Big Plans, Slow Builds: Hotel Construction Drags Behind Booming Pipeline

Key Points

• U.S. hotel room supply growth has slowed to 0.5% annually due to high construction costs and tight financing.
• The planned pipeline for hotel rooms has increased, but actual construction remains below pre-Covid levels.
• A constrained supply has led to increased pricing, market share gains for branded hotels, and more M&A activity.

Summary

The U.S. hotel room supply has been growing at a slower rate of 0.5% annually, significantly less than the pre-Covid 1.3% growth rate. This slowdown is primarily due to high construction costs and tight financing conditions. Although the pipeline for planned hotel rooms has expanded, actual construction is still lagging behind pre-pandemic levels. The constrained supply has resulted in higher prices, greater market share for branded hotel chains, and increased mergers and acquisitions activity.