US hotel construction up nearly 6% year over year
- According to a September 2017 pipeline report from hotel research company STR, the U.S. hotel construction industry reported an overall 5.7% increase in rooms under construction, while 50% of the busiest markets in STR's report saw a decline, according to Hotel News Now.
- Among those metros where rooms under construction saw a decrease from September 2016 are Denver (-8.5%) and Houston (-15.3%), where Hurricane Harvey has negatively impacted hotel construction due to site damage and the increase in material prices, according to STR.
- Despite the year-over-year difference, Houston still has more than 16,000 rooms planned or under construction, the Houston Chronicle reported, and Denver had 4,091 rooms under construction in September, according to the Denver Business Journal.
According to an early-October report from the National Real Estate Investor, STR expects hotel demand to increase over the next few years in response to a healthy economy. Jan Freitag, senior vice president of lodging insights for STR told NREI that as long as gross domestic stays near 2%, an indicator that U.S. companies will continue with programs of robust business travel, demand for hotel rooms will remain high.
And while the latest round of hurricanes to hit the U.S. has created logistical and pricing hurdles in some areas, they have only increased demand in ravaged areas around Houston and in some areas of Florida, as homeowners need somewhere to stay while their houses are being rebuilt, and out-of-town construction crews need somewhere to house personnel.
One way hotel giant Marriott International is meeting the demand is by implementing a program of modular construction. The company expects to include both entire modular rooms or just bathrooms built offsite in approximately 13% of its hotel deals this year, which translates to 50 projects. Marriott said it has turned to modular construction to reduce its building costs and to help eliminate the hurdles related to the ongoing construction labor shortages in the U.S.
Although a company the size of Marriott has the resources to explore offsite and modular construction for its projects, smaller companies might have difficulty obtaining traditional financing for such projects. According to Lad Dawson, former CEO and managing partner at Guerdon Modular Buildings, modular products fall under the category of materials because they're delivered ready to install. Because modules can comprise the bulk of a building, the higher-than-normal percentage of materials can throw off typical lender formulas.
- Hotel News Now STR: US hotel pipeline for September 2017
- The Business Journals New Denver hotel construction pace slows down over past year
- Houston Chronicle Houston hotel construction down after Harvey
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