Following the substantial decline in travel during recent years, pent-up demand and increased consumer sentiment and spending has led to record-high rates of travel and much-improved hotel revenue over the last few months. Analysis of the hotel industry at the end of the second quarter suggests the outlook is positive and growth is expected to continue throughout the year, albeit at a decelerated pace than initially expected. The industry’s ability to adapt to the constantly changing economic environment provides a positive outlook for hotel performance and its eventual full recovery.
However, market volatility, persistent inflation, rising energy prices, elevated transportation costs, materials shortages and supply chain backlogs continue to pose a challenge and slow the timeline to full recovery. Some hotels have noted a reduction in certain services and put a limit on the number of available room nights. Furthermore, although leisure travel has had a robust comeback this year, business travel is only slowly returning. To counterbalance the occupancy lag and capitalize on the strong leisure recovery, room rates have significantly increased with ADRs considerably higher than those recorded in 2019.
Even though the U.S. and the hotel industry are facing some economic challenges that can be expected to continue into the near future, corporate and personal balance sheets are reasonably strong, the U.S. banking system is healthy, and the planning of new hotel projects continues. Hotel investors and developers are still eager to move forward on projects and are being more mindful when approaching a deal. There were a total of 428 new projects accounting for 47,034 rooms announced into the pipeline in the second quarter. This number more than doubled YOY when compared to the second quarter of 2021 when 202 new hotel projects/25,653 rooms were recorded. Also of note, at Q2 2022, there are a total of 1,889 projects/237,420 rooms in the renovation or conversion pipeline in the U.S., with project and room conversions reaching an all-time high and increasing 66% YOY by projects and 35% YOY by rooms.
During the first and second quarters of this year, the U.S. opened 247 new hotels with 28,116 rooms. LE is forecasting another 428 projects/50,322 rooms to open during the year for a total of 675 projects/78,438 rooms by year-end, representing a 1.4% increase in new supply. A total of 733 projects/87,253 rooms are expected to open in 2023, representing a 1.5% increase in new supply. And, for the first time, LE has released its new hotel openings forecast for 2024, for which analysts expect 848 projects/93,581 rooms to open with a 1.6% new supply increase.
Tags: Construction Pipeline Trend Report, hotel contruction, Lodging Econometrics (LE), U.S. hotel construction pipeline
