U.S. Hotel Pipeline Shows Confidence in Meetings, Biz Travel

The number of upper-upscale hotels under construction in STR's March pipeline report demonstrate growing developer interest in these traveler segments. 

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The latest U.S. hotel pipeline report from lodging data provider STR indicates a surge in upper-upscale hotel projects — a sign that developer interest in business and group travel is returning, as these are the property types most closely associated with those segments.

“Upper-upscale saw the slowest recovery, but a steady climb in performance, and the business travel indicators have supported developer confidence in the segment,” said Isaac Collazo, STR’s vice president of analytics. “The more than 23,000 upper-upscale rooms in construction right now represent 3.4 percent of the segment’s existing supply. That is well above the long-term growth average (2 percent) in the U.S.”

Of the 23,564 rooms currently under construction in the upper-upscale category, more than 89 percent (or more than 21,000 rooms) are in properties with meeting space, which should be welcome news for planners.

The overall pipeline remains strong, though after three consecutive month-over-month increases, the number of rooms under construction fell slightly. That's in line with seasonal patterns, according to STR. The 154,284 rooms under construction in March is a hair lower (-0.5 percent) than a year ago, in March 2022. While the 232,517 rooms in the planning phase represents a 21.6 percent year-over-year drop, the shift to the final planning phase was dramatic: The 239,995 rooms in that category represent a 34.6 percent increase year-over-year.

Hotel construction in the luxury, upscale and upper-midscale chain-scale segments continues to be quite healthy, with luxury leading the way in terms of rooms under construction as a percentage of the existing supply.

Hotel Chain Scales Under Construction

    “Luxury, though the smallest in terms of room count, shows the highest projected growth against existing supply, matching the rate gains experienced in the segment over the last few years,” Collazo explained. “Select-service (upper-midscale and upscale) continues to grow as well, which is no surprise given how well the segment of the market has regained demand. The upper tier of select-service also caters to the transient business traveler.”