Dive Brief:
– The U.S. hotel construction pipeline hit a record high of 5,964 projects, or 693,963 rooms, in the fourth quarter of 2023, according to Lodging Econometrics’ 2023 year-end U.S. Construction Pipeline Trend Report. In the quarter, the pipeline surpassed the previous project count high, which was 5,883 projects in Q2 2008.
– In the fourth quarter, hotel conversions and renovations dominated the pipeline, with a combined record of 2,028 projects, or 303,330 rooms. Additionally, in Q4, the upper midscale segment had the highest project count of all chain scales in the pipeline, reaching an all-time high of 2,245 projects, or 218,112 rooms. And the market with the largest hotel construction pipeline was Dallas, followed closely by Atlanta.
– The fourth quarter results signal upward growth for hotel construction despite a still-challenged lending environment, according to Lodging Econometrics. Hotel conversions, in particular, have garnered strong interest from developers in recent months and are expected to continue to do so in the first half of 2024.
Dive Insight:
There were 1,118 hotel projects, or 141,768 rooms, under construction in the U.S. in the fourth quarter of 2023, up 11% by projects and 5% by rooms year over year.
The number of U.S. hotel projects scheduled to start within the next 12 months — 2,259 projects, or 261,582 rooms — also increased year over year, up 9% and 11%, respectively. And projects in the early planning stage hit all-time highs in Q4, standing at 2,587 projects, or 290,613 rooms — year-over-year increases of 9% and 4%, respectively.
Hotel conversions and renovations, which made up a large chunk of the total pipeline, saw growth as well. Combined, conversion and renovation activity increased 5% by projects and 21% by rooms year over year. And project and room counts were both up 6% from the previous quarter, another record-setting quarter for conversion and renovation activity.
Lodging Econometrics SVP Bruce Ford previously told Hotel Dive that the hotel conversion pipeline will continue to grow throughout 2024, as conversions remain one of the fastest ways to grow portfolio scale in the current lending environment.
Emerging brands like IHG’s Garner and Spark by Hilton, both of which launched in 2023, will likely bolster conversion pipeline growth this year. Ford previously said he wouldn’t be surprised to see more conversion-oriented brands launch in 2024 to keep up with demand.
As for where hotel development is happening, Dallas led other U.S. markets with the largest hotel construction pipeline. In the fourth quarter, the city had a record-breaking 193 projects, or 22,291 rooms, signifying “Dallas’ robust growth and confidence in the hospitality sector,” according to Lodging Economics.
Atlanta followed closely behind Dallas, setting its own record with 151 projects, or 18,730 rooms. Hospitality experts previously told Hotel Dive a robust meetings and events industry is driving the city’s hotel boom. One highly anticipated project in the city, Signia by Hilton Atlanta, opened earlier this month ahead of schedule.
Nationwide, Lodging Econometrics predicts lending volume to increase slowly in the first half of 2024 and then gradually pick up pace in the second half of the year. This could have positive implications for new construction and acquisitions, as well as conversions, the report detailed.
