Smarter and more selective: How hotel construction capital is evolving heading into 2026
As 2025 draws to a close, hotel developers looking to finance projects in 2026 are facing higher costs and an exceptionally cautious lending environment.
Some have even decried that hotel construction lending is dead, but reports of its death are greatly exaggerated. Hotel construction is still being financed, just under a smarter and more selective playbook.
Hotel lenders, who are famously risk-averse, have further tightened their underwriting and diversified their capital sources. They’re looking for the surest bet possible before signing a deal. Currently, developers who are winning contracts are the ones bringing discipline and certainty to the table.
There is opportunity for developers positioning projects to open into the next upcycle, if they play their cards right. Here’s what developers should know before approaching lenders.
The new reality
The first thing that developers must keep in mind is that construction projects are taking longer and costing more across the board. CoStar data shows that the average hotel build time now exceeds 23 months, and costs have escalated across all chain scales. Predictably, lenders adjusted to the new reality and have evolved how deals are underwritten, priced and financed. The capital is still there; it just diversified and got smarter about risk.
When it comes to construction capital, banks have been joined by debt funds, private credit and even insurance companies. The capital stack has never been more flexible, but it does demand sophistication from loan-seekers. In fact, the strongest developers are treating capital structure as part of the development plan, not an afterthought. Here’s a brief overview of how different lenders can be leveraged.
Banks. Banks selectively lend to developers with whom they have an existing relationship. They are seeking lower-leverage deals — ≤65% loan-to-cost, with occasional outliers reaching 70% LTC on sub-$30 million deals — and fully entitled, GMP-ready projects.
Debt funds and private credit. These lenders are filling the gap left by banks and are often willing to take construction risk for higher spreads (SOFR + 500-800 bps) and stronger covenants. They’re also typically offering leverage a few points higher than banks — in some cases reaching up to 80% LTC through stretch-senior structures — especially for experienced sponsors or strong brands.
Insurance companies. Insurance companies are funding core-market builds with long-term yield profiles. They’re extremely selective.
Other structured capital layers. PACE, EB-5, mezzanine debt, and preferred equity are no longer considered “alternative” means of funding a project; they’re now a part of the overall mix.
Underwriting has also evolved. After all, lenders aren’t scared of construction; they’re scared of uncertainty. Uncertainty is what kills deals.
So what are lenders doing? They’re looking past models and digging deeper into market fundamentals like new supply, RevPAR trends and brand overlap to ensure that a project makes sense in today’s flat-growth environment. The market story must make sense for a deal to move forward. Loan sizing has also become more disciplined — proceeds are being set against total project feasibility, not just static cost metrics.
Developers must show that they can absorb things like cost creep and carry longer than expected without causing the deal to crumble. Many lenders also add limited recourse tied to the cost overruns or liquidity gaps, which are a step up from the standard completion guarantees written into most deals, to keep developers engaged through the full construction cycle.
Expertise is perhaps most critical. Execution certainty is critically valued, and the market is chasing a sure bet over volume. In short — credibility outweighs leverage. Committees are backing experienced developers who show clean budgets, verified bids, and a clear path to delivery. The easiest way for a developer to lose a lender is to overpromise or underdocument; lenders will fund risk if they can quantify it.
What’s getting financed
Certain types of hotel projects are more likely to get financed now than others. These projects have strong brand alignment and clear demand drivers in markets with good fundamentals — e.g., Sun Belt metros, medical/university hubs, and resort corridors. Select-service and extended-stay brands are particularly attractive because they’re reliable. Full-service and lifestyle properties are also appealing if they’re paired with JV equity or structured mezzanine/PACE layers.
Generally speaking, it’s the developers who understand leverage discipline and how to bring complete capital stacks to the table who will close deals. These savvy developers engage capital advisors early to design financeable stacks before locking in GMPs. They are also prepared for deeper due diligence from lenders, who are typically seeking cost verifications, timeline modeling and liquidity testing. Credibility and clarity matter more than maxing out leverage or project speed. Developers need to think like financiers before seeking funding.
