The United States is experiencing a significant slowdown in hotel room construction, reaching its lowest level in years. According to recent data, the number of hotel rooms under construction has declined steadily, marking a notable shift in the commercial real estate and hospitality industries. For property owners, developers, investors, and contractors, understanding the factors behind this decline is critical to navigating the current market and planning for the future.
Recent industry reports show that as of June 2025, there were only about 138,922 hotel rooms under construction in the U.S., an 11.9% drop compared to the previous year and a five-year low for new hotel development activity. This marks the sixth consecutive month of year-over-year decline in rooms under construction. Meanwhile, the number of hotel rooms in the planning phases has mixed trends, with a slight increase in early planning but stagnation in final planning phases. Many planned projects remain in early stages or face potential delays or cancellations, reflecting cautious market sentiment.
Several prominent factors contribute to the current lull in U.S. hotel room construction:
Economic Uncertainty
The U.S. economy is navigating a period of uncertainty driven by fluctuating consumer confidence, inflation concerns, and evolving political dynamics. Such an environment makes lenders and developers more cautious about committing large capital investments in new hotel projects. The unpredictable economic outlook makes it harder to secure favorable financing terms and increases the perceived risk of new developments.
Rising Construction Costs
Construction costs across the country have escalated in recent years due to inflation in materials and labor shortages. Although some easing of construction-cost inflation has been seen in 2025, costs remain significantly high, impacting project budgets and timelines. For hotel development, which requires specialized materials and finishes along with compliance with stringent safety and accessibility standards, these cost pressures are even more pronounced.
Reduced Demand for Hotel Stays
While travel demand rebounded strongly post-pandemic, recent shifts in traveler behavior, including an increase in remote work, changes in vacation preferences, and reduced international visitation, have put downward pressure on hotel demand growth. This decreased demand leads developers to rethink the scale and timing of new hotel projects, especially in markets outside major metropolitan areas.
Regional and Market Dynamics
Most ongoing hotel construction projects are concentrated in the Southern United States, often outside of the top 25 metropolitan markets. Upscale and upper-upscale hotel segments continue to dominate new construction, targeting luxury and premium travelers. However, many projects in planning remain uncertain, particularly in suburban and less-traveled markets where returns are less predictable. The industry is facing a cautious approach that favors quality and selectivity over quantity.
Opportunities Amidst Challenges
Despite the slow construction environment, opportunities exist for forward-thinking developers and contractors. The quieter project pipeline allows for more thorough pre-development work, such as market analysis and site planning, potentially positioning savvy players for growth when economic conditions stabilize. Additionally, hotel renovations and brand conversions have seen strong activity, providing alternative paths for property owners to enhance value without building new rooms.
At Parkwest General Contractors, we specialize in navigating the complexities of commercial and hotel construction, delivering quality results on time and within budget. In today’s challenging environment, our experienced team understands how to manage rising costs, economic shifts, and project uncertainties to help you achieve your vision. Whether you are planning new construction or renovation, we offer tailored solutions to keep your project moving forward with minimal disruption.
Don’t let the slowdown in hotel construction delay your ambitions. Contact us today for a professional consultation and policy review. Our experts will help you assess your project’s feasibility, manage risks, and explore innovative strategies to succeed in today’s market. Call us directly at (714) 632-8001, to discuss how we can support your hotel construction or renovation needs.
The decline is mainly due to economic uncertainty, rising construction costs, and reduced demand for hotel accommodations nationwide.
The Southern U.S. has most projects under construction, but many are outside major metro areas and still face challenges in early planning stages.
Recovery depends on economic stability and construction cost trends, but current forecasts suggest gradual supply growth from 2025 through 2028.
Hotel renovations and brand conversions are growing, offering alternative growth opportunities without the risks of new construction.
