Hotel Developers Have Shifted Strategy Amid High Costs

Rising construction expenses and high interest rates have forced U.S. developers to prioritize hotel renovations over new builds.

Updated on Oct. 13, 2026 in Hotels

Bold vector editorial illustration depicting a stylized hotel facade with geometric scaffolding, representing a shift toward renovation in the hotel industry. — Rising construction costs and high interest rates have shifted U.S. hotel developers' focus from new builds toward renovations and brand conversions. AI Illustration. Upload story photo >

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Access Point Financial released a report indicating that hotel developers are moving away from new construction projects to focus on renovations and brand conversions. High debt costs and construction expenses have stalled new development across the United States.

Why it matters

Rising construction costs and burdensome debt service requirements are limiting new development projects. Capital is being diverted toward refinancing the $48 billion in commercial mortgage-backed security loans maturing through 2026.

The Turner Building Cost Index reached 1552 in Q2 2026, while construction and bridge financing rates currently range from 8% to 10% or higher. U.S. hotel supply growth has slowed to 0.5% as of early 2025.

The players

Access Point Financial

Access Point Financial is a specialty lender and advisory firm that provides financing and capital solutions to the hospitality industry.

The details

Developers are increasingly opting for acquisitions and brand conversions to bypass the high capital costs required for new construction. With 59 luxury hotels under construction as of Q1 2026, the sector is currently struggling to return to 2019 levels, with gross operating profit per room holding at 90% of that benchmark.

2019 served as the baseline year for gross operating profit per room.
Early 2025 marked a period where U.S. hotel supply growth reached 0.5%.
A total of $48 billion in hotel loans are maturing between 2025 and 2026.
As of Q1 2026, the luxury segment had 59 hotels under construction.
The Turner Building Cost Index hit a level of 1552 in Q2 2026.

Travel Outlook

This shift mirrors broader trends in the hospitality sector where rising infrastructure costs dictate development feasibility. The focus on conversions rather than new capacity follows the historical pattern of adapting existing assets during periods of high economic volatility.

Travelers may find that hotel brands are increasingly refreshing their existing properties rather than opening new locations in their destination cities. Those booking stays should expect a higher volume of renovated rooms as developers pivot away from ground-up construction projects.

The takeaway

Developers are prioritizing the modernization of older properties to circumvent the high borrowing costs currently affecting the industry. Travelers can expect to see more rebranded and renovated hotels as the market balances limited new supply with existing asset updates.