Finally, and most importantly, relationships are still the ultimate driver of the hospitality industry. A strong rapport with lenders — and familiarity with a developer’s team and expertise — can decrease approval times and help close a deal.
Discipline today, premium tomorrow
Caution was the name of the game in 2025, but we still were able to lay meaningful groundwork for a stronger 2026. Hotel developers breaking ground now who use the disciplined assumptions and structured capital stacks mentioned above will deliver projects into a healthier demand and rate environment when those hotels open their doors in 2027 and 2028. Additionally, those new properties will come into the market with limited new supply competition and an aging competitive set, positioning them for a RevPAR premium.
The best operators are already planning for this eventuality and leaning into new hotel projects. They’re positioning themselves to win when the industry recovers, building through the trough to meet the rebound. Developers who build now aren’t being contrarian — they’re positioning ahead of the recovery.
Ryan Bosch is principal at Arriba Capital and a seasoned expert in hospitality debt and structured finance, managing a portfolio exceeding $2 billion across 140 deals.
The opinions expressed in this column do not necessarily reflect the opinions of CoStar News or CoStar Group and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to contact an editor with any questions or concern.
Public hotel companies diverge on outlook following mixed earnings results
Earlier in the year, most publicly traded hotel companies downgraded their full-year 2025 outlook as tariffs were unveiled by the U.S. and sentiment from international travelers weakened.
Changes to outlooks were mixed during third-quarter earnings calls, with some companies choosing to raise their projections while others decreased them further. If there's one thing they can agree on, it's that there's still a level of uncertainty clinging to the economy moving forward.
Leeny Oberg, chief financial officer and executive vice president of development, Marriott International
"With ongoing economic uncertainty, we expect global RevPAR to increase 1% to 2% in the fourth quarter. The acceleration in global RevPAR growth from the third quarter to the fourth quarter is partially due to calendar shifts and onetime events. RevPAR growth is anticipated to still be meaningfully stronger internationally than in the U.S. & Canada, and higher-end chain scales are expected to continue to outperform lower-end chain scales.
"As we look ahead to next year, while we're still working on our budget, our preliminary view is that 2026 year's year-over-year global RevPAR growth could be similar to the 1.5% to 2.5% growth expected this year. Growth is expected to a gain internationally than in the U.S. & Canada. And next summer's World Cup could contribute around 30 to 35 basis points to full year global RevPAR growth."
Jon Bortz, chairman and CEO, Pebblebrook Hotel Trust
"Our Q4 outlook assumes same-property RevPAR will range between minus 1.25% to up 2%, with total RevPAR between a negative 1.25% and a positive 2.7%.
"On the cost side, due to the benefits of our strategic efficiency and productivity efforts, we expect total hotel expenses to grow just 0.8% at the midpoint. That means expenses per occupied room should decline again in Q4.
"As we look ahead to 2026, we remain cautiously optimistic due to our belief that fundamentals provide a favorable setup for next year. We believe macroeconomic uncertainty will fade. Hotel demand is likely to normalize with GDP growth, and we know new supply will remain at historically low levels. I know there are many professional prognosticators who are currently forecasting limited RevPAR growth for 2026, but there are several significant pluses for next year, both for the industry and specifically for our portfolio."
Sourav Ghosh, chief financial officer and executive vice president, Host Hotels & Resorts
"We are increasing our comparable hotel RevPAR and total RevPAR guidance estimates as a result of our outperformance year-to-date, and improved expectations for the fourth quarter. We now expect comparable hotel RevPAR growth of approximately 3%, and comparable hotel total RevPAR growth of 3.4% compared to 2024.
"We expect low single-digit RevPAR growth in the fourth quarter, an improvement over our prior guidance, partially driven by strong estimated RevPAR growth of 5.5% in October.
"Our guidance assumes a continued recovery in Maui, no improvement in the international demand imbalance, and steady demand trends in the fourth quarter.
"Our guidance also takes into account the limited impact we saw from the government shutdown in October, primarily in Washington, D.C., and San Diego. If the government shutdown continues through the end of the year, full-year RevPAR growth could be negatively impacted.
"We expect a comparable hotel EBITDA margin of approximately 28.8%, a 20 basis point improvement over our prior guidance midpoint, which is 50 basis points below 2024."
