Decline in U.S. Hotel Construction Continues Amid Economic Uncertainty

As of September 2025, the U.S. hotel construction sector has experienced a significant downturn, with 137,956 hotel rooms under construction. This figure represents a 12.3% decrease compared to the same month in 2024, marking the ninth consecutive month of year-over-year decline, according to data from CoStar. This decline has brought construction levels to their lowest point in 40 quarters, with current figures more than 80,000 rooms below the peak observed in the third quarter of 2020.

U.S. Hotel Construction Decline Continues for Ninth MonthCoStar: U.S. hotel construction hits 40-quarter lowU.S. hotel construction down for ninth consecutive monthUS construction lowest in 40 quarters

The ongoing contraction in hotel construction is attributed to several macroeconomic challenges. Isaac Collazo, Senior Director of Analytics at STR, noted that uncertainty in the market often leads to inaction among developers and financial institutions. High building and material costs have further hampered new project initiations, with many stakeholders awaiting a more favorable economic environment before proceeding with new developments.

U.S. Hotel Construction Decline Continues for Ninth Month

Despite the overall decline, construction remains active across various hotel chain segments, albeit at different levels. The luxury segment accounts for 5,911 rooms (3.8% of existing supply), while the upper upscale segment has 15,292 rooms (2.1%). The upscale segment includes 33,376 rooms (3.6%), and the upper midscale segment leads with 39,075 rooms (3.3%). Midscale and economy segments show smaller numbers, with 12,746 (2.4%) and 4,559 (0.7%) rooms under construction, respectively.

U.S. hotel construction down for ninth consecutive month

The persistent decline in hotel construction is expected to have broader implications for the industry. Analysts suggest that the current slowdown is less severe than the post-2008 downturn, indicating a potentially more stable long-term outlook for hotel investment once economic conditions improve. The tighter pipeline for new room supply over the next two to three years may help stabilize occupancy rates and average daily rates (ADR) in key U.S. markets.

U.S. hotel construction down for ninth consecutive monthU.S. Hotel Construction Decline Continues for Ninth MonthU.S. hotel construction down for ninth consecutive month

Critics of the current construction trends argue that the prolonged period of inaction could lead to a shortage of hotel accommodations in the future, particularly in urban and airport markets where demand remains steady. The focus on renovations and conversions over new builds may not adequately address the growing needs of travelers.

U.S. hotel construction down for ninth consecutive month

In response to the ongoing challenges, industry experts emphasize the need for a shift in economic conditions to reignite hotel development. Isaac Collazo stated, “Higher building and material costs are also hampering groundbreakings, and we don’t foresee the cycle turning for some time. However, more rooms are under construction now than after the Great Recession—development is down but still happening.”

U.S. Hotel Construction Decline Continues for Ninth Month

Looking ahead, stakeholders in the hotel industry are closely monitoring economic indicators that could signal a recovery in construction activity. Until then, the focus will likely remain on managing existing properties and exploring renovation opportunities rather than initiating new projects.

U.S. Hotel Construction Decline Continues for Ninth Month