Growth in the construction pipeline remains slow and is likely to continue at a modest pace at least through early 2014, according to Lodging Economics’ (LE) “Lodging Real Estate Trends- Executive Summary” for the U.S.

As of Q3 of this year the total construction pipeline stands at 2,819 projects and 358,691 rooms⎯⎯a year-over-year increase of just two percent by projects and five percent by rooms. Hotels under construction have uptrended for nine quarters and are now at 710 projects and 92,065 rooms, an increase of 27 percent for projects and 30 percent for rooms. 

Meanwhile, totals for hotels scheduled to start in the next year stand at 1,008 projects and 122,905 rooms, which is an increase of 17 percent and 22 percent, respectively. Projects in early planning, however, have been in steady decline since their peak in Q4 2010, and show a decrease of 19 percent for projects and 15 percent for rooms.

The increase in forward migration is similar for projects already in the pipeline, but previously stalled in early planning. Already partially invested, and with the recovery of the broader economy and lodging industry confirmed, developers are anxious to resolve the remaining approval and financing issues necessary to get underway.

Early planning totals then tend to reach cyclical lows in the beginning years of the new real estate cycle. This stage does not replenish its projects until much later in the cycle, when the economy is growing at a faster pace and financing for larger projects becomes more accessible.
Of the non-casino projects in the pipeline, 79 percent have already chosen a brand. Thirty percent of the projects are in the upscale category while 61 percent are in the midscale category and mostly consist of extended stay and select and limited service brands. In the last three years, over 85 percent of all new openings have been branded. LE estimates that of the 586 pipeline projects that are currently unbranded, approximately 500 to 525 will choose a brand before opening.

Three companies are the clear branding leaders. After accounting for casino and unbranded projects, 27 percent of the remaining pipeline rooms are branded by Hilton. Marriott follows closely with 26 percent and then IHG with 21 percent.
