The record U.S. hotel construction pipeline kept growing in the first quarter of this year, hitting new all-time project counts, according to Lodging Econometrics’ Q1 2024 U.S. Hotel Construction Pipeline Trend Report.
The pipeline reached 6,065 projects, or 702,990 rooms, in the first quarter, growing 9% and 7% year over year, respectively.
Hotel projects under construction increased 9% year over year to 1,144 projects, or 141,336 rooms, in the quarter, while projects slated to start construction in the next 12 months increased 10% to 2,259 projects. Projects in the early planning stage also increased 9% year over year in Q1, reaching a record high of 2,662 projects.
Extended stay hotels “dominated” the pipeline, and renovations and brand conversions also saw “significant growth,” according to Lodging Econometrics. With strong momentum expected to continue, Lodging Econometrics analysts forecast robust conversion and renovation activity will continue for the remainder of the year, and modest growth in new hotel openings is likely.
Pipeline standouts
Dallas led all other U.S. markets for the largest total hotel construction pipeline in Q1, with 185 projects, or 21,882 rooms, according to Lodging Econometrics data obtained by Hotel Dive. This was slightly below its record-high pipeline at the end of Q4 2023.
Atlanta followed Dallas, with an all-time high pipeline of 153 projects, or 17,929 rooms. Nashville (127 projects), Phoenix (123 projects) and the Inland Empire region of California (121 projects) followed Atlanta for the largest U.S. hotel construction pipeline.
In Q1, the leading markets for new project announcements were New York with 12 projects, or 1,660 rooms, followed by Orlando, Atlanta, Denver and the Inland Empire.
Of all the projects in the pipeline, more than half were concentrated in the upscale, upper midscale and midscale chain scales.
Hotel companies Choice Hotels International and Wyndham Hotels & Resorts, which have historically dominated the lower-tier economy segment, have recently made pushes in upscale.
Meanwhile, Marriott International is expanding in the U.S. midscale segment for the first time with its newly launched StudioRes extended stay brand.
Extended stay
Demand for extended stay — “a segment that developers have increasingly favored in recent years,” Lodging Econometrics said — continued in Q1, with the segment making up a significant portion of projects in the total pipeline.
Brands in the segment accounted for 37% of the total projects under construction, 41% of projects scheduled to begin within the next 12 months and 39% of projects in the early planning stage, according to Lodging Econometrics.
Some 63% of extended stay projects in the pipeline were for middle-tier brands, like Marriott’s StudioRes.
Hyatt and Hilton are also expanding in the middle-tier extended stay segments. Hyatt recently broke ground on its inaugural upper midscale Hyatt Studios hotel, and Hilton is growing its lower midscale LivSmart brand.
Wyndham, on the other hand, recently entered the upscale extended stay segment through a strategic partnership with WaterWalk.
Hotel conversions
Beyond extended stay, Lodging Econometrics forecasted that heightened conversion activity will continue in 2024.
At the beginning of the year, the company’s SVP Bruce Ford told Hotel Dive that conversions will remain one of the fastest ways to grow portfolio scale until the hotel construction financing environment loosens, which could be as soon as the second half of 2024.
Los Angeles had the largest count of combined renovation and conversion projects in its pipeline, with 31 projects, or 4,857 rooms, according to Lodging Econometrics. New York, Atlanta and Chicago followed, each with 30 projects accounting for 8,020 rooms, 3,488 rooms, and 8,128 rooms, respectively.
IHG Hotels & Resorts is expanding in the conversion space with its newly launched midscale brand Garner and expanding upper midscale conversion brand Atwell Suites.
Openings outlook
As a result of the record pipeline, Lodging Econometrics predicts there will be modest growth in new hotel openings through year-end.
Some 114 hotels, representing 15,506 rooms, opened in the U.S. in Q1, with more than half located in suburban markets. New York City, though, is set to “top the new hotel openings chart” in 2024, with 26 hotels expected to open, according to Lodging Econometrics.
The company forecasts an additional 547 projects, with 60,483 rooms, will open nationwide by year-end, representing a 1.3% increase in new hotel supply.