Joan Bottarini, chief financial officer, Hyatt Hotels Corp.
"We've tightened our RevPAR range and expect full-year 2025 RevPAR between 2% to 2.5%, which implies RevPAR growth in the fourth quarter between 0.5% and 2.5%. The quarter is off to a good start with October RevPAR increasing in the United States by approximately 1% and globally by approximately 5%.
"For the United States, we expect RevPAR growth for both the fourth quarter and full year 2025 of approximately 1%.
"We expect fourth-quarter RevPAR growth outside of the United States to remain an area of strength, especially in Europe and Asia Pacific, excluding Greater China.
"We're increasing our net rooms growth outlook range to 6.3% to 7% and which does not include rooms added from the Playa acquisition. Gross fees are expected to be in the range of $1.195 billion to $1.205 billion, a 9% increase at the midpoint of our range compared to last year. We've lowered our adjusted G&A range to $440 million to $445 million reflecting the run rate cost efficiencies that we've been able to achieve throughout the year. Adjusted EBITDA for the full year is expected to be in the range of $1.09 billion to $1.11 billion, an 8% increase at the midpoint of our range compared to last year when adjusting for the impact of asset sales.
"As a reminder, owned assets sold in 2024 accounted for $80 million worth of owned and leased segment adjusted EBITDA last year.
"Our full-year adjusted EBITDA outlook implies growth in the fourth quarter of 9% at the midpoint of our range. Adjusted free cash flow is expected to be in the range of $475 million to $525 million, which excludes $117 million of deferred cash taxes paid in 2025 relating to asset sales that took place in 2024. In the fourth quarter, we'll receive upfront cash of $47 million as part of the amended agreement with Chase. And we are increasing our full year outlook for capital returns to shareholders and expect to return approximately $350 million in 2025, inclusive of share repurchases and dividends."
Pat Pacious, president and CEO, Choice Hotels International
"In the third quarter, we drove adjusted EBITDA 7% higher to $190 million, reflecting the strength of our higher revenue brand mix, a surge in our small and medium business traveler and groups business revenue, continued momentum across our partnership revenue streams and the accelerating earnings contribution now coming from our expanding international business. The strength of these earnings drivers allows us to raise the midpoint of our full-year earnings outlook and tighten the range, reinforcing our confidence in the growth of our global business going forward.
"As we look ahead, we're optimistic about the next phase of the U.S. lodging cycle and its impact on new construction openings. In the U.S., we expect last week's lowering of interest rates, continued investments in the build out of AI infrastructure and a constructive regulatory environment will drive stronger demand, especially for our travelers, combined with low industry supply growth, continued favorable demographic trends and significant demand catalysts such as the 2026 World Cup, the U.S. 250th anniversary and the Route 66 centennial. These tailwinds are expected to generate incremental travel across our markets and set the stage for stronger RevPAR growth in the years ahead.
"We expect last week's lowering of interest rates, continued investments in the build-out of [artificial intelligence] infrastructure and a constructive regulatory environment will drive stronger demand, especially for our travelers."
Scott Oaksmith, chief financial officer, Choice Hotels International
"For the full year, we now expect U.S. RevPAR to range between minus 3% and minus 2%. As a reminder, fourth quarter comparisons will be impacted by elevated hurricane related demand in the prior year, and we continue to monitor potential impacts related to the government shutdown.
"We are tightening our full-year adjusted EBITDA with the midpoint up by $1 million. We now expect adjusted EBITDA to range between $620 million and $632 million. We are adjusting our full-year adjusted EPS guidance to range from $6.82 to $7.05, primarily reflecting additional amortization expense related to the intangible assets from the Choice Hotels Canada acquisition, which was not included in prior guidance, as well as lower equity earnings from joint ventures due to the timing of hotel openings."
Bryan Giglia, CEO, Sunstone Hotel Investors
"While the operating environment remains choppy and additional uncertainty has been introduced from the government shutdown, based on what we see today, we are maintaining our outlook for the year, and are continuing to work with our operators to drive incremental revenue and control costs."
