Dive Brief:
- The volume of U.S. hotel rooms under construction decreased year over year for a sixth consecutive month in June, according to new CoStar data.
- As of last month, there were 138,922 U.S. hotel rooms under construction, a 20-quarter low, according to Isaac Collazo, senior director of analytics at CoStar subsidiary STR. The volume of rooms under construction decreased 11.9% year over year in June, per CoStar.
- The continued decline is not surprising given “hotel demand trending downward, unrelenting economic uncertainty and rising construction costs,” Collazo said. Most of the rooms under construction are in the upscale and upper upscale segments, which STR previously forecasted would see the highest RevPAR growth this year, driven by changing traveler behavior.
Dive Insight:
The volume of U.S. hotel rooms under construction has decreased each month since January, coinciding with President Donald Trump’s second term. In those months, U.S. government actions have caused economic uncertainty, and tariffs have negatively impacted construction pipelines.
The volume of U.S. hotel rooms in final planning (266,276 rooms) also decreased year over year in June, albeit only by 0.1%, according to CoStar. The number of U.S. hotel rooms in the planning stage (349,802 rooms), meanwhile, increased 4.8% year over year in the month.
The majority of rooms in the U.S. hotel construction pipeline are in these two planning phases, but “many will likely not be built in the near future,” Collazo said.
Of rooms currently under construction, the majority are in the upscale and upper upscale segments, according to Collazo, who also noted that more than half of all rooms under development are in the South, largely outside of the top 25 markets.
Higher-tier hotel segments were a bright spot for the industry last year, driving performance as high-income households prioritized travel.
That trend has continued, with high-income households anticipated to make up nearly half of travelers this summer, Deloitte reported in May. Ahead of this year’s Memorial Day weekend, travel outlooks appeared mostly stable despite a dip in consumer confidence and dampening international visitation.
Last month, however, CoStar and Tourism Economics downgraded their 2025 and 2026 growth projections for U.S. hotel top-line performance metrics, citing elevated macroeconomic concerns.
