Hotel development has been difficult lately due to high construction costs and interest rates, but hotel brand executives speaking during first-quarter earnings calls expressed optimism in their net unit growth and pipelines in the quarter and beyond.

For commentary from hotel brand executives on net unit growth and pipeline numbers in the first quarter 2024, read below.

“Over the next few years, we think we’ll be at 6% to 7% in [net unit growth]. The reality is we had strong expectations carrying over momentum from the end of the year, but it was better in terms of signings and starts and openings. … The way to think about our guidance of 6% to 7% [net unit growth] over the next few years is there’ll be a one-time [addition] for Graduate Hotels, but it’s otherwise organic in the way it’s always been.”

“We ended the quarter with more than 472,000 rooms in our pipeline, up 10% year-over-year with approximately 60% of those rooms located outside the U.S. and nearly half of them under construction. Looking to the year ahead, we expect net unit growth of 6% to 6.5%, excluding the planned acquisition of Graduate Hotels.”

"We opened over 13,000 rooms globally, 27% more rooms than we opened last year, our largest first quarter of room openings since going public nearly six years ago. We increased our franchisee retention rate by 30 basis points versus the same time last year to 95.6%. We delivered a record 3.7% increase in net room growth, and most importantly for the 15th consecutive quarter, we grew our development pipeline by 8% to a record 243,000 rooms.

"Here in the United States, we again saw both sequential and year-on-year improvement, driven by 3.3% system growth in the more revenue intense midscale and above segments. We added 50 hotels domestically, including 11 hotel conversions under the newly created WaterWalk Extended Stay by Wyndham brand located in key markets such as Charlotte, Raleigh, Tucson and Jacksonville.

"Internationally, we increased net rooms by 1% sequentially and by 8% versus prior year. Our Latin America team drove over 2% of sequential net room growth and 6% of net room growth versus prior year, adding significant conversions from competitive brands like the 600-room Wyndham Sao Paulo Convention Center hotel in the financial capital of Brazil along with the new Tryp by Wyndham Asuncion, steps from the renowned shopping centers of Paraguay's capital city.

"Our EMEA team, which added 49% more rooms to its development pipeline than they did in the first quarter of 2023, once again grew net room sequentially and by 12% versus prior year, adding aspirational hotels like the Ramada Sapanca Thermal resort in Turkey, and the new Trademark by Wyndham H2 Hotel in downtown Vienna, Austria.

"Globally, our teams awarded 171 contracts for approximately 24,000 room additions. Domestic contracts signed in the first quarter were 50% higher than last year for our midscale and above segments and international [first-quarter] signings increased by 80% year over year. This acceleration of our development activity grew our pipeline to a record 243,000 rooms and nearly 2,000 hotels.

"Midscale and above brands in the pipeline increased 4% to a record 168,000 rooms and now represent nearly 70% of our pipeline. Our domestic pipeline for midscale and above brands increased by 4%, and the pipeline for our highest international RevPAR regions of EMEA and Latin America increased by 21%."

“By increasing our scale, network of franchisee relationships and customer reach, we have significantly increased our future growth opportunities, resulting in a record global pipeline of over 115,000 rooms at quarter end, which is a 10% increase quarter over quarter. And our strategic focus on more revenue-intense hotels means that the pipeline continues to be a significantly higher value than the current hotel portfolio. Importantly, the hotels in our domestic pipeline now represent a more than 30% RevPAR premium compared to our existing portfolio, a meaningfully higher average effective royalty rate, driven by our strengthened value proposition to franchisees, and they have, on average, a 40% higher room count per hotel as compared to our current domestic system.”

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“In the current hotel development environment, our core competency of a best-in-class hotel conversion capability has an even greater impact. Through our superior speed-to-market conversion processes and best-in-class franchisee support, we are able to move projects quickly through the pipeline, which allows Choice to start generating revenues sooner. In fact, of the domestic franchise agreements we executed for conversion hotels over the trailing 12 months, we opened 113 during the same period, a 43% increase over the same period of the prior year. This core competency will continue to be a key growth driver throughout this year as developers choose to convert to our brands. Specifically, as of the end of March, we grew our global rooms pipeline for conversion hotels by 36% quarter-over-quarter, including a 9% increase coming from our Radisson upscale brand.”

“We continue to be very optimistic about our extended-stay franchise business. Last year, we communicated an anticipated 15% average annual extended stay unit growth through 2027, and we are pleased that we remain on track to achieve this impressive growth rate. And third, we continue to invest in our midscale portfolio with our overall domestic midscale rooms pipeline at quarter end totaling approximately 22,000 rooms, which represents nearly one-fourth of our total domestic pipeline. Our effective royalty rate also continues to be a significant source of revenue growth. Our domestic system effective royalty rate for first-quarter 2024 increased four basis points to over 5% year over year, representing approximately $4 million of incremental royalties on an annual basis.”

"And when you think about the kind of the overall environment, I think you've got a couple of things going on. You've still got a constrained lending environment, certainly in the U.S. and Europe.

"At the same time though, there is more confidence in a steadier economic picture, if you will, ... we've seen an increase in construction starts in the U.S. at about 25% compared to a year ago. So really seeing nice pickup as people start to move forward and look at a more positive environment with perhaps not quite as much volatility.

"And again, as [Marriott CEO Tony Capuano] is always quick to remind everyone, this is a long-term business where folks are used to weathering the economic cycles and recognize that if there's a great place to put a hotel with strong demand fundamentals, it's good to get it going, especially with a beautiful new product.

"So from that perspective, we feel really good. We added 31,000 rooms to our pipeline in the first quarter and really had strong momentum around the world in terms of developer interest across all brands."

Editor’s note: Chris Nassetta serves on the board of directors for Hotel News Now’s parent company, CoStar Group.

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