Access Point Financial has released a new report examining the state of hotel construction lending, offering hoteliers and developers a historical perspective, an assessment of current market conditions and projections for the future.
Titled “I Will Gladly Pay You Tuesday for a Hamburger Today: The State of Hotel Construction Loans,” the five-page report tracks the evolution of hotel construction financing since the early 2000s and explores the challenges and opportunities shaping development activity today.
“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,” Dana Tsakanikas, chief investment officer of APF, said in a statement.
While researching the report, the company found hotel development remains sluggish nationwide, though certain segments and markets continue to show strength. “Perhaps least surprising, it quickly became obvious that hoteliers remain a resilient and creative bunch,” Tsakanikas said.
According to the report, developers increasingly are favoring conversions and property improvement plans over ground-up development as construction and borrowing costs continue to rise. Renovations and brand conversions can offer a lower-cost path to refreshing assets while avoiding expenses associated with new hotel construction.
Extended-stay hotels remain a notable exception to the slowdown in development activity, supported by lower operating costs and steady guest demand.
The report also notes strong early-stage pipeline activity in the luxury segment, which had 59 hotels under construction at the end of first-quarter 2026. Developers continue to pursue luxury projects in response to what APF describes as an industrywide supply shortage.
Construction costs remain elevated. The Turner Building Cost Index, which tracks U.S. nonresidential construction costs, increased 8.0 percent in 2022 and 6.0 percent in 2023 after averaging 1.9 percent growth during 2020 and 2021. The index reached 1,552 in the second quarter of 2026, up 5.15 percent year over year.
The report also found hotel financing remains more expensive than financing for many other commercial real estate asset classes. As of July 2026, 10-year fixed CMBS rates for hotels ranged from 5.85 percent to 6.85 percent, compared with 5.50 percent to 6.30 percent for multifamily and industrial properties. Hotel construction and bridge financing typically ranged from approximately 8 percent to more than 10 percent, depending on structure and leverage.
Meanwhile, hotel supply growth has slowed significantly. U.S. hotel supply growth declined from a pre-pandemic average of 1.3 percent year-over-year to 0.5 percent in early 2025, while rooms under construction remain below pre-COVID levels. The widening gap between the cost of developing a new hotel and acquiring an existing one has contributed to increased merger-and-acquisition activity, although valuation differences continue to separate buyers and sellers.
The report estimates roughly $48 billion in CMBS-era hotel loans will mature during 2025 and 2026, forcing many borrowers to refinance at debt service levels about 40 percent higher than their original loans. As a result, lenders and sponsors are dedicating more capital and attention to existing assets rather than funding new construction.
APF also noted that while revenue metrics such as average daily rate and RevPAR have recovered in many markets, profitability has lagged. Gross operating profit per room remains near 90 percent of 2019 levels, reducing owners’ ability to absorb higher debt and construction costs.
Despite those headwinds, hotel lending activity has accelerated. Hotel loan volume increased 85 percent year over year during the first quarter and another 19 percent year over year during the second quarter, according to the report.
“Based on the success rate of our existing client activity of late, we remain bullish on the ‘Build, Baby, Build,’ strategy,” Tsakanikas said in a statement. “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.”