The US hotel conversion pipeline marked a record 1,567 projects in the second quarter of 2026, representing 152,044 rooms. This reflects a 15% increase in project count and an 18% gain in room numbers compared to a year earlier, according to Lodging Econometrics data.
Rising financing and construction costs are pushing hotel owners and international operators toward converting existing properties rather than pursuing new builds. Access Point Financial (APF) estimates approximately US$48 billion in hotel loans will mature between 2025 and 2026, with refinancing debt-service costs potentially 40% higher than original terms. Construction and bridge financing interest rates currently range
from 8% to over 10%, depending on loan details.
Hilton’s Conversion Focus
International hotel groups are increasingly using conversions to expand via franchise or management agreements without acquiring the underlying real estate. Hilton, for instance, reported nearly 40% of its worldwide hotel openings in 2025 were conversions. The company’s Outset Collection, launched in October 2025 to target independent hotels, had over 60 properties under development as of January 2026.
Conversions enable operators to expand efficiently amidst higher costs while allowing independent owners to access brand reservation systems, loyalty programs, and broader marketing channels.
Financial and Operational Considerations of Conversions
Conversions require owners to provide funding for refurbishment and acquisition
fees and manage trading disruptions during renovations. While conversions ease some financial pressures by reducing costs and lead times compared to new builds, they do not eliminate all expenses. Owners must balance refurbishment costs, brand affiliation obligations, and potential revenue losses during the transition.
Concurrent New Construction Activity
Alongside the rise in conversions, new hotel construction continues. Lodging Econometrics recorded 1,081 US hotel projects under construction at the end of June 2026, totaling 133,216 rooms. Construction starts in Q2 2026 numbered 176 projects, a 14% increase year on year. The luxury development pipeline also reached a record 103 projects with 25,496 rooms, reflecting ongoing
investment in new high-end properties.
This activity indicates that while financing and construction costs weigh heavily on expansion strategies, they have not halted new developments in markets with strong demand or where existing properties lack suitability.
Investment Decisions and Market Challenges
Owners and investors must evaluate the total capital requirements and realistic earning potential when choosing between conversions, property acquisitions, or new builds. Conversion success depends on factors such as property condition, refurbishment costs, brand agreement terms, and local market demand.
Property sales negotiations remain complex due to valuation gaps between buyers and sellers. Investors must carefully assess acquisition, refurbishment, and financing costs against expected
revenue benefits. Refinancing pressures may prompt some owners to sell, but attractive investment opportunities require favorable valuations and manageable upgrade expenses.
The record-high hotel conversion pipeline demonstrates the growing appeal of existing hotel assets amid a challenging US financing and construction environment, offering an alternative avenue for expansion in the hospitality sector.
