Hotel construction across the United States is continuing its downward trend, declining for the third month in a row, according to the latest data released by CoStar for March 2025. The number of rooms currently under construction dropped by 7.5% compared to March 2024, with 144,760 rooms in development.

That figure is down by 103 hotels year over year, signaling a tangible slowdown in the later stages of the hotel development pipeline. The decline underscores the effects of rising costs, tighter financing conditions, and broader economic caution on the hospitality sector’s capital investment plans.

Key Pipeline Figures (Year-Over-Year)

• In Construction: 144,760 rooms (-7.5%)
• Final Planning: 273,068 rooms (+3.7%)
• Planning: 359,878 rooms (+10.9%)

“With increased uncertainty and the potential for rising construction costs, it is not surprising that fewer projects have broken ground,” said Isaac Collazo, senior director of analytics at STR. “The number of hotels under construction is down 103 versus a year ago, meaning most markets are seeing one less hotel in the final phase of the pipeline. The overall pipeline remains robust, however, with 6,500 hotels and 777,000 rooms when you add in the planning phases. We’ll be watching those planning phases closely because those are where economic uncertainty is most likely to be impactful. Projects already in construction are going to be completed regardless.”

Despite the slowdown in groundbreaking activity, there’s still momentum in the earlier phases of development, especially in markets where demand fundamentals remain strong. The planning and final planning stages show positive growth, suggesting that developers are still laying the groundwork for future projects, albeit with more caution.

Construction by Chain Scale (% of Existing Supply)

• Luxury: 4.1% (6,421 rooms)
• Upper Upscale: 2.6% (18,813 rooms)
• Upscale: 3.8% (35,082 rooms)
• Upper Midscale: 3.2% (38,217 rooms)
• Midscale: 2.7% (13,883 rooms)
• Economy: 0.9% (5,933 rooms)

“The construction decline was concentrated in Upper Midscale, which accounted for more than a third of the difference in room count and slightly more in the number of hotels versus a year ago,” Collazo said. “Even with the decrease, Upper Midscale makes up the largest number of hotels and rooms under construction.”

Upper Midscale brands, often ^representing budget-conscious family and business travel, have traditionally led the way in hotel development. But economic headwinds are hitting this category particularly hard, causing developers to rethink timelines or delay starts.

While the volume of projects actively under construction has dipped, the overall size of the U.S. hotel development pipeline suggests a long-term optimism among developers and investors. Many are preparing for a rebound in travel and business demand in the latter half of the decade, especially as inflation cools and interest rates stabilize.

Originally reported by Hotel Investment Today.