Dive Brief:

• At the end of this year’s second quarter, the U.S. hotel construction pipeline stood at 5,572 projects, or 660,061 rooms, with projects up 7% and rooms up 6% year over year, according to Lodging Econometrics’ Q2 2023 U.S. Construction Pipeline Trend Report. 
• The pipeline grew incrementally quarter over quarter during the past year, the report details, while developers and franchise companies pushed through short-term challenges like inflation and higher interest rates. At the end of Q2, the total pipeline was only 5% below its all-time peak projects level, Lodging Econometrics shared. 
• New construction projects in the upscale and upper midscale segments dominated the pipeline in Q2, accounting for 62% of the projects in the total U.S. construction pipeline. Extended stay development was also on the rise, growing at roughly three times the actual and forecasted industry growth rates for 2022 to 2025.

Dive Insight:

Since the start of 2022, the upscale and upper midscale segments have seen strong performance as luxury and lifestyle accommodations garner increasing demand. The chain scales are expected to have the highest guest room growth rates through 2025, according to the report. 

Developers took note of these performance metrics in the second quarter and ramped up construction on hotels in the upscale and upper midscale segments. In addition to dominating the pipeline with new construction projects, the two chain scales also represent 63% of the projects and 57% of the rooms anticipated to open by year-end. 

Across the board, there was increased consumer confidence and sentiment that led to strong demand for hotel guest rooms in Q2. That demand is expected to continue through the rest of the summer and into the fall, with “heavy tourist demand through August and the kick-off of the fall conference season after Labor Day,” Lodging Econometrics predicted in the report. 

Consumers have also shown interest in the extended stay space, bolstering developers to hone in on the longer-term stay hotel option. The extended stay pipeline has increased consecutively over the last eight quarters, including Q2 of this year, according to the report.

At the end of the second quarter, there were 2,083 extended stay projects, or 214,557 rooms, in the U.S. hotel construction pipeline. Extended stay projects account for 32% of projects under construction in the total pipeline, 42% of projects scheduled to start construction in the next 12 months and 36% of the projects in early planning across the U.S. Lodging Econometrics forecasts that 180 extended stay projects will open by year-end. 

The extended stay push has been reflected in recent news from major hotel brands. In May, Choice Hotels’ WoodSpring Suites broke a brand record by opening six hotels in one month. And Marriott and Hilton announced new extended stay brands within the second quarter of this year. Marriott entered the U.S. midscale segment with its new Project MidX Studios brand, while Hilton launched a lower midscale brand, dubbed Project H3.