Hotel Pipeline Bloat: U.S. Construction Hits Wall

The U.S. hotel construction pipeline is bloated with planned projects that aren’t breaking ground, a sign the country’s already sluggish supply growth may be stalling further.

Roughly 139,000 hotel rooms were under construction nationwide at the end of the second quarter, according to CoStar, down around 15,000 from the same time last year.

Meanwhile, the number of rooms stuck in planning and final planning stages has swelled to more than 615,000. Those in the final planning stage rose nearly 10% from a year ago.

Developers still want to build, and brands are pushing new products. But deals are increasingly unworkable, caught between high costs and tight lending held back by elevated interest rates.

“The reason why we see this deceleration in rooms in construction and this acceleration in final planning is purely the interest rate,” said Jan Freitag, national director of hospitality analytics at CoStar. “It's just very, very tough