Hotel Supply in Top 25 U.S. Markets to Outpace Demand

While planners have experienced a persistent seller's market in the hospitality realm in recent years, that could begin to change in some major cities in the United States in 2019. A new report released by Portsmouth, N.H.-based hotel analysts Lodging Econometrics finds that this year, new hotel inventory in the top 25 domestic markets will reach 2.7 percent of current guest-room inventory — the highest in eight years (the rest of the country shows just 1.7 percent of new growth). Coupled with demand growth of only 2.5 percent in those markets, the numbers point to increased competition between hotels for business, as supply outpaces demand.

At the end of 2018, 10 of the Top 25 markets had total pipelines in excess of 15 percent of their current guest-room inventory. Chief among them was Nashville, which topped the list with 34.4 percent, followed by New York City, Miami, Los Angeles, Dallas, Detroit, Seattle, Denver, Boston and Houston, the last at 17.9 percent. According to Lodging Econometrics, these are the markets likely to see the fastest supply growth and the largest supply-demand variances over the next few years.
The markets with the largest hotel-construction pipelines at the end of 2018 were New York City with 171 projects (29,457 rooms), followed by Dallas and Los Angeles, both hitting pipeline all-time highs with 163 (19,476 rooms) and 147 projects (23,404 rooms ), respectively. Houston has 141 (15,499 rooms), followed by Atlanta with 115 (15,522 rooms) and Nashville with 114 (15,510 rooms).
The markets topping the forecast for new hotel openings in 2019 are New York City with 65 properties, Dallas with 31, Houston with 30, Nashville with 22 and Los Angeles with 14.