Hotel Construction Falls for Sixth Consecutive Month: CoStar

(Illustration: Hotel Stock photo courtesy of pixabay via pexels)

The number of hotel rooms under construction decreased year over year for a sixth consecutive month, according to CoStar, Arlington, Va.

“With hotel demand trending downward, unrelenting economic uncertainty, and rising construction costs, it’s not surprising that the number of hotel rooms under construction is at a 20-quarter low,” STR Senior Director of Analytics Isaac Collazo said.

Collazo noted more than half of all rooms under development are in the south, and most are outside of the top 25 largest markets. “Like most of the pipeline, these rooms are mostly in the two planning phases [as opposed to being under construction], and many will likely not be built in the near future.”

CoStar found 138,922 rooms currently under construction, down 11.9% from June 2024. Looking at hotel properties not yet under construction, the report found 349,802 rooms in the planning phase, up 4.8% from a year ago, and 266,276 rooms in the final planning (down 0.1%).

Analyzing the various chain scale segments, CoStar reported that most (34,047 rooms) are in the upscale segment. 16,336 rooms are in the upper-upscale segment, followed by 12,715 rooms in the midscale segment. Just 5,830 rooms are under construction in the economy segment.

“Most rooms under construction continue to be centered in the middle tier–upscale and upper-upscale,” Collazo said. “While we expect the number of these projects to decrease, they will remain the focus of new development for the foreseeable future.”