Are you hesitant about renovating your current hotel property because of the substantial decline in travel during recent years? Recent data indicates hotel construction is trending up as pent up demand and increased consumer spending has led to record-high rates of travel and improved hotel revenue over the last few months. Even though the hotel industry is still facing some economic challenges, 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. The hospitality industry’s ability to adapt to the constantly changing economic environment provides a positive outlook for hotel performance, and its eventual full recovery.
According to Lodging Econometrics (LE), early planning hotel projects and room counts nationwide hit a new all-time high in the first quarter with 2,434 projects/276,274 rooms. Year-over-year, the Top 25 markets in the U.S., as a group, have seen a 10% growth in early planning projects. According to the report, this is the fourth consecutive quarter of total pipeline growth for the U.S. hotel construction industry, which can be, in part, attributed to the robust recovery of travel demand. Projects scheduled to start construction in the next 12 months are up 14% by projects and 12% by rooms year-over-year. Projects and rooms in the early planning stage increased 18% and 17% year-over-year, reaching all-time high counts.
The top five U.S. markets with the largest hotel construction pipelines at the close of the first quarter are led by Dallas with, record-high project and room counts, followed by Atlanta, Los Angeles, Phoenix, and Nashville. In another report, LE analysts also detailed the leading franchise companies and their brands in the construction pipeline at the close of the first quarter. Marriott International tops the charts, followed closely by Hilton Worldwide with a record-high count, and then InterContinental Hotels Group (IHG). Combined, these three franchise companies comprise 68% of the projects in the total U.S. pipeline.
Brand conversion and renovation activity continues to be a significant focus in the lodging industry. In the first quarter of 2023, renovation and brand conversion activity in the U.S. continues to boom as LE recorded record-high hotel renovation and brand conversion totals of 1,953 active projects/253,533 rooms for a 38% increase by projects and a 37% increase by rooms year-over-year. LE expects renovation and conversion activity to continue growing as owners spend to bring their hotels into alignment with current brand standards or look elsewhere for new brand identification. The markets with the largest count of combined renovation and conversion projects are Atlanta, Houston, Chicago, Dallas, then San Diego.
LE is forecasting the top 50 markets in the U.S. to open 319 new hotels/42,743 rooms in 2023. LE analysts anticipate that new hotel openings will continue to rise within the top 50 markets, forecasting 327 new hotels/43,525 rooms to open through 2024.