Virgin Hotels New York City is among those under construction that were scheduled to open in 2020. Photo Credit: Virgin Hotels
As the U.S. hotel business continues to report record-setting drops in revenue per available room,
according to STR, the construction pipeline continues to grow as
development is put on hold. There were 214,704 rooms under construction
in March, the highest end-of-month total ever reported by the lodging
data provider.
The March numbers surpassed February's total of 211,859 rooms. Previous
to that, however, one had to go back to December 2007 for the
record-high figure of 211,694 rooms.
"The number of rooms in construction will likely remain high, just as it
did during the pre-recession peak," explained Jan Freitag, STR's senior
vice president of lodging insights. "Because of the coronavirus
pandemic, the industry is no longer operating in a record-setting demand
environment, so there isn't the same rush to open hotels and tap into
that business. In addition to a lack of guests awaiting new hotels,
there are also limitations around building materials and potential labor
limitations from social distancing. With all of that considered,
projects are likely to remain under construction for a longer period."
Depending on how travel restrictions and the economic effects play out
over the coming months, some projects in the planning pipeline are likely to
be cancelled altogether. In March, nine projects that had been in the
final planning stage were moved to deferred status, according to STR, as
were an additional 21 projects that were in the planning phase. Eight
projects were abandoned altogether, one of which was in the final
planning phase.
"It's worth remembering," added Freitag, "that in 2008, the projects
that were in the ground continued to get built, while the projects that
were in the planning or final planning stages were most likely shelved.
We expect the current pipeline to follow a similar pattern."
The number of projects abandoned in March was a significant jump over
February, when two projects were shelved. "We're going to pay very, very
close attention to this dataset as it moves forward," Freitag said in a
data presentation last week, "because I would fully expect that that
number continues to increase rapidly."
As for those projects already in the ground, four major markets reported
more than 6,000 rooms under construction, in the form of either new
builds or expansions: New York (14,051 rooms), Las Vegas (9,082 rooms),
Orlando (8,737 rooms), and Los Angeles/Long Beach, Calif. (6,640 rooms).