Hotel Pipeline Grows, Daily Rate Growth Slows

Michael Tucker mtucker@mba.org

November 02, 2017


U.S. hotel rooms under construction grew 5.7 percent on a yearly basis through September, reported STR, Hendersonville, Tenn.

STR Senior Vice President of Operations Bobby Bowers noted that figure has fallen from last year. "Construction activity and the total pipeline remain up year over year--just at a lot lower rate of growth compared with 2016," he said.

STR reported 585,248 rooms in 4,886 hotel projects "under contract"--projects in the planning, final planning and in-construction stages--in the United States. This represents a 6.6 percent increase in the number of rooms under contract compared with September 2016.

Bowers noted the overall room construction total fell from August's level.

"The impact of new supply coming online is already visible in occupancy rates among the major markets," Bowers said. "Demand in those markets continues to grow at a healthy clip as well, but not enough to lift hotelier pricing confidence."

Among largest markets, New York had the most rooms under contract with 25,607 rooms, STR reported. Other markets with more than 15,000 rooms under contract in September included Dallas (19,312 rooms), Orlando, Fla. (16,368 rooms), Houston (16,266 rooms) and Los Angeles/Long Beach (15,023 rooms).

CBRE Hotels, Atlanta, said hotel average daily room rate growth has slowed despite rising occupancy. National occupancy rose to 71.4 percent in the third quarter--the highest quarterly occupancy level since 1987.

Average daily rates grew 1.4 percent nationally--the slowest growth rate since the Great Recession, CBRE Hotels said. Revenue per available room grew 1.9 percent year-over-year, down from a 2.7 percent rate in the second quarter.

More than half of the 60 markets CBRE Hotels tracks saw supply gains exceeding 2 percent in the third quarter; one-third saw occupancy declines.

Overall, hotel demand grew 2.4 percent nationally in the quarter, up from the second quarter's 2.3 percent rate, CBRE Hotels said. Supply grew by 1.9 percent from a year ago.

Houston had the largest demand increase in the country--16.5 percent--driven by displaced residents and relief workers after Hurricane Harvey, CBRE Hotels reported. Hurricane Irma-affected markets Tampa and Orlando, Fla. also saw strong demand gains, 6.6 percent and 6.1 percent, respectively.

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