Will Supply-Demand Dynamic Now Tilt toward Buyers and Operators? The U.S. hotel industry recorded 214,704 rooms under construction in March 2020, the highest end-of-month total ever reported by STR, the Hendersonville, Tenn.-based hotel industry research firm. The industry’s previous construction peak occurred in December 2007 with 211,694 hotel rooms in construction. That level was slightly surpassed in February 2020 at 211,859 rooms in the final phase of the development pipeline.
“The number of rooms in construction will likely remain high, just as it did during the pre-recession peak,” said Jan Freitag, STR’s senior vice president of lodging insights. “Because of the coronavirus pandemic, the industry is no longer operating in a record-setting demand environment, so there isn’t the same rush to open hotels and tap into that business. In addition to a lack of guests awaiting new hotels, there are also limitations around building materials and potential labor limitations from social distancing. With all of that considered, projects are likely to remain under construction for a longer period.”
Also during March 2020, nine projects from the final planning of the pipeline moved to deferred status, as did 21 projects from the planning phase. Additionally, one project in final planning and seven projects in planning were abandoned.
Noted Freitag,“It’s worth remembering—in 2008, the projects that were in the ground continued to get built, while the projects that were in the planning or final planning stages were most likely shelved. We expect the current pipeline to follow a similar pattern and will continue the monitor the number of projects that are halted in the coming months.”
Four major markets reported more than 6,000 rooms under construction between new builds and expansion projects. New York led with 14,051 rooms, which represented 11.0% of the market’s existing supply, followed by Las Vegas (9,082 rooms, 5.5% of existing supply).