During the first and second quarters of this year, the U.S. opened 472 new hotels with 59,034 rooms. LE is forecasting another 450 projects/51,754 rooms to open this year for a total of 922 projects/110,788 rooms by year-end. This will represent a 2.0% increase in new supply for 2021. A total of 1,008 projects/113,871 rooms are expected to open in 2022, representing a 2.0% increase in new supply for next year. And, for the first time this quarter is LE’s forecast for 2023, which LE is expecting 997 projects/115,271 rooms to open. This is again a 2.0% increase in new supply.
Following a nearly 16-month hiatus related to COVID-19 shutdowns, the first half of this year saw a substantial uptick in hotel bookings and travel reservation numbers. As vaccination rates rise and travel restrictions ease, consumer confidence continues to increase, and booking numbers move toward pre-pandemic levels. As demand increases, new hotel project announcements will soon follow. There were a total of 372 new projects accounting for 45,084 rooms announced into the pipeline in the first half. Of those totals, 202 new project announcements with 25,653 rooms occurred in the second quarter. The arrival of summer, a rebounding demand for domestic business and leisure travel, combined with the recent pledge from the U.S. Department of Commerce to invest $750 million in the travel and tourism industries, has investors and developers feeling increasingly optimistic. This confidence has resulted in a 20% increase in new project announcements in Q2 2021 when compared to the second quarter of 2020 when 169 projects/20,359 rooms were recorded.
Projects currently under construction stand at 1,165 projects/159,581 rooms. Projects scheduled to start construction in the next 12 months total 1,843 projects/213,744 rooms. Projects in the early planning stage saw a 25% increase in projects and a 28% increase in rooms YOY, standing at 1,779 projects/224,786 rooms. The increase in projects in the early planning stage reflects a combination of developer’s confidence to initiate new construction projects and the recalibration of some of their timelines for existing projects.
As COVID-19 safety guidelines and restrictions evolve across the country and in anticipation of international travel bans being lifted, more hotels are reestablishing renovation plans, and/or are repositioning their properties with a brand conversion. In the first half of this year, experts at LE recorded 1,152 active renovation projects/238,110 rooms and 1,181 active conversion projects/128,810 rooms throughout the U.S.
Los Angeles has second-most projects
Focusing on Los Angeles while many in the industry are in town for the Americas Lodging Investment Summit (ALIS), in the most recent Lodging Econometrics (LE) Market Trend Report, the L.A. market has a total of 135 projects/22,586 rooms in the construction pipeline, the second-largest market pipeline in the U.S. behind New York City, which has 146 rooms/25,232 rooms. In L.A., 34 projects/5,771 rooms are currently under construction, projects scheduled to start construction in the next 12 months are at 42 projects/6,359 rooms, and those in early planning are at 59 projects/10,456 rooms.
Los Angeles should continue its fast-paced growth. For the first half of the year, it ranked fifth of all markets for new hotel project announcements into the pipeline, with eight projects/998 rooms, slightly behind Austin, TX, which announced nine new projects.
Of the 10 market tracts in L.A., the three with the largest hotel construction pipelines are the Los Angeles Central Business District (CBD) with 39 projects/9,255 rooms; the Los Angeles East tract with 27 projects/3,687 rooms; and the Hollywood-Beverly Hills tract with 21 projects/3,306 rooms. These three market tracts combined account for 64% of the Los Angeles market’s total construction pipeline.
The top three market tracts with the highest count of projects presently under construction are the Los Angeles CBD with nine projects/13,997 rooms; the Los Angeles North tract with eight projects/926 rooms; and the Hollywood-Beverly Hills tract with five projects/820 rooms.
LE’s forecast for new hotel openings predicts the Los Angeles market will rank sixth in the nation for new hotel openings in 2021 with 19 projects/3,208 rooms, a growth rate of 3.1%. In 2022, L.A. will rank third with a growth rate of 3.7% and a forecast for new hotel openings of 26 projects/4,004 rooms.
There has been a total of 42 hotels sold or transferred during the last four quarters in L.A. Most of those taking place in the Los Angeles North Market Tract.
Tags: construction report Lodging Econometrics (LE) Los Angeles market
