US Hotel Construction Pipeline Hits Historic New Record

Construction continues on The Grand, a luxury mixed-use development designed by architect Frank Gehry and located across the street from the Walt Disney Concert Hall, in Los Angeles on April 30, 2020. Robyn Beck/AFP via Getty Images

The U.S. hotel construction pipeline hit historic new heights in the fourth quarter of 2024, with Dallas leading the way, according to a new report.

The construction boom comes as hotels expand their brands to cater to consumers across different income levels, and as the Airbnb market continues to navigate changes.

The construction pipeline refers to the total number of projects in various stages of development: under construction, scheduled to start within the next 12 months, and in the early planning phase.

According to the latest Hotel Construction Pipeline Trend report by Lodging Econometrics, the total hotel pipeline in 2024 reached 6,378 projects, setting a new record with 746,986 new rooms. This represents a year-over-year growth of 7 percent in projects and 8 percent in rooms.

Increases were seen across all project stages, including 1,149 projects (142,238 rooms) under construction and 2,259 projects (259,108 rooms) scheduled to break ground within the next 12 months.

Meanwhile, Dallas is expected to benefit from the most new projects, with a record-breaking 204 projects totaling 23,669 rooms in the planning stage, followed by Atlanta (168 projects, 16,824 rooms), Nashville (130 projects, 17,029 rooms), and Phoenix (130 projects, 16,824 rooms).

Hotels Seek to Diversify Brand Offerings

According to Lodging Econometrics senior vice president Bruce Ford, several factors are contributing to the historically robust hotel building schedule, led by hotels wanting to add more brands to meet all income levels.

“I believe what has led to the current construction numbers is that larger hotel companies are seeking to continue diversifying their brands by offering more price tiers than ever before. Hotel owners want to lock up specific markets,” Ford told The Epoch Times.

“Part of it is that the brands have more efficient hotels in the pipeline to replace the older boxes out there. They are tearing down and building new hotels more efficiently. Many of those are the ones in the pipeline. The new brands are smaller and more cost effective, and the efficiency of these buildings is appealing to developers.”

Despite inflation and high interest rates for construction capital, 583 new hotels with 67,995 rooms opened in the United States last year, expanding the country’s hotel supply by 1.2 percent.

Lodging Econometrics projects that 730 new hotels will open in 2025, adding 82,538 rooms. In 2026, 904 new hotels with 97,328 rooms are expected to open.

According to Statista, hotel occupancy reached 70 percent in June 2024, the highest since the COVID-19 pandemic, marking a 28 percent increase from June 2020—the height of the pandemic—as demand continues to grow.

The global number of users in the hotel segment of the travel and tourism market is forecast to increase by 564.1 million from 2024 to 2029, representing a 45 percent increase. That number is estimated to reach 1.8 billion by 2029.

Statista pointed out that the number of users in that segment had increased regularly over the past several years.

A CoStar report released in December 2024 also shows that hotel construction was at a higher level than the previous year. In September 2024, about 157,000 hotel rooms were under construction—7 percent more than a year earlier.

Bumps in the Road for Airbnb

According to some analysts, travelers and cities that have grown less enthusiastic about temporary housing options such as Airbnb have spurred demand for more hotel options.

New York City banned its residents from offering their properties for short-term rentals through the passage of NYC Local Law 18 in 2022. The move aimed to increase the housing supply, lower rents, and make housing more affordable. Airbnb has been lobbying the New York City government ever since to reverse the ban, but to no avail.

Makarand Mody, associate professor at the School of Hospitality Administration at Boston University, said in a June 2024 interview that changing consumer wants, needs, and habits have negatively affected Airbnb since its pandemic heyday, driving consumers to conventional hotels.

“With prices generally going up as they have, for people who were on the fence about staying at an Airbnb versus a hotel, it came down to a diminishing value proposition. The thought was, if I’m going to get services like staff to check me in and housekeeping at hand, then I might as well pay all that money for a hotel versus having to do it myself at an Airbnb,” Mody said in the interview published on the university’s website. “The other piece is cities cracking down on regulations for short-term rentals.”

In its last quarterly revenue report, Airbnb generated $3.7 billion in revenue, but net income dropped to $1.4 billion from $4.4 billion in the same quarter of the previous year (when the firm gained a $2.8 billion tax windfall). The company also reported that it is in the process of removing what it refers to as “low-quality listings,” which have affected its supply.

Ryan Smith, who runs the popular travel blog UpgradedPoints, told The Epoch Times that he believes excessive add-on costs at Airbnbs are driving travelers to hotels, where they know exactly what they’re paying for.

“I do think there is an element to people [being] frustrated with the fees associated with Airbnb, when you go search online and see a property listed for $150 a night, and when you check out, you’re paying $225, which is cleaning and upkeep fees. People are frustrated,” he said.

Smith said that several hotel brands now directly compete with Airbnb and VRBO by purchasing their vacation properties.

“When renting a vacation home began to take off, you never associated those options with Hilton or Hyatt, but now they’ve launched their own vacation home portals. Also, Marriott now has homes and villas they rent out trying to compete,” he said.

Financial Hurdles Ahead for Hotel Expansion

Despite the hotel industry’s plans, some believe that the current construction economy in the United States might keep many of these projects on the drawing board.

“Yes, the pipeline is bigger because a lot of people are talking about ‘wouldn’t it be great if?’ But financing is hard, and things may not happen. The attrition rate needs to be applied to these numbers,” Jan Freitag, national director of hospitality analytics for CoStar, told The Epoch Times.

Ford is also concerned that current economic conditions may prevent some projects from getting off the ground.

“The only thing holding up progression in the pipeline is the cost of capital. It’s expensive if you can get it and the rate cuts from the [Federal Reserve] have not changed that yet,” he said.