U.S. hotel construction hits a financing wall

Developers want to build, but rising costs, tighter lending, and labor pressures are slowing U.S. hotel supply growth to a crawl

The U.S. hotel development pipeline looks busy on paper, but much of it is stalled. While more than 615,000 rooms are technically in planning stages, only 139,000 are actually under construction — down from last year. High borrowing costs, volatile material prices, and shrinking labor pools are making deals unworkable, leaving many projects frozen on the drawing board. Instead, capital is flowing to conversions and renovations until interest rates and conditions ease, likely not before 2026.

Key takeaways

• Pipeline bloat, little progress: 615,000+ rooms in planning vs. 139,000 under construction — a 15,000-room drop year-over-year.
• Financing is the choke point: Elevated interest rates push borrowing costs near 9–10%, making many projects uneconomical.
• Muted supply growth: U.S. hotel supply grew just 0.2% in 2023 and 0.5% in 2024; growth is expected to stay below 1% through 2026, well under historical averages.
• Labor and tariffs add uncertainty: Enforcement and deportations are thinning construction labor pools, while tariffs cause unpredictable swings in material costs.
• Shift to conversions and renovations: With ground-up builds deferred, developers and lenders favor repositioning existing assets.
• Optimism delayed: Developers expect relief from rate cuts by late 2026, but for now most new builds remain on hold.

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