Construction is up for U.S. hotels, with a record number of new projects in the pipeline at the end of 2023.

There were 5,964 projects in the construction pipeline at the end of the year, expected to bring 693,963 new hotel rooms across the country, according to a new report from Lodging Econometrics.

The previous high came in the second quarter of 2008, when there were 5,883 projects in the national pipeline, according to the hospitality research firm.

Cities in the South saw the lion’s share of projects, as anticipated interest rate cuts from the Federal Reserve bolstered optimism for the sector.

Just over 21,000 hotel rooms, spread across 260 projects, entered the construction pipeline in the fourth quarter, according to Lodging Econometrics’ count. That represents a 9% increase in projects year-over-year.

Upper-midscale and upscale hotels made up the majority of projects at the end of the quarter, accounting for 62% of the hotel construction pipeline nationally.

Combined hotel renovations and brand conversion projects also broke records, finishing the year with a little more than 2,000 projects covering 303,330 rooms. Across the top 50 U.S. markets measured by Lodging Econometrics, 43 had 10 or more hotel conversion or renovation projects. Atlanta had the most, with 33 projects set to revamp almost 4,000 rooms.

Atlanta also had a record overall pipeline at 151 projects. Nashville and Phoenix also had high project counts at 123 and 122, respectively.

Dallas led the charge in 2023, with 193 projects spanning more than 22,000 rooms underway over the course of the year. More projects are scheduled to kick off in Dallas during the next year, according to the report, providing a stark contrast to the pessimism seen in the market at the end of 2022.

Nationally, 2,259 projects are scheduled to start over the next 12 months, following the Fed’s signals that it may cut interest rates in 2024. Lower borrowing costs could catalyze additional new construction, acquisitions, renovations and conversions as investors return to the sector, Lodging Econometrics’ report says.

A report from JLL released earlier this week also predicts investors will return to hotel assets across the globe in 2024, anticipating a 15% to 25% increase in spending. Luxury hotels are anticipated to be the most popular with investors.

“Cities that focus on intentional tourism and leverage technology will garner long-term investor interest, with foreign capital likely to be the most acquisitive in 2024,” JLL researchers wrote.