Marriott, Hilton and IHG Dominate the Hotel Pipeline

The majority of the franchise hotels in the U.S. construction pipeline belong to Marriott, Hilton and IHG.

According to the quarterly United States Construction Pipeline Trend Report from Lodging Econometrics (LE), Marriott, Hilton and IHG account for 68% of the projects and 66% of the rooms in the total pipeline, which is roughly the same percentage it’s been quarter-over-quarter throughout 2020.

Marriott International had 1,390 projects and 184,450 rooms in the pipeline. It was followed by Hilton Worldwide with 1,351 projects and 155,626 rooms and InterContinental Hotels Group (IHG) with 873 projects and 89,375 rooms, according to LE.

Hilton’s Home2 Suites and IHG’s Holiday Inn Express continue to have the largest U.S. pipelines with 402 projects and 42,036 rooms and 348 projects and 33,351 rooms, respectively. Hampton by Hilton follows is next with 291 projects and 30,140 rooms, followed by Tru by Hilton with 280 projects and 26,991 rooms and Marriott’s Fairfield Inn with 277 projects and 27,005 rooms. Through the third quarter of 2020, 599 new hotels with 68,712 rooms opened across the United States, according to LE. Marriott, Hilton and IHG branded hotels collectively accounted for 72% of these openings through Q3 ‘20. Marriott brands accounted for 173 of the hotels, while Hilton brands accounted 170. Another 86 of the openings were IHG brands.

LE is expecting these top franchise companies to open another 202 hotels by the end of 2020. In 2021, it projects that they will open 655 new hotels adding 77,101 rooms to the census of open and operating hotels in the U.S.

These openings will probably occur in the midst of a pandemic that has hindered travel and slammed the hospitality industry. Recent Trepp analysis shows that waves of distress could be coming in hospitality and retail. 

Transaction activity has also slowed. The LW Hospitality Advisors (LWHA) Q3 2020 Major U.S. Hotel Sales Survey included 12 single asset sale transactions over $10 million, none of which are part of a portfolio. These transactions totaled $829 million and included approximately 2,700 hotel rooms with an average sale price per room of $306,000. Comparing Q3 2020 with Q3 2019, the number of trades decreased by approximately 70 percent while total dollar volume declined roughly 78 percent and sales price per room increased by roughly 8 percent.

Eventually deal flow will come back but it could take until 2022, according to a blog post published by Preqin, John McCourt and Ryan McAndrew of RSM US LLP. But when it does return, it will likely come in fits and starts depending on the asset type, its location and the financial status of the owner.