US hotel construction pipeline grows again to new highs

For another consecutive quarter, total hotel construction projects in the United States grew to new highs.

In the second quarter of 2024, the total pipeline reached a record 6,095 projects, or 713,151 rooms, representing year-over-year growth of 9% and 8%, respectively, according to a Lodging Econometrics trends report. On a sequential basis, pipeline projects increased 0.5% in the quarter.

Compared to a year ago, projects currently under construction in the quarter increased by 10%, while projects scheduled to begin construction in the next 12 months increased by 5%. Meanwhile, projects in the early planning stage increased by 13% year-over-year in the quarter.

Extended stays remained “popular” among developers in the second quarter, with the upper-midscale and upper-end segments outpacing others in terms of project volume, the report said. Additionally, Dallas again led other U.S. markets in terms of the largest hotel construction pipeline.

Looking ahead to the second half of 2024, Lodging Econometrics predicts another 400 hotels will open, pushing total openings for the year well above 2023 levels.

Dallas leads again

According to the report, Dallas led all other U.S. markets in the largest hotel construction pipeline in the second quarter, with 189 projects, four projects shy of its all-time high at the end of the fourth quarter of 2023. The market maintained its lead from the first quarter, when it also had the largest hotel construction pipeline.

Atlanta followed with a record 159 projects, or 18,522 rooms. Next came the Inland Empire, California, with a record 124 projects; then Nashville with 123 projects; and Phoenix with 120 projects.

In the second quarter, Dallas also led with the most projects scheduled to begin in the next 12 months (73) and the most hotel projects in the early planning stage (86).

New York surpassed Dallas for the most hotel projects under construction during the quarter. New York had 46 projects under construction, or 7,572 rooms, while Dallas had 30 projects, or 3,523 rooms.

In terms of new projects announced during the quarter, Atlanta had the most, with 10 projects, or 1,140 rooms. Dallas followed closely behind, also with 10 projects, but with slightly fewer rooms, 1,051. Miami, Indianapolis and New Orleans followed close behind.

Long-term and upper-middle-range stays predominate

Across all markets, extended-stay remained a priority for developers in the second quarter. The category accounted for 36% of total projects under construction, 33% of projects scheduled to begin within the next 12 months and 34% of projects in the early planning stage. About 64% of projects in the extended-stay development pipeline were for mid-tier brands, according to Lodging Econometrics.

Several major hotel companies are expanding into the midscale segment, including Marriott International, which broke ground on its inaugural Studio Res hotel earlier this year. Marriott first launched the brand in June 2023, entering the U.S. midscale extended-stay segment.

Meanwhile, Hyatt is working on the first hotel under its upper-midscale extended-stay brand, Hyatt Studios. And Wyndham Hotels & Resorts opened its first Echo Suites extended-stay hotel earlier this month, with plans to significantly expand the brand.

Lodging Econometrics found that the upper-midscale chain segment led all other segments in total pipeline, with 2,262 projects or 219,547 rooms. It was followed by the luxury segment, with 1,417 pipeline projects or 175,343 rooms. Together, the luxury and upper-midscale segments comprised 60% of all pipeline projects, according to the report.

One hotel company that is strategically expanding into the luxury segment is Choice Hotels International. In the second quarter, Choice continued its push into this segment with the opening of a property in Cambria.

Vacancy Summary

More than half of the hotels already opening in 2024 are in the high-end and upper-midscale segments, according to Lodging Econometrics, which forecasts the two segments will have the highest growth rates through 2026.

In the first half of this year, 250 hotels with 29,777 rooms opened across the United States, according to the report.

Lodging Econometrics anticipates an additional 400 projects, or 44,451 rooms, will open during the remainder of 2024, bringing the total openings for the year to 650 hotels with 74,228 rooms.

New York City is expected to open the most hotels (23) by the end of the year, followed by Dallas (16), Atlanta (15), Inland Empire (14) and Orlando (13).

The forecast for the end of 2024 represents a 35% increase over the number of hotel openings in 2023, which stood at 480 hotels, or 60,922 rooms, according to the report.

Looking ahead, Lodging Econometrics analysts forecast there will be 779 hotel openings in the United States in 2025 and 928 openings in 2026, representing a 1.8% increase in new supply.

A major project scheduled to open in 2025 is the $1 billion VAI Resort in the Phoenix metropolitan area.