The exponential growth of certain cities, primarily in the Sun Belt, parallels the rise in hotel development in those particular markets. Last year, we reported that the top five markets were Nashville, Miami, New York City, Phoenix and Dallas, and while all of those will still see rapid growth, other markets are emerging as top contenders.
Still, Jan Freitag, national director, hospitality analytics with CoStar Group, said that the overall state of the hotel development market in 2026 is stable but muted, meaning that hotel supply growth is below historical norms for several reasons: rooms under construction are declining and final planning projects are down 7 percent.
“In 2024, we counted 150,000 rooms in construction. At the end of 2025, that number was 136,000,” said Freitag. “That all then means that if you have fewer rooms that are in final planning, obviously those then can’t break ground, so we expect the number of rooms in construction is muted; we expect supply growth number to be muted going forward.”
The slowdown, he continued, is due to higher interest rates and tariffs, with construction loans remaining costly, and a higher cost of labor and materials, as well as availability of staff.
“Nationally, there appears to be a pullback in hospitality groundbreakings, as the active pipeline at the start of this year was at an eight-year low,” agreed Gregory LaBerge, chief client officer/senior vice president with Marcus & Millichap.
Mitch Patel is the founder and CEO of Vision Hospitality, based in Nashville; to date, his company has built 60 plus hotels, and they are both developers and operators. Patel said he believes in the long-term strength of the hotel industry, expecting that demand will outpace supply.
Top Markets by the Numbers
Freitag said that the top rankings are not based on total rooms under construction but rather on percentage growth relative to existing supply. The formula, he said, is to add rooms currently under construction and rooms in final planning, divide that total by the market’s existing room inventory, and that yields a potential supply growth rate.
Freitag’s data based on Costar’s analytics reveals the following:
- Nashville has 2,568 rooms in construction, and 8,300 rooms in final planning
- Dallas has 4,300 rooms in construction, and 7,500 rooms in final planning
- Denver has 1,700 rooms in construction, and 4,700 rooms in final planning
- Phoenix has 4,500 rooms in construction, and 5,700 rooms in final planning
- Miami has 4,000 rooms in construction, and 5,800 in final planning
He further noted that while New York City has a very large construction pipeline, there are fewer rooms in final planning. Still, most experts place New York City high on the list insofar as new development goes. Christine Bang, research manager, JLL’s Hotels & Hospitality Group, reported that New York has 4,272 rooms under construction.
LaBerge provided a list of top markets similar to Freitag’s list, though adding: Orlando with 2,330 rooms; Indianapolis with 2,280 rooms; Austin with 2,260 rooms; Los Angeles with 2,175 rooms, and Atlanta with 2,110 rooms.
“None of these areas is a new hot spot for hotel development, as over the past five years, all these metros have seen room inventory growth of 9 percent to 20 percent, the highest increases across major U.S. hotel markets,” said LaBerge.
Experts have cited a number of US markets that are primed for growth in the coming years, due to the same factors that precipitated the growth of the markets that have already experienced growth momentum. These include Tampa Bay, Raleigh, Charlotte and Washington, DC.
JP Ford, senior vice president and director of global business development of Lodging Econometrics, added what the Inland Empire in southern California, centered around Riverside and San Bernardino counties, a market that has 120 projects in the pipeline.
Factors Influencing the Market
Much of the development is due to demographic changes, particularly, a north-south migration. “I don’t think there’s a big mystery around it; Nashville, Miami, Phoenix, and Dallas are all markets in the South, all states that have seen a huge in-migration. In real estate, demographics is destiny. If you have more people coming, you have more companies locate there or the other way around. And then that means there is more demand for corporate transients,” said Freitag. And, because they are all warm weather locations, they are all attractive from a leisure perspective. Denver may be an outlier as it reflects a west-east migration from California.
Joe Blewitt, senior vice president of hotel development at Jackson & Shaw, a real estate development company based in Dallas, said that factors include whether that market has major universities, a convention center, corporations or a large entertainment draw. Blewitt highlighted Austin as an example of a city ripe for hotel growth, from the University of Texas at Austin located downtown, with the university having medical facilities and a medical school, as well as Austin being a major entertainment center, which draws lots of conventions.
LaBerge said that a hybrid of factors drives local hotel demand, though noting that certain markets like New York City and Los Angeles are more affected by shifts in business travel and international tourism. “Expanding Sun Belt markets with standout net in-migration and significant commercial real estate construction may also see demand rise for rooms suitable for family visits and for construction workers requiring extended stays,” said LaBerge.