Liz Perkins, chief financial officer and senior vice president, Apple Hospitality REIT
"The adjustments made to full-year guidance reflect performance year-to-date as well as the potential negative impact of prolonged economic uncertainty and the government shutdown on the remainder of the year.
"For the full year, we expect net income to be between $162 million and $175 million, comparable hotels RevPAR change to be between negative 2% and negative 1%, comparable hotels adjusted hotel EBITDA margin to be between 33.9% and 34.5% and adjusted EBITDAre to be between $435 million and $444 million.
"As compared to the midpoint of previously provided 2025 guidance, we are decreasing comparable hotels RevPAR change by 100 basis points while increasing comparable hotels adjusted hotel EBITDA margin by 20 basis points and increasing adjusted EBITDAre by approximately $300,000 as a result of strong cost control measures year-to-date, a more favorable general liability insurance renewal than anticipated and lower G&A expense. We have assumed for purposes of guidance that total hotel expenses will increase by approximately 2.1% at the midpoint, which is 3.4% on a CPOR basis.
"We continue to assume these increases are driven primarily by higher growth rates for certain fixed expenses, including real estate taxes and general liability insurance than those experienced last year."
Jonathan Stanner, president and CEO, Summit Hotel Properties
"Our outlook for the fourth quarter incorporates sequential improvement in operating trends compared to the second and third quarters of this year.
"As we shift out of the leisure-heavy summer travel months, we are benefiting from relatively stronger business transient trends, which have helped drive — helped to drive midweek RevPAR growth, particularly in key urban markets. Fourth quarter pace for our pro forma portfolio is tracking approximately 2.5% behind last year, which notably incorporates several difficult special event comparisons that benefited the fourth quarter of 2024 and incremental headwinds driven by the government shutdown.
"For context, pace for the third quarter was approximately 10% behind last year at this time 90 days ago.
"October RevPAR on a preliminary basis declined between 2% and 2.5% year-over-year, which represents our best monthly performance since February of this year. It's worth noting that historically, October represents approximately 40% of our fourth quarter revenue and 50% of hotel EBITDA. We currently expect fourth quarter RevPAR growth to actualize down between 2% and 2.5% year-over-year, which would result in a full year RevPAR decline of between 2.25% and 2.5%. These expectations should be caveated by the uncertainty created by the U.S. government shutdown.
"While we have experienced limited negative effects across our portfolio quarter-to-date, the longer-term implications of the shutdown create additional risk for lodging demand broadly, including disruption to air travel.
"Looking ahead to 2026, we believe the setup is more favorable than it has been in the past several years. Industry expectations remain low and year-over-year comparisons for government travel eased significantly after March 1."
William H. Conkling, executive vice president and chief financial officer, Summit Hotel Properties
"While we remain confident in the long-term fundamentals in our portfolio, near-term results are being negatively affected by increased price sensitivity and continued macroeconomic volatility.
"We currently expect fourth quarter 2025 RevPAR to range from minus 2% to minus 2.5% as operating trends demonstrate sequential improvement from the second and third quarters of this year. Operating expense growth is expected to range from 1.5% to 2% for the full year. It is worth noting that the recent sales of the Courtyard Amarillo and Courtyard Kansas City will result in approximately $400,000 of foregone pro rata hotel EBITDA in the fourth quarter, representing the date of sale through year-end. From a nonoperational perspective, we expect full year pro rata interest expense, excluding the amortization of deferred financing costs to be $50 million to $55 million, Series E and Series F preferred dividends to be $16 million and Series D preferred distributions to be $2.6 million.
"From a capital expenditure perspective, we are targeting a full year 2025 spend of $60 million to $65 million on a pro rata basis. The previously referenced nonoperational estimates do not include any additional acquisition, disposition or capital markets refinancing activity beyond what we have discussed today."
Marcel Verbaas, chair and CEO, Xenia Hotels & Resorts
"As we look ahead to the remainder of the year, we remain cautious in our near-term outlook, which is reflected by slightly reduced expectations for the fourth quarter.
"For the full year, we now expect a same-property RevPAR increase of 4%, and adjusted EBITDAre of $254 million, at the midpoint of our updated full year guidance. Atish will provide additional details on these modest adjustments to guidance during his remarks.
"As has been the case for most of the year, group business continues to be a driver of our RevPAR growth, with leisure softening a bit this year, as we had anticipated, while business transient continues to improve gradually. We saw a continuation of this trend again in October.
"We are encouraged by the approximately 5.8% RevPAR growth that we project our same-property portfolio will achieve in October, which represents a meaningful improvement over our portfolio's third quarter performance.
"With strong overall group base for the fourth quarter, we again anticipate significant growth in food and beverage revenues during the quarter as well.
"Looking ahead to 2026, we believe that Grand Hyatt Scottsdale will continue to ramp consistent with our underwriting, and we expect good demand across the portfolio to be robust and drive outsized non-rooms revenue growth.
"We continue to believe strongly in the long-term growth prospects for our well-located, diversified and high-quality portfolio in 2026 and beyond. Barry when will provide more details on our third quarter operating results, the W. Nashville Food & Beverage relaunch and our other capital projects."
The original nine golden rules: A journey
Redesigns are completed more often and they have higher success rates
Nearly half of the golden rules have evolved
Today’s golden rules of redesign, and what they look like in practice
Bring leaders along from the start
The refreshed rules: Success by the numbers
The refreshed rules: Golden again
First, create alignment among leaders and decision-makers, grounded in strategy
Second, invest deeply in rewiring workflows
Third, make significant investments in people
Finally, create a performance-oriented culture for durable impact
NATIONAL REPORT – Despite research from Deloitte predicting slower holiday traffic in the U.S., Thanksgiving is showing strength and a lot of last-minute bookings with the government shutdown over and airlines reporting smoother operations.
Amadeus Travel Intelligence data captured on November 19 suggests a busy period with U.S. air traffic up 4% year-over-year during Thanksgiving week. Amadeus’ data also shows mid-sized and secondary airports, especially in California markets, are posting 9% growth in Thanksgiving bookings.
AAA said it expects a record 81.8 million Americans to travel for the holiday this year with about 90% of those travelers planning to drive to their destinations, turning Thanksgiving weekend into one of the busiest travel periods the country has ever seen.
AAA forecasts that 1.6 million more people will travel at least 50 miles from home between November 25 and December 1 compared to last year.
Among the top 10 U.S. destinations where hotels are filling fastest for Thanksgiving week, according to Amadeus, seven are in Arizona, Florida or Hawaii.
Amadeus said Phoenix shows the strongest momentum, with departures up 3.4% and arrivals up 10.5% between November 25 and December 2, signaling renewed interest in the mild climate and outdoor attractions during the holiday season. Atlanta also shows strong gains, with departures up 5.4% and arrivals up 6.3%, cementing its role as both a key connector and a growing leisure gateway for southeastern travelers.
Resort markets in Hawaii lead the pack, with occupancy levels at 69% between November 23-29, more than double the U.S. average. Kahului, Honolulu, and Waikoloa are the strongest performers.
Elsewhere, Sedona in Arizona is the most popular destination this Thanksgiving, while Page (home of Lake Powell and near Glen Canyon Dam) sits at number nine. Florida’s Gulf and Atlantic coasts show similar momentum, led by destinations such as Key West and Key Largo.
Amadeus also reported that the beaches and islands are filling fast, but rate increases remain modest. While most top destinations are slightly more expensive than last year, a few key markets like Kahului and Key West are cheaper.
Post-Thanksgiving weekend shows strength in college football towns with Auburn, Alabama (+$214); Ann Arbor, Michigan (+$145) and Norman, Oklahoma (+$129) seeing sharp jumps in ADRs.
All of this data comes after Deloitte reported that for the first time in at least five years, more than half of surveyed Americans plan to take trips between Thanksgiving and early January, but most of that increase comes from people staying with friends and family rather than in paid accommodations.
However, Deloitte noted that the signs of softness don’t stop there, as planned trip length and frequency, as well as travel budgets, are all down compared to 2024. With fewer trips and more conservative spending, travel providers could see a weaker winter in key metrics, including airline load factors, hotel RevPAR, and activity bookings.
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