ARLINGTON, Va. — The volume of U.S. hotel rooms under construction fell for the sixth month in a row, according to CoStar’s June 2025 report, continuing a trend driven by slowing demand and cost pressures.

As of June 2025, there were 138,922 hotel rooms under construction, marking an 11.9% decrease compared to June 2024. Projects in the final planning phase held nearly steady at 266,276 rooms, down just 0.1%, while rooms in the early planning phase rose 4.8% to 349,802 rooms.

“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,” said Isaac Collazo, STR’s senior director of analytics.

Collazo noted that more than half of all hotel rooms in development are in the Southern U.S., mostly outside the Top 25 Markets — and many projects in early planning may never break ground if market conditions remain soft.

Chain Scale Breakdown:

• Luxury: 4.1% of supply (6,443 rooms)
• Upper Upscale: 2.3% (16,336 rooms)
• Upscale: 3.7% (34,047 rooms)
• Upper Midscale: 3.1% (36,718 rooms)
• Midscale: 2.5% (12,715 rooms)
• Economy: 0.9% (5,830 rooms)

“Most rooms under construction continue to be centered in the middle tier (Upscale and Upper Upscale),” Collazo added. “While we expect the number of these projects to decrease, they will remain the focus of new development for the foreseeable future.

The Impact

‍Hotel developers continue to battle rising material and labor costs, high interest rates, and a softer travel market in some regions. Although the travel industry recovered rapidly after COVID-19 lockdowns, many developers now face tougher lending conditions and unpredictable booking patterns.

Regional Focus

‍Southern states lead the pipeline activity as brands and investors target fast-growing suburban and secondary markets, hoping to capture demand from regional business travel and leisure events.

Outlook

‍Industry analysts say that while the drop in active construction eases pressure on supply growth, it may slow down the pace at which new hotels enter the market — especially for budget and mid-tier travelers who have driven much of the industry’s post-pandemic rebound.

CoStar Group and its research division STR will continue to monitor trends that shape the national pipeline for the global hospitality industry, offering developers, lenders, and investors critical insights.

For more information on CoStar’s real estate data and hospitality insights, visit www.costargroup.com.

Originally reported by STR in Hospitality Net.