Paul Sacco, chief growth and development officer for PM Hotel Group, agreed that the strongest development markets are hybrid markets, meaning those that balance corporate, group and leisure demand. “That diversity reduces seasonality, supports stronger rate integrity and creates more ancillary revenue opportunities,” he said.
Ford said that before deciding where to build hotels, developers should ask several questions: is it the right parcel in the right location, with strong demand drivers; is there enough demand, and what is the supply like. “They are also looking at what future generators may come into the market that may be announced as well,” said Ford.
On the flip side, a market that is highly tied to the city’s overall economy is one that developers may not flock to as frequently, with one example being Las Vegas, as it depends heavily on tourism and is cyclical.
Whether any of the top markets have staying power or is just reflective of short-term momentum, is dependent upon each market’s economics, the local government and the leadership in the market, noted Blewitt.
Types of Hospitality Projects in the Pipeline
Freitag said that developers are building more brand hotels than independents, which has always been the case, and the most growth has been in the upscale and upper mid-scale type segment.
But it is market-dependent. For example, LaBerge said that upper midscale properties account for one-third of the Dallas-Fort Worth Metroplex’s pipeline, luxury and upper upscale properties account for 70 percent of construction in Miami-Dade, and in New York, at least half of the active pipeline represents full-service properties. To contrast this, Orlando, he continued, is one of the few major metro areas where construction is underway on at least one property across each level of the chain scale.
“Extended stay remains a meaningful driver in the midscale space, particularly among multi-property developers. At the higher end, lifestyle and experiential-focused hotels are expanding in markets that blend business and leisure demand,” added Sacco.
Adaptive reuse and conversion projects lag behind, as, LaBerge pointed out, they are difficult to execute and already faced obstacles before labor shortages and construction material-related tariffs. Moreover, “Hotels are a property type more often acquired and converted to other uses than other commercial property types are converted to lodging. Additionally, available well-located land for ground-up commercial development is limited, a dynamic that could facilitate the removal of certain hotels as investors acquire these assets for their redevelopment potential and land value.”
Blewitt added that when his company develops hotels in a specific market, they like to look at it from a guest experience standpoint. “When we develop hotels, we try to create a sense of place,” he said.
Market Snapshots
Nashville
Mitch Patel, founder of Vision Hospitality, said that Nashville’s growth is supported by corporate demand, convention and group demand and the leisure-tourism demand. He believes it is not a short-term boom but structural growth, as Nashville has a strong identity. Patel said that Nashville was an outlier for a while. “It’s really amazing what has happened in Nashville in the last 10-15 years; I wouldn’t have predicted it.” He said that Nashville has attracted a lot of luxury development over the past few years, which parallels the segment that has seen the most growth overall in the US.
As a developer, he is also betting on the experience economy. “People are going to value, emphasize and spend money on experiences rather than buying goods,” he said. Nashville is a prime example of travelers looking for experiences, as it has a well-defined brand. Long-term, he said Nashville has many fundamental elements that make it attractive, from its position as the state capital, it being a major university town, having an active convention center, which he calls a ‘game-changer,’ office growth, strong in-migration, great entertainment and no state income tax.
Dallas
Everything is bigger in Texas, so the saying goes, and the hotel development market in Dallas is proof.
Dallas has seen substantial growth in recent years with no signs of tapering off; there is both land availability and has a sizable labor pool. “The region’s scale, economic diversity and capital liquidity make it one of the most resilient development environments in the country. DFW benefits from a highly diversified demand base. Corporate travel, airline connectivity through DFW International Airport and Love Field, major healthcare and education anchors such as UT Southwestern and year-round leisure and sports activity all contribute to consistent performance. With the Dallas Convention Center undergoing renovation, Fort Worth has absorbed incremental group demand, reinforcing regional strength across the broader metro,” said Paul Sacco, chief growth and development officer for PM Hotel Group.
Sacco said that development is concentrated in the Uptown, Downtown and North Dallas corridors, Fort Worth’s cultural and entertainment districts and airport-adjacent submarkets. “These areas offer density, infrastructure and established demand generators that support absorption and rate growth,” he said. “Long-term population growth, sustained corporate relocation and infrastructure investment have reinforced DFW’s trajectory across cycles. Capital continues to view the region as a durable growth story.”
This article was originally published in the April/May edition of Hotel Management magazine. Subscribe here.