THE U.S. HOTEL construction pipeline increased by 7 percent in the third quarter of this year, when compared to the same quarter a year ago, reported Lodging Econometrics.
The company also noted in its November news release that developers are rushing to get shovels in the ground before the end of the year to mitigate rising costs.
“The total pipeline has been growing modestly over the past two years and is expected to continue its ascent at least into the first quarter of 2019,” reports Lodging Econometrics.
The 3Q18 pipeline stands at 5,376 projects or 650,600 rooms, an increase of 365 hotels and 41,800 rooms over 3Q17 when projects totaled 5,011 projects or 608,800 rooms.
It notes the pipeline is “still distant from the all-time high” reached in the second quarter of 2008 when analysts charted nearly 5,900 projects [or] 785,500 rooms.
The U.S. lodging industry is “not expected to reach those records again this cycle,” said Lodging Econometrics.
Hotels scheduled to start construction in the next 12 months – 2,100 projects or 253,000 rooms, are near even year over year. Hotels under construction number 1,638 projects with a total of 213,400 rooms, a modest YOY increase.
Supporting the analysis is a recent report by Construction Dive on Dodge Data & Analytics’ prediction that overall construction starts in the U.S. in 2019 will increase by a slight 0.15 percent to $808 billion.
Lodging Econometrics noted activity that indicates a rush to market by developers anxious to get ahead of rising interest rates and other trends that threaten to slow the pace of construction.
Hotel developments in the early-planning stage – 1,600 projects or 84,000 – show a year-over-year 31 percent increase in projects and a 23 percent increase in rooms.
“Big jumps are typical for the back-end of a hotel real estate cycle when developers rush to move projects from the drawing board to the pipeline before further interest rate hikes, the rising cost of building materials and the continued struggle to secure skilled labor take effect,” reported Lodging Econometrics.
The company also reports the hotel renovation and conversion pipeline also is signaling significant levels of activity. The 1,770 hotels (274,400 rooms) “is the largest count that LE has ever recorded,” said the company. “These numbers show a remarkable 30 percent increase by projects and 27 percent increase by rooms, YOY.
“The surge in announced renovation and conversion counts can also be seen quarter-over-quarter with a 25 percent increase in both projects and rooms since the second quarter of 2018.”