Much of the commercial buildings construction spotlight has been shining on the office buildings sector because of its large role in green building and overall positive growth. But don’t sleep on hotels.
According to Dodge Data & Analytics, total hotel construction saw its third straight year of growth in 2013, with starts advancing 25 percent to 42 million square feet.
Hotel construction has seen a sharp increase from 2011-2014, and Dodge projects there’s more growth underway.
At the 2015 Dodge Construction Outlook Executive Conference in Washington, D.C., earlier this month, Dodge chief economist and vice president Robert A. Murray discussed the continued growth of construction in the hotel sector. Murray says a positive contributing factor to the recent progress—and to future prospects—has been the increase in business travel as industry financials are stronger, and “casino building is becoming more active.”
According to Dodge, occupancies are up to 65.9 percent in 2014, an increase from the 62.3 percent in 2013. Another driver is revenue per available room, which is up from 5.4 percent in 2013 to 8.2 percent in 2014.
All of those things, according to Murray, “provide a supportive backdrop for investment.”
He adds that several major projects are reaching ground breaking.
The Marriott Marquis Hotel in Houston, Texas, has led the way in that regard, coming in with a value of $272.2 million and a square-footage of 864,000. Second is the $260 million Cleveland Convention Center Hilton Hotel, followed by the $200 million Trump International Hotel in Washington, D.C.
Meanwhile, major renovations made a big impact in hotel construction last year, the largest being the $476 million hotel portion of the Korean Air Hotel in Los Angeles. Closely behind was the $415 million renovation of the SLS Hotel and Casino in Las Vegas.
Additionally, with the continued increase in hotel construction has come more green building. Green building’s share in the hotel sector is 43 percent ($5 billion), up from 38 percent ($3 billion) in 2012.
Looking forward, Murray says an “optimistic outlook for hotel construction is justified by market fundamentals,” adding that the “historical record provides a basis for bullish expectations, as well.”
Dodge anticipates hotel construction will gain 14 percent to 64 million square feet in 2015 and will see a 17-percent increase to $12.9 billion in that same span.