end of the second quarter was about 9 percent higher than one year prior, according to a new report from Lodging Econometrics. While the company expects growth to continue due to developers’ pent-up demand, elevated costs for materials and supply chain issues could slow its pace, according to the report.

The total second-quarter U.S. hotel construction pipeline stood at 5,220 projects, up 9 percent year over year, representing about 621,000 rooms, up 4 percent. Projects in the early planning stages of development were up 26 percent to nearly 2,250—a record high, according to Lodging Econometrics—representing a 15 percent in increase in rooms. However, the company reported 965 projects under construction, representing about 131,000 rooms, figures that were down 17 percent and 18 percent, respectively, from one year prior.

Lodging Econometrics predicted development growth would continue throughout 2022 and noted that “pent-up demand and increased consumer sentiment and spending has led to record-high rates of travel and much improved hotel revenue over the last few months,” but suggested jittery economic conditions cloud developers’ futures.

“Market volatility, persistent inflation, rising energy prices, elevated transportation costs, materials shortages, and supply chain backlogs continue to pose a challenge and slow the timeline to full recovery,” according to Lodging Econometrics. Still, the company noted that “corporate and personal balance sheets are reasonably strong, the U.S. banking system is healthy, and the planning of new hotel projects continues. Hotel investors and developers are still eager to move forward on projects and are being more mindful when approaching a deal.”

Marriott Top Chain

Marriott International had more U.S. projects under construction at the close of the second quarter than any other hotel company, with 1,355 projects representing about 167,000 rooms in development. Hilton Worldwide had 1,312 projects representing about 148,000 rooms in the pipeline, and IHG Hotels & Resorts had 789 projects with about 79,700 rooms.

Hilton’s Home2 Suites led all individual brands with 465 projects in development, totaling about 48,000 rooms, followed by IHG’s Holiday Inn Express (299 projects with about 28,600 rooms) and Hilton’s Hampton brands (281 projects with about 28,600 rooms). Marriott’s TownePlace Suites (270 projects with about 25,300 rooms) and Fairfield Inn (235 projects with about 21,900 rooms) followed.

Dallas Leads Cities

More projects as of June 30 were in the pipeline for Dallas than any other U.S. location, with 173 projects planned totaling about 20,700 rooms. It was the fourth straight quarter Dallas topped the pipeline list, and the second-quarter figures were record highs for the city, according to Lodging Econometrics.

Dallas was followed by Atlanta (140 projects with about 18,100 rooms), Los Angeles (124 projects with about 20,400 rooms), New York (113 projects with about 19,200 rooms) and Phoenix (108 projects with about 15,000 rooms.)

Chris Davis www.businesstravelnews.com