NASHVILLE, Tennessee—Although global hotel expansion gets the majority of attention, the pipeline in the United States also is growing, Duane Vinson, STR’s VP of database content and integrity, said during the Hotel Data Conference last week.
In a session titled “What’s up with the pipeline? U.S. Hotel Development,” Vinson said that although brands are developing at a rapid pace in Brazil, Russia, India and China, the United States is continuing to develop and plan new properties, as well.
“Seventy percent of projects (in the U.S.) are branded,” he added. STR is the parent company of HotelNewsNow.com.
During 2011, 379 hotels comprising 38,909 rooms opened in the U.S.; New York has the largest active pipeline with 172 hotels comprising 21,509 rooms.
“The media talks about hotels outside of the U.S.,” Vinson said, but “the economic outlook for the rest of the world is bleak and the U.S. continues to improve.”
The pipeline of rooms in the in construction phase is up 12.2% from July 2011 to July 2012. However, the active pipeline is down 6.8%. Vinson noted a “slowdown” in the planning and pre-planning stages.
During 2008, the height of the recession, there was a ballooning of projects (1,397 hotels with 153,600 rooms).
“We built into a recession,” Vinson said. In 2011, however, only 379 hotels opened with 38,909 rooms.
Fewer properties were closing in 2008, he said, because “there was no good use for the land,” and “mom-and-pop hotels were more efficient with a lower operating cost,” meaning they could operate during the depths of the recession, Vinson said.
“The number of existing rooms continued to grow,” Vinson said.
During the recession many projects were deferred or abandoned, he said. However, deferred properties can “come back to life; they’re more likely to be resuscitated,” when the economy gets better.
Currently, there are 4.9 million rooms compared to 4.4 million rooms in 2005, which shows a compound annual growth rate of 1.2%.
Pipeline by chain scale
When it comes to chain-scale segments, Vinson said the upscale and upper-midscale segments had the most projects in the final planning stage with 37,000 projects and 42,900 projects, respectively. The unaffiliated segment also is seeing progress, but Vinson noted those projects tend to “filter into the midscale or economy segments.”
Of the top 30 brands, “Hilton has dominance of rooms in construction,” Vinson said, “but no brand is very dominant.”
Vinson said there are large projects going on, as well, including:
- the Marriott Marquis Convention Center in Washington, D.C., with 1,175 rooms opening May 2014;
- the Omni Nashville with 800 rooms opening in November 2013;
- the JW Marriott Marquis in Austin, Texas, with 1,003 rooms, opening in 2015;
- the Hyatt Regency McCormick Place, opening 800 rooms in Chicago in June 2013;
- the Radisson Blu at Mall of America in Bloomington, Minnesota, opening 501 rooms in March 2013; and
- the Hilton Columbus Downtown in Ohio, opening 532 rooms in October 2012.
In the pipeline, “luxury is not seeing a whole lot going on,” Vinson said, with four large projects showing up on the radar, such as the Loews hotel in Orlando, Florida.
As far as the other segments, the upper-upscale segment has a “few larger projects through 2012 and 2013. Overall, the active pipeline is down 27.6% year over year,” Vinson said. The upscale segment is “seeing a lot of activity,” with projects in construction up 33% and final planning projects increasing 42.5%. The midscale segment also is showing “a lot of activity in 2013 and 2014,” Vinson said.
However, the economy segment is stagnant. “There’s not much going on, not a lot of growth. There’s not much there at all,” Vinson said.
Market supply and demand
Vinson said New York, Washington, D.C., Orlando and Nashville are the markets with the most rooms in construction. Focusing on New York, with an 8.5% increase in existing supply growth, Vinson asked if the market could absorb this significant supply increase. “It’s hard to argue they won’t be able to do it,” he concluded.
North Dakota and West Texas are also seeing large hotel demand. It’s a tale of two oil fields, Vinson said.
With the Bakken Shale oil field in North Dakota, “it’s an explosion in hotels,” Vinson said. For example, Vinson looked at Minot, a city in north central North Dakota, where the cheapest room rate was $150. Revenue is up 50%, and there is a huge explosion of hotel supply, with 4,200 total rooms in North Dakota as of July 2012; Choice Hotels International has 11 projects in the active North Dakota pipeline.
West Texas, meantime, is seeing a labor and housing shortage. “There is demand and revenue growth—tremendous growth—but no supply growth.” West Texas had 21,309 hotel rooms in January 2010 compared to 22,790 rooms in July 2012.
There might not be a strong push for more room supply because, Vinson said, “It’s Texas. Texas oil booms come and go.”