STR’s Director of Global Census Dominik Kozissnik shared insights into the U.S. hotel supply pipeline, which includes breaking it down by brands and major markets.
NASHVILLE, Tennessee—The year 2020 looks to be a big one for U.S. hotel openings, according to pipeline data from STR, which shows 34% of rooms in planning, final planning or construction are projected to come online that year.
(STR is parent company of Hotel News Now.)
But, as STR’s Director of Global Census Dominik Kozissnik pointed out during the “Hotel supply pipeline: Visualizing the growth” presentation at the recent Hotel Data Conference, a lot can happen between now and 2020.
“If you look at opening year, you can see the biggest opening year is actually 2020, which there’s a couple of things there,” he said. “That’s kind of a milestone year, so probably a lot of people said, ‘Well, we’ll open in 2020.’ That could be part of it. Also, the further you go out, the less likely it can happen. … There’s still a lot of time to go, and things can not materialize or projects can be canceled.”
Kozissnik’s presentation provided views of the U.S. pipeline from overhead—total U.S. and the big brands—and the ground, breaking down growth trends in major markets.
The active pipeline for total U.S., according to STR data, includes 5,200 projects with about 619,600 rooms, fairly equally divided into three phases—planning, final planning and in construction.
Of those projects, 43% are in suburban markets and 24% are in urban markets, Kozissnik said. Also, 85% of projects in the U.S. pipeline have 150 rooms or fewer, the data shows.
“We talk about those suburban properties; a lot of those limited-service properties are coming into the market,” Kozissnik said. “It’s amazing how many projects that are 50 to 100 rooms are in the pipeline. Larger properties don’t actually play as big of a role.”
Midscale to upscale classes represent 87% of projects and 79% of rooms in the active pipeline, according to the data.
As the below chart illustrates, the total number of rooms in construction in the U.S. sits at approximately 187,000 through June 2018 and remains below the historical peak of approximately 211,700 in December 2007.
By number of rooms in the active pipeline, the brand leaders are Home2 Suites with nearly 40,000 rooms, followed closely behind by Holiday Inn Express, then Hampton (more than 30,000 rooms) and Tru by Hilton (26,700 rooms).
“Looking at the brands that are out there, you can see that a lot of the top brands … just number of rooms, not even number of projects … are all those kind of midtier, limited-service brands,” Kozissnik said.
In the chart below, he said, “you can see some interesting differences. Holiday Inn Express has a lot in the next 24 months. The question is, is all that going to materialize or not?”
Tru by Hilton’s active pipeline includes 25 properties along a 250-mile corridor between Nashville and Atlanta that are projected to open by 2020, Kozissnik said.
New York City
A look at the active pipeline in New York shows approximately 26,100 rooms are due to come online, up from the approximately 17,600 rooms that opened between 2015 and 2018.
What’s also noteworthy is where in New York City those rooms are opening. Historical data shows that prior to 2000, 89% of hotel rooms opened were in Manhattan. That percentage has been in the 70s through this year, but the active pipeline now shows only about 50% of rooms to open are in Manhattan.
An estimated 10,000 rooms are expected to open In New York next year. Of the city’s total rooms pipeline, 36% are in the upscale segment and 25% are upper-upscale. A large majority of those rooms are at independent properties.
“A lot of the top brands coming into the market are those limited-service type brands … Moxy being the No. 1 brand coming to New York,” he said. “Those are brands that typically have not been interested that much in New York.”
Of the 16,400 rooms in 128 projects in Nashville’s pipeline, 44% are within a two-square-mile area of the city’s downtown, Kozissnik said.
“Very concentrated,” he said. “If you’re a hotel in Nashville with all that supply coming in, that’s something to potentially be concerned about, especially if you’re going after the same target market.”
About 6,000 rooms, 41% of the total pipeline in Nashville, are projected to open in 2020, and about 4,000 rooms are due to open in 2019, the data shows. The upper-midscale segment represents the largest percentage (30%) of pipeline projects in Nashville.
Compared to Nashville, the hotel pipeline in Dallas is not nearly as concentrated downtown, with only about 16% of the 162 pipeline projects in the central business district, Kozissnik said.
“Most of the supply is in the suburban areas around, so if you’re up in Frisco, you probably have a lot of competition out there in the next couple of years,” he said.
The pipeline projects will add approximately 19,900 rooms, about 30% of which are due to open next year.