What’s changed since the US pipeline’s last peak
What’s changed since the US pipeline’s last peak
12 SEPTEMBER 2019 7:40 AM

STR’s Dominik Kozissnik looked at how the U.S. hotel pipeline has changed in the last 10 years during a session at the Hotel Data Conference.

NASHVILLE, Tennessee—The U.S. hotel pipeline has reached a high of 200,000 rooms in construction, which is the highest it’s reached in a decade.

During the “Riding the pipeline’s 10-year high” session at the 2019 Hotel Data Conference, Dominik Kozissnik, global director of census at STR, parent company of HNN, looked into what’s changed in the U.S. pipeline since 2007.

Top 25 markets
At the last high in 2007, there were more than 211,000 rooms in construction in the top 25 U.S. markets. This July, there were 206,000 rooms.

“So we only have a gap of about 5,000 rooms between (2007 and 2019),” he said.

Looking at rooms in construction in top 25 markets, things have changed a bit in the last decade. Cities such as San Diego, Seattle and Richmond, Virginia, have dropped off since 2007, and new markets such as Denver, Philadelphia and Columbus, Ohio, have joined the top 25 markets for rooms in construction in 2019.

Types of projects in construction
The average size of hotel projects has decreased by 30 rooms since 2007, Kozissnik said.

There are only 47 projects in the pipeline with 500 rooms or more compared to 155 in 2007, and 50% of the projects right now are midscale or upper midscale versus 42% in 2007, he said.

“We’re building smaller, less-big projects and low-end projects compared to 2007,” he said.

Since 2007, the number of hotels closed has stayed about the same, which means most of the rooms in construction that are open today are new supply to the market, he said.

Total US pipeline
Looking at the total U.S. pipeline, Kozissnik said there are 695,000 rooms in the pipeline and the majority are in final planning. There are 77,000 rooms slated to open the rest of this year, and 224,000 rooms expected to open in 2021.

“When we look at the year-over-year pipeline, we can see all phases across the board are up,” he said. “The active pipeline is up 8.4%, but all the phases, including planning, are up year over year and those planning and final planning projects at some point are going to go into construction.”

Active pipeline across chain scales
The active pipeline by class shows that 86% of projects are in midscale to upscale class with 79% of the rooms in those segments, he said.

The total U.S. rooms pipeline by parent company shows that Hilton, Marriott International and InterContinental Hotels Group combined make up approximately 75% of the pipeline right now.

“If you look at 2007 where they only made up about 39%, if you include Starwood, 45%, (there’s) a really big contrast there,” he said.

For the top 15 U.S. brands, Home2 Suites has the most rooms in the active pipeline with more than 2,000 rooms, Kozissnik said.

He said that Oyo Homes and Rooms is a brand to keep an eye on. The company has only 800 rooms in the U.S., but it has more than 400,000 in China and over 200,000 in India.

“They have a rapid conversion model that consists of a little bit of paint, a little bit of logo on top, not much to it, but this is something that might fly under the radar because it’s not necessarily new construction but in terms of conversion, definitely some activity, and we will see how that continues in the U.S.” he said.

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