Hotel Development in the United States Gains Momentum as Brand Executives Target Data Center Regions and Tax-Free States

Published on October 14, 2025

The United States hotel industry is entering a new phase of development momentum as brand executives identify promising areas for growth. Despite facing challenges such as high construction expenses, inflationary pressures, and fluctuating interest rates, leading hotel groups are steering their strategies toward resilience and long-term expansion. The hotel development landscape is increasingly shaped by emerging demand from data center investments, tax-free states, and infrastructure-driven markets. Senior executives from global hospitality brands including Hilton, Hyatt, Wyndham Hotels & Resorts, IHG Hotels & Resorts, and Choice Hotels International are directing attention toward regions demonstrating sustained economic activity, population shifts, and evolving travel trends. As construction costs show signs of easing and non-traditional demand drivers such as AI data centers and battery manufacturing facilities reshape the national map, the sector is regaining its footing. This growing optimism reflects a broader rebound in U.S. tourism and hospitality, supported by strategic positioning, infrastructure investment, and an evolving consumer base moving toward high-growth states such as Texas, Florida, and Tennessee.

A Renewed Sense of Momentum in U.S. Hospitality

Across the U.S. hospitality industry, the term “momentum” has become synonymous with renewed optimism among brand executives. The outlook is being driven by gradual improvements in construction conditions and the anticipation of interest rate cuts. Representatives from top global hotel groups, speaking at the Lodging Conference in Phoenix, reflected on how the first half of 2025 began with uncertainty but is now marked by cautious optimism.

Dan Hansen, head of development in the Americas for Hyatt Hotels Corporation, observed that despite lingering economic challenges—ranging from political volatility to elevated borrowing costs—the industry continues to progress beyond these obstacles. His perspective was echoed by David Pepper, chief development officer at Choice Hotels International, who emphasized that delayed economic recovery indicators are beginning to align, allowing growth prospects to strengthen.

Falling Construction Costs Bring New Confidence

A crucial element supporting this revived momentum is the reported decrease in hotel construction costs. According to Choice Hotels’ David Pepper, the cost of developing new properties has declined between 5% and 10%, largely due to reductions in labor expenses. This downward trend provides developers and investors with a renewed sense of financial flexibility, paving the way for new project initiations across key U.S. regions.

The opening of the Everhome Suites San Bernardino-Loma Linda in California exemplifies how targeted investments continue to emerge even in high-cost markets. With construction materials stabilizing and supply chain constraints easing, hotel brands are finding more viable entry points into diverse markets nationwide.

Growth Rooted in New Demand Drivers

The primary areas of opportunity, according to multiple brand executives, are closely tied to emerging industries and infrastructure projects. Wyndham Hotels & Resorts has reