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Pack Your Bags: Hotel Construction Pipeline Grows

By Lori Lovely | May 30, 2023
hotel room interior
For the fourth consecutive quarter, the construction pipeline for hotel projects in the United States has seen growth, according to the April 2023 Lodging Econometrics’ U.S. Construction Pipeline Trend Report. The first quarter of 2023 saw a pipeline increase of 9% year over year.

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For the fourth consecutive quarter, the construction pipeline for hotel projects in the United States has seen growth, according to the April 2023 Lodging Econometrics’ U.S. Construction Pipeline Trend Report. The first quarter of 2023 saw a pipeline increase of 9% year over year.

Additional findings in the report indicate 5,545 projects (658,207 rooms) at the close of the first quarter. Q1 also saw growth of hotel projects already under construction, scheduled for construction in the next year, and in the early planning stages—all of which account for 44% of the pipeline and set a record of 2,434 projects (276,274 rooms).

Reasons for the record-setting pace of pipeline growth can be attributed to a vigorous recovery in travel demand and an increase in consumer confidence and spending. However, according to Lodging Econometrics representatives, the pipeline isn’t at its full potential. They believe it is limited by today’s economic challenges and uncertain financial climate.

Overcoming some of those challenges, Marriott International, Hilton and InterContinental Hotels Group, which represent 68% of properties in the construction pipeline, are turning to extended-stay hotels. Hilton’s extended-stay brand Home2 Suites leads the pack, with 546 projects (56,001 rooms).

The big three aren’t the only hoteliers turning to the extended-stay model. Choice Hotels recently debuted “Premium Kitchen in a Box,” a midscale model allowing franchisees to convert transient hotels into economy extended-stay MainStay Suites properties. Together, engineers, architects and designers work to transform transient guestrooms into full, extended-stay suites with kitchens. This is just one of the customer-centric options hotel brands are offering to improve the guest experience.

Bruce Ford, senior vice president with Lodging Econometrics, said the supply chain, inflation and the cost of capital aren’t normal right now. Therefore, developers are waiting to begin projects. He considers conversion or renovation a cost-effective alternative to new construction and says several owners and developers are looking into it.

Per the report, renovations and brand conversions in the United States tallied record counts of 1,953 hotel projects (253,533 rooms) in Q1 2023—up 38% (37% rooms) year over year.

Extended-stay lodging is winning over developers due to efficiency resulting from less need for housekeeping during longer guest stays, according to Ford. “When developers engage in new construction, they want costs to be predetermined with a theory of no surprises,” he said.

Matt McElhare, senior director of Choice Hotels’ extended-stay brands, believes the option of conversion could increase the gross operating profit of developers by 10%–15% in the transition from an average select-service hotel. “The upside [of extended-stay conversion] is huge because of that performance differential,” he said. “It’s a compelling value for a developer.”

McElhare went on to say that he thinks the extended-stay option will also be favored by new construction developers because it presents fewer challenges than new construction.

About The Author

Lori Lovely is an award-winning writer and editor in central Indiana. She writes on technical topics, heavy equipment, automotive, motorsports, energy, water and wastewater, animals, real estate, home improvement, gardening and more. Reach her at: [email protected]


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