Overall hotel construction starts may be down, but it doesn’t mean projects aren’t percolating—it just depends on the segment and location, argues Access Point Financial in a new hotel industry report focused on the construction loan sector, jocularly titled: “I Will Gladly Pay You Tuesday for a Hamburger Today: The State of Hotel Construction Loans.”
“With continual market fluctuations, economic uncertainties and rising costs, we wanted to provide hotel owners and developers with truly useful information to make future growth plans,” said Dana Tsakanikas, chief investment officer of APF. “While researching this project, we learned a few things ourselves. Hotel development remains sluggish nationwide, but we are seeing meaningful exceptions in certain segments and locations. Perhaps least surprising, it quickly became obvious that hoteliers remain a resilient and creative bunch.”
Stubbornly high construction costs have forced hotel developers to shift focus from ground-up development to “flips and PIPs,” investing in brand conversions and renovations. Like-new comes with a lower price tag, as renovations bypass expensive construction loan costs required for new builds.
Extended-stay products are an anomaly for new development, as owners appreciate lower operational overhead costs and resilient customer demand.
Early-stage pipeline activity is at a record level, particularly in luxury, reflecting developers’ response to the current undersupply. As of the close of the 2026 first quarter, the luxury segment has 59 hotels under construction.
The Turner Building Cost Index, which tracks U.S. non-residential construction costs, rose 8.0% in 2022 and 6.0% in 2023 after averaging 1.9% growth in 2020–2021. It reached an index level of 1552 in Q2 2026, up 5.15% year-over-year.
Hotel-specific debt is meaningfully more expensive than other CRE asset classes. As of July 2026, 10-year fixed CMBS rates for hotels run 5.85%–6.85%, compared with 5.50%–6.30% for multifamily or industrial. Hotel construction and bridge financing runs roughly 8%–10%+ depending on structure and leverage.
U.S. hotel supply growth fell from a pre-pandemic year-over-year average of 1.3% to 0.5% as of early 2025, with rooms under construction still below pre-COVID levels. The gap between the cost of building new hotels and acquiring existing ones has fueled M&A activity, as hotel companies expand through acquisitions and partnerships rather than new construction. That activity is proving to be an exercise in “testing the market,” as a material gap still exists between seller and buyer price expectations.
About $48 billion in CMBS-era hotel loans are maturing in 2025–2026, often refinancing at debt service about 40% higher than the original loan. This pulls lender and sponsor attention and capital toward existing assets rather than new construction.
Gross operating profit per room remains near 90% of 2019 levels, even where ADR and RevPAR appear healthy, leaving a thin cushion to absorb higher construction and debt costs. The report cites a stack of cost of capital, tighter lender selectivity and margin compression, with construction and material cost inflation as one input among several.
Dollar volume for hotel loans rose 85% year-over-year in the first quarter and a further 19% year-over-year in the second quarter of this year.
“Based on the success rate of our existing client activity of late, we remain bullish on the ‘Build, Baby, Build,’ strategy,” Tsakanikas noted. “With historic product undersupply, our owners and developers are realizing a distinct market advantage bringing new hotels into areas with otherwise aging and outdated competition.”
