PORTSMOUTH, N.H. — According to the Q3 2022 Construction Pipeline Trend Report for the United States from Lodging Econometrics (LE), the U.S. hotel construction pipeline stands at 5,317 projects totaling 629,489 rooms, up 10 percent by projects and 6 percent by rooms year over year (YOY).
At the close of Q3, LE reports that 987 hotel projects totaling 135,050 rooms are under construction in the United States. The number of projects scheduled to start construction in the next 12 months stands at 2,074 projects and 236,894 rooms, up 14 percent and 13 percent YOY, respectively. Project counts in the early planning stage reached record highs in Q3 at 2,256 projects/257,545 rooms, a 14 percent increase by projects and a 7 percent increase in rooms YOY.
The lodging industry is healthy, and many hotel owners are expected to experience record-high revenues in 2022, according to LE. As lending rates have changed significantly in 2022 due to the Federal Reserve’s rate increases, ownership and management groups are finding that reinvesting in their current portfolios, whether that be renovating or repositioning to another brand, is a better return on investment right now. At the end of Q3 2022, brand conversion room counts reached record highs of 988 projects/99,474 rooms. The renovation pipeline remained strong as well, with 893 projects/140,440 rooms—some of the highest counts since Q3 2018. Combined, renovation and conversion activity accounts for 1,881 projects/239,914 rooms, up 36 percent YOY by projects and 50 percent by rooms YOY.
Travel throughout the United States saw a steady recovery in all segments over the summer months and is expected to continue into the fall and winter months, LE reports. New project announcements and construction starts continue to recover from the lows experienced during the COVID-19 pandemic. The new construction pipeline in the United States continues to grow, albeit at a moderate, modest pace, with projects in the early planning stage establishing a new peak for this cycle. This peak signals a favorable outlook by developers for development conditions to improve in the near future.
The upper-midscale chain scale continues to have the largest project count of all chain scales in the total U.S. construction pipeline, standing at 2,127 projects/214,473 rooms in Q3 2022. Following upper midscale is upscale, which stands at 1,528 projects/202,907 rooms at the close of the quarter. Together, upper-midscale and upscale project counts in the pipeline account for 69 percent of all projects.
The brands with the most projects in the upper-midscale chain scale are Home2 Suites by Hilton with 494 projects/50,809 rooms; IHG’s Holiday Inn Express with 297 projects/28,323 rooms; and TownePlace Suites by Marriott with 291 projects/27,329 rooms. In the upscale chain scale, the top brands are Residence Inn by Marriott with 234 projects/28,659 rooms and SpringHill Suites by Marriott with 148 projects/16,350 rooms, followed by IHG’s Staybridge Suites with 125 projects/12,962 rooms.
At the end of Q3 2022, 1,846 projects/189,289 rooms in the U.S. construction pipeline were extended-stay projects, accounting for 35 percent of all projects in the total U.S. hotel pipeline. Home2 Suites by Hilton currently has the largest extended-stay pipeline with 494 projects/50,809 rooms. The brand with the second-largest number of projects in the extended-stay pipeline is TownePlace Suites by Marriott with 291 projects/27,329 rooms, followed by Residence Inn by Marriott with 234 projects/28,659 rooms.
Thus far in 2022, the United States saw 343 new hotels open, accounting for 39,772 rooms, with another 182 projects/22,261 rooms anticipated to open by the end of the year. This represents a 1.1 percent increase in new hotel supply for 2022. LE analysts expect new hotel openings to increase in 2023 and 2024, representing a 1.3 percent supply increase for 2023 and a 1.4 percent supply increase for 2024.