Hotel Industry Scales Back Development Amid Costs and Weak Demand

The U.S. hotel industry is slowing down its expansion plans as rising costs and weakening travel demand weigh on operators, according to a new survey by the American Hotel & Lodging Association (AHLA). The poll, conducted in late August among 387 property owners and operators, found that 32% have delayed investment projects, 24% are scaling back development, and 8% have scrapped projects entirely. Only 8% plan to move ahead with new investments despite the economic climate.

Labor shortages continue to exacerbate the problem. Nearly half of respondents (49%) reported being understaffed, adding further financial and operational strain at a time when leisure travel is softening. About 30% of hotels reported declines in completed leisure stays, while 26% saw drops in upcoming bookings compared to last year. Business, group, and government travel also showed signs of weakness, with 15–17% of properties reporting fewer bookings.

The downturn coincides with a sharp decline in international visitors. Statistics Canada recently reported an over 25% drop in Canadian air travelers returning from the U.S. in August 2025 versus the same period last year, along with a 33.9% decrease in return trips by car. Analysts link the slump to new U.S. policies and rising travel costs, which have dampened interest among key markets such as Canada and Southeast Asia.

AHLA President & CEO Rosanna Maietta said hotels remain eager to invest but need stronger demand and policy support to move forward. “Rising costs and uncertain demand are forcing many to put projects on hold,” she noted.

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