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Growth in U.S. hotel room supply has rebounded from its Covid crash, but it remains well below pre-pandemic levels.
Until 2020, growth was steady at 1.3% annually. Now it’s just 0.5%, largely due to high construction costs and tight financing conditions.
Skift Research digs deeper into the causes of the decline and its impact in our recent report, “U.S. Hotel Supply Outlook: How Slowing Growth Is Shaping the 2025 Market.”
The past four years have seen a significant decline in hotel rooms being opened, falling from more than 127,000 rooms in June 2021 to only 73,000 rooms in September 2024.
The pipeline of future hotel rooms has risen dramatically, but that tells only part of the story.
As of September 2024, the pipeline had more than 760,000 rooms, up from 632,000 rooms in August 2023. It is now 13% of total current supply, up from around 11%.
However, a closer look at the pipeline shows that the majority of its growth is driven by planned hotel rooms versus those that are under construction.
Although the planned pipeline of rooms has risen over the past five years, rooms in construction are yet to recover to pre-Covid levels. As of September 2024, there were 157,000 hotel rooms in construction in the U.S., 25% less than the 209,000 rooms in construction at the start of 2020.
Rooms in construction have fallen from 31% of the total pipeline in January 2020 (with the rest being rooms in planning) to 21% in September 2024.
Rising construction costs have significantly impacted hotel construction in the U.S., with a clear correlation to the slowdown of hotel rooms in construction (we used the purchasing power index for the construction of non-residential buildings as a measure of cost).
Although construction costs stabilized in 2024, they still remain well above 2019 levels, while rooms in construction remain well below. This, in turn, has affected the number of hotel rooms that are eventually opened, with constrained supply further shaping market dynamics.
In our latest Skift Research report, we highlight three key consequences of a constrained supply of hotel rooms:
High demand and restricted supply have driven significant pricing growth.
Tight debt markets and rising construction costs have disproportionately impacted independent hotels, allowing branded chains to expand their market share.
The gap between high construction costs and relatively lower acquisition prices has spurred M&A activity among hotel brands.
We explore these further in the report.
What You’ll Learn From This Report
Growth levels of hotel room supply in the U.S. today
The number of hotels in the pipeline for new openings
How rising construction costs in the U.S. have reduced the number of hotel rooms under construction
The effects of a constrained supply environment on the wider hotel market: higher pricing growth, brands gaining share over independent hotels, and increased M&A activity due to high construction costs and relatively lower acquisition prices.
Opportunities for future growth across the chain scale, including market share analysis of major hotel brand per chain scale
This is the latest in a series of research reports, analyst sessions, and data sheets aimed at analyzing the fault lines of disruption in travel. These reports are intended for the busy travel industry decision-maker. Tap into the opinions and insights of our seasoned network of staffers and contributors. Over 200 hours of desk research, data collection, and/or analysis goes into each report.
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