NASHVILLE, Tennessee—The U.S. hotel industry will see a healthy increase in supply during the next 18 months, fueled by a 23% increase in the number of rooms under construction year-over-year in July, according to STR pipeline data.
During July, 75,620 rooms were under construction compared to 61,490 in July 2012, representing the largest percent change in the active pipeline, said Steve Hood, senior VP of research at STR and founding director of the STR SHARE Center, during a presentation titled “Pipeline Potpourri” at the 5th annual Hotel Data Conference hosted by STR and Hotel News Now.
“Supply matters so much because it’s the denominator,” Hood said. “It’s pretty basic, but whether you look at occupancy or revenue per available room, supply is part of the equation.”
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The total number of U.S. hotel rooms has grown from 3 million in 1988 to fewer than 5 million in 2013, according to STR data.
Following are five additional data points about the U.S. pipeline:
1. Largest supply growth in upscale, upper midscale
The upscale and upper-midscale segments have shown the largest growth on a 12-month moving average during the last 25 years, followed by the upper-upscale and luxury segments, according to STR data.
In the upscale segment, larger brands such as Courtyard by Marriott and Residence Inn have seen the most growth in new supply during 2013. Half of all growth in the segment came from new brands including Hilton Garden Inn, Springhill Suites by Marriott, Homewood Suites by Hilton, Hyatt Place and Staybridge Suites.
Holiday Inn Express has led supply growth in the upper-midscale segment through 2013, followed by Holiday Inn and Hampton. Both Holiday Inn and Holiday Inn Express benefitted from conversions, Hood said.
As an aside, hotels comprising 75 to 149 rooms saw the largest growth during the last 25 years, while hotels comprising less than 75 rooms saw a decline.
2. Luxury and upper upscale trail in opens
There are no luxury or upper-upscale brands rounding out the top 20 U.S. hotel brands, in terms of new opening during the past five years, Hood said.
From 2009 through July 2013, Holiday Inn Express reported the most hotels and rooms opened followed by Hampton Inn & Suites and Hilton Garden Inn.
Holiday Inn Express and Hampton Inn & Suites also round out the top two spots when looking at new opens in the last two years. Hampton Inn crept into the third spot.
3. New York remains at the top
New York has more than three times the number of rooms under construction than any other market, Hood said. The city has 62 projects comprising 11,534 rooms under construction as of July.
New York’s total active pipeline comprises 152 projects totaling 23,244 rooms, according to STR.
Can the region absorb such an influx of new supply? The New York City Area tract is one that possibly could become overbuilt, Hood said.
4. Lots of conversion activity
Extended Stay America, Quality Inn and DoubleTree by Hilton converted the most rooms in during the last two years.
Comfort Inn, Homestead and Days Inn converted the most rooms out.
Many of these conversions were related to company adjustments, such as Extended Stay America’s restructuring following its bankruptcy in June 2007.
DoubleTree led net conversions during the last two years, converting in 47 hotels comprising 12,721 rooms. In the process, the brand only converted one hotel comprising 105 rooms out.
5. Off-the-radar markets
Hood pulled several tracts that on a 12-month moving average saw a RevPAR percent change of more than 8.5% and a supply percent change of less than 0.5%.
Markets such as Lake Oswego/I-5 South, Oregon, saw a very healthy RevPAR increase (12.6%) but have zero rooms in the active pipeline. Waikiki, Hawaii, is another market that posted large RevPAR increases on a 12-month moving average (15.6%) but has zero rooms in the active pipeline.