Key Trends Driving and Shaping the Construction of Hotel Properties Today
By Bill Wilhelm President, R.D. Olson Construction | May 17, 2020
Due to the continued growth of U.S. tourism and the nation's progressive economy, the hotel industry is poised to experience steady growth and opportunity in 2020. More specifically, hotel construction – which makes up $16 billion of the nation's GDP – is projected to continue to expand over the next five years and increase by 0.7% this year, according to IBIS World.
As a result, hotel owners and developers remain bullish, but cautious, and are open to exploring and creating opportunities for hotel development across various geographic markets with the overarching goal to create a social heart for travelers and locals alike. Here's a look at key trends driving and shaping the design and construction of hotel properties today and strategies general contractors are applying to help mitigate rising construction costs and create thriving destinations that provide optimal return on investment for hoteliers.
Key Drivers of Hotel Construction
Despite the steady rise in construction costs and developer uncertainty, mainly caused by trade and tariff concerns, the U.S. hotel construction pipeline continues to grow 6% by projects year-over-year, as reported by Lodging Econometrics. In fact, if all projects come to fruition by year end, 2021 will be the highest count of hotel development in past last decade. The following are key trends driving hospitality construction.
1. Growth of Secondary and Tertiary Markets
Due to the low supply and high demand of quality opportunities in primary markets, such as Manhattan, New York and San Francisco, California, secondary and tertiary markets have become increasingly attractive to investors. This is due to their high population growth, stable unemployment rates and lower cost of real estate. As a result, investors are continuing to explore second and tertiary markets where they feel they can be most competitive.