U.S. Hotel Construction Pipeline Hits New Heights — Again

For another consecutive quarter, the total number of hotel construction projects in the United States reached new highs.

In the second quarter of 2024, the total number of hotel projects in progress reached a record 6,095 projects, or 713,151 rooms, representing growth of 9% and 8% from the previous year, according to a trends report from Lodging Econometrics. On a sequential basis, projects in progress increased by 0.5% during the quarter.

Compared to the previous year, projects currently under construction during the quarter increased by 10%, while projects scheduled for construction in the next 12 months increased by 5%. Projects in the initial planning phase increased by 13% compared to the previous year during the quarter.

Extended stays remained “popular” among developers in the second quarter, with the upper midscale and upscale segments leading the way in terms of project counts, the report said. Additionally, Dallas again led other U.S. markets in the largest hotel construction pipeline.

For the second half of 2024, Lodging Econometrics forecasts that another 400 hotels will open, bringing the total number of openings for the year well above 2023 levels.

Dallas back on top

According to the report, Dallas led all other U.S. markets in terms of the largest hotel construction pipeline in the second quarter, with 189 projects, four projects short of its record set at the end of the fourth quarter of 2023. The market maintained its lead from the first quarter, when it also had the largest hotel construction pipeline.

Atlanta follows with a record 159 projects, or 18,522 rooms. Inland Empire, California, comes next with a record 124 projects, followed by Nashville with 123 projects and Phoenix with 120 projects.

In the second quarter, Dallas also led with the most projects scheduled to break ground in the next 12 months (73) and the most hotel projects in the initial planning phase (86).

New York outpaced Dallas in the number of hotel projects under construction during the quarter. New York had 46 projects under construction, or 7,572 rooms, while Dallas had 30, or 3,523 rooms.

In terms of new projects announced during the quarter, Atlanta had the most, with 10 projects, or 1,140 rooms. Dallas followed closely, also with 10 projects, but slightly fewer rooms, or 1,051. Miami, Indianapolis and New Orleans followed next.

Extended stay, upper mid-range dominant

Across all markets, extended stays remained a priority for developers in the second quarter. The category represented 36% of total projects under construction, 33% of projects scheduled to break ground in the next 12 months, and 34% of projects in the early planning stages. Midscale brands accounted for 64% of projects under construction, according to Lodging Econometrics.

Several major hotel chains are expanding into the midscale segment, including Marriott International, which opened its first Studio Res hotel earlier this year. Marriott first launched the brand in June 2023, entering the midscale extended-stay segment in the United States.

Hyatt, meanwhile, is working on the first hotel in its upper-midscale extended-stay brand, Hyatt Studios. And Wyndham Hotels & Resorts opened its first extended-stay Echo Suites hotel earlier this month, with plans to significantly expand the brand.

According to Lodging Econometrics, upper midscale hotel chains led all other segments of the total pipeline for the most projects, with 2,262 projects, or 219,547 rooms. The upscale segment followed with 1,417 projects in progress, or 175,343 rooms. Together, the upscale and upper midscale segments accounted for 60% of all projects in the total pipeline, according to the report.

Choice Hotels International is one of the hotel groups that is strategically expanding in the upscale segment. In the second quarter, Choice continued its progress in this segment with the opening of a hotel in Cambria.

Overview of openings

More than half of the hotels that have already opened in 2024 are upscale and upper midscale, according to Lodging Econometrics, which predicts that the two segments will see the highest growth rates through 2026.

During the first half of this year, 250 hotels with 29,777 rooms opened across the United States, according to the report.

Lodging Econometrics projects that an additional 400 projects, or 44,451 rooms, will open through the remainder of 2024, bringing the total openings for the year to 650 hotels with 74,228 rooms.

New York City is expected to open the most hotels (23) by the end of the year, followed by Dallas (16), Atlanta (15), Inland Empire (14) and Orlando (13).

The forecast for the end of 2024 represents a 35% increase over the number of hotel openings in 2023, which stood at 480 hotels, or 60,922 rooms, according to the report.

Looking ahead, Lodging Econometrics analysts predict 779 hotels will open in the United States in 2025 and 928 in 2026, representing a 1.8% increase in new supply.

One of the major projects scheduled to open in 2025 is the $1 billion VAI Resort in the Phoenix metro area.