Hotel construction in the U.S. increased marginally in December 2022, after 25 consecutive months of YOY declines, revealed STR’s pipeline data.
At a market level, New York City, Phoenix and Dallas will report the largest supply percentage increases from current construction. Among the chain scales, luxury and upscale categories lead in the measurement.
- In construction: 159,344 rooms (+0.3%)
- Final planning: 213,066 rooms (+15%)
- Planning: 240,092 rooms (-15.6%)
Although the overall pipeline continued to decline YOY, there was strength in the latter phases of development in December.
“Over the past year, we’ve seen late-stage pipeline rooms consistently decline from 2021 levels, while rooms in the planning phase often showed double-digit growth. We started to see a change in this pattern in November when final planning rooms significantly jumped year over year and planning rooms came down pretty firmly. The same occurred in December, with the only difference being construction increasing slightly over 2021. When looking strictly at volume, the in-construction phase has been fairly stable throughout the year, remaining under 160,000 rooms and showing month-over-month increases from July through October and again in December,” said Alison Hoyt, STR’s senior director of consulting.
In terms of the in-construction phase of the pipeline, luxury chains reported the highest number of rooms as a percentage of the current supply.
1. Luxury- 5.3%, 7,241 rooms
2. Upscale- 4.6%, 41,111 rooms
3. Upper midscale- 3.7%, 43,946 rooms
4. Upper upscale- 3%, 20,140 rooms
5. Midscale- 2.5%, 10,766 rooms
6. Economy- 0.9%, 6,482 rooms
New York City leads the major markets in rooms in construction as a percentage of existing supply.
1. New York City – 8.5%, 10,944 rooms
2. Phoenix – 7.1%, 4,968
3. Dallas – 5%, 4,877
4. Nashville – 4.8%, 2,746
5. Detroit – 4.7%, 2,192 rooms
The markets with the most luxury rooms under construction were the ones that performed well during the pandemic and/or are strong leisure destinations, with Fort Worth/Arlington, Texas, and New York City at the top of the list.
“While NYC also has the most rooms in construction as a percentage of existing supply, the market will likely see a slowdown after ongoing projects are built due to new development restrictions in place. Nashville is also showing signs of a slowdown, so we could expect a shuffle in the top pipeline markets later in 2023,” said Hoyt.