Population gains tend to drive growth in hotel rooms, but leisure destinations outperform other regions

Hotel developers view population shifts by market as an indicator of potential demand and development opportunities, and CoStar data suggests there is a positive relationship between population growth and supply growth. hotelier.

Between 2015 and 2020, the supply of hotel rooms in the United States increased by 2.7%. At the same time, the American population increased by 3.4%. The increase in room supply in the five years to 2020 was overshadowed by a steep 3.6% drop in available rooms between 2019 and 2020 when the pandemic hit, largely due to hotels temporarily closed. When these properties reopened, room supply data normalized. In the five years ending in 2021, hotel room supply has increased by 6%.

In the 384 metropolitan areas where hotel data is available, an average 10% increase in population was accompanied by a 6% increase in the number of rooms.

While the relationship between an increase in population and rooms is positive, the impact of population changes on specific markets can vary significantly. Many fast-growing markets in Texas and Florida are showing double-digit growth in room counts thanks to rapid demographic gains. Growth in hotel development mirrors the national average of approximately 6% increase in supply for every 10% increase in population.

On the other hand, the two largest states on each coast, New York and California, were undergoing demographic shifts even before the pandemic. In both states, many markets were experiencing declines in population. Hotel developers have taken notice, resulting in only a 2% increase in hotel room counts in these two states.

An additional metric that can be useful in assessing whether a market is seeing above or below average supply in hotel rooms is the calculation of the number of rooms per 10,000 population. On average, large cities offer 155 rooms per 10,000 inhabitants. However, this number can vary greatly, especially in holiday destinations.

In leisure-oriented markets such as those listed in the graph above, the number of residents and population growth are not the main drivers of demand. Instead, their strong appeal to leisure travelers makes these areas prime development targets for hotels.

The number of rooms per resident in the largest hotel markets in the United States is much closer to the national average. These markets are heavily populated and their demand for rooms is more balanced between leisure travelers, groups and transients.

The strong rebound in leisure travel has largely fueled the US hospitality industry. Leisure destinations have traditionally experienced stronger increases in room counts than would generally be expected based on their population, a trend that is expected to continue. As a result, the continued shift in population and migration patterns to the Sun Belt states is expected to be accompanied by a higher level of hotel development.

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