Analysts at Lodging Econometrics (LE) report that in 2018, new supply growth was 2.0%, the first time it has reached 2.0% in eight years. The top 25 markets had new supply growth of 2.7% while the remainder of the country showed growth at 1.7%.
Demand growth was 2.5% for both the top 25 markets and for the remainder of the country as well.
Last year, 12 of the top 25 markets had supply growth in excess of demand growth. With the exception of Houston, Seattle, and Orlando the variances were modest. As the economy settles into the new normal of slower growth and low inflation, LE expects the number of markets with supply growth exceeding demand growth to increase and the variances to widen.
In the fourth quarter of 2018, the top five markets with the largest hotel construction pipelines are: New York City with 171 projects/29,457 rooms, followed by Dallas and Los Angeles, both hitting construction pipeline all-time highs with 163 projects/19,476 rooms and 147 projects/23,404 rooms respectively. Next is Houston with 141 projects/15,499 rooms, Atlanta with 115 projects/15,522 rooms, and Nashville with 114 projects/15,510 rooms.
The important metric to monitor is markets with large current pipelines compared to their existing census. At the end of 2018, there were 10 markets with total pipelines in excess of 15% of their current census. Nashville tops this list of markets at 34.4%, followed by New York City, Miami, Los Angeles, Dallas, Detroit, Seattle, Denver, Boston, and then Houston at 17.9%. These are the markets likely to see the fastest supply growth and the largest supply-demand variances over the next few years.
The markets topping the forecast for new hotel openings in 2019 will be New York City with 65 new hotels/9,396 rooms, Dallas with 31 projects/3,673 rooms, Houston with 30 projects/3,478 rooms, Nashville with 22 projects/2,785 rooms, and Los Angeles with 14 projects/2,124 rooms.
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