U.S. hotel development pipeline reaches cyclical low

UNITED STATES Further declines have brought U.S. hotel construction pipeline counts to a new cyclical low of 2,951 projects and 354,100 guestrooms, according to the latest report from Lodging Econometrics.

Just 14% of the total pipeline is currently in the construction phase, which is the lowest it has been since the 1990s. Conversely, early planning counts have been growing since late 2009. Hotels that are larger and have longer timelines are being planned today for when construction financing becomes more accessible.

With fewer projects under construction, the rate of new hotel openings has slowed. Just 72 hotels comprising 9,051 guestrooms came online as new supply in the first quarter, marking the first time in the current cycle that quarterly new openings have fallen below 100 hotels and 10,000 guestrooms. Lodging Econometrics has decreased its forecast for new openings slightly, with just 408 hotels and 44,035 guestrooms now expected to open this year.

Only 211 new projects were announced in the first quarter, totaling 28,641 guestrooms. Since the peak in 2007, the number of new project announcements has been insufficient to offset new hotel openings and the cyclically high cancellations and postponements that came in the wake of the credit crisis. The decline in new projects is expected to continue, causing the number of annual openings to reach new cyclical lows through the middle of the decade, Lodging Econometrics predicts.