Despite this improving backdrop, hotel construction remains constrained by the same forces that have weighed on the development pipeline for several years: elevated costs of debt and equity capital, along with construction costs that have continued to rise even as broader inflation has cooled.

Each year, HVS researches and compiles development costs from our database of actual hotel construction budgets. This source provides the basis for our illustrated total development costs per room and per product type.

INTRODUCTION

After relative stability in 2025, the national lodging market has regained its footing in 2026. CoStar reported that 2025 RevPAR declined 0.3% nationally as softening occupancy more than offset modest ADR growth, leaving the industry largely treading water for the year.

That pattern has changed in 2026, with occupancy, ADR, and RevPAR all trending higher through the first part of the year and RevPAR growth running well ahead of the modest gains recorded over the previous two years. This improvement has been underpinned by steady group and business travel in primary markets, even as continued inflationary pressure pushes room rates higher. Occupancy remains firmly in the low-60% range, a level the industry has now held for several consecutive years, which suggests the market has settled into a new normal below the pre-pandemic levels.

Despite this improving backdrop, hotel construction remains constrained by the same forces that have weighed on the development pipeline for several years: elevated costs of debt and equity capital, along with construction costs that have continued to rise even as broader inflation has cooled. Lenders remain selective, frequently requiring larger equity contributions and underwriting new projects conservatively, which has kept many otherwise feasible developments on the sidelines.

The result is a market in which operating fundamentals increasingly support the case for new supply, yet actual development activity remains muted. Nationwide supply growth has continued to fall well below pre-pandemic norms, and this gap is expected to persist in the near term, leaving the industry in the somewhat unusual position of strengthening performance metrics paired with a historically slow pace of new hotel openings.

HVS has tracked hotel development costs for more than four decades, collecting data from actual hotel cost budgets during our assignments. The 2026 survey reports per-room hotel development costs based on data compiled by HVS from hotel projects proposed or under construction during the 2025 calendar year. The data reflect six product categories: limited-service, midscale extended-stay, upscale extended-stay, select-service, full-service, and luxury hotels.

The HVS U.S. Hotel Development Cost Survey sets forth averages of development costs in each defined lodging product category. The survey is not meant to be a comparative tool to calculate year-to-year changes, but rather, it reflects the actual cost of building hotels across the United States in 2025.

As will be discussed, the medians and averages set forth in this survey are greatly affected by the types and locations of hotels being developed at this point in the economic cycle. Our goal in sharing this publication is to provide a basis for developers, investors, consultants, and other market participants to evaluate hotel development projects.

Given that development costs for hotels are dependent on a multitude of factors unique to each development and location, this report should not be relied upon to determine the cost of actual hotel projects or for valuation purposes. Instead, it is intended to provide support for preliminary cost estimates, as well as to show a comparison across the various hotel categories.

SUPPLY-AND-DEMAND DYNAMICS AFFECTING HOTEL DEVELOPMENT

In 2025, U.S. hotel occupancy softened from the 2024 level, while ADR continued to edge higher. CoStar reported national year-end 2024 occupancy at 63.1% and ADR at $159.06, compared to year-end 2025 figures of 62.3% occupancy and $160.54 ADR. These levels equate to a 1.2% decline in occupancy and a 0.9% increase in ADR for 2025.

RevPAR was essentially flat for the year, down 0.3%, as rate growth did not quite offset the occupancy softness. That trend has reversed meaningfully in 2026: through the year-to-date period ending May, national occupancy was up 1.3%, ADR grew 2.7%, and RevPAR climbed 4.0% compared to the same period in 2025, marking a notable step up from the muted growth recorded during the prior two years.

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Luigi Major, MAI, is Managing Director, Advisory of HVS Americas. A trusted advisor, he serves clients across the Americas to deliver tailored solutions to meet their needs, leveraging the breadth of HVS resources and expertise. He has participated in thousands of assignments throughout the United States, Latin America, and the Caribbean. Luigi earned his bachelor's degree from the University of Houston's Conrad N. Hilton College of Global Hospitality Leadership and joined HVS in 2007. Contact Luigi at (310) 270-3240 or lmajor@hvs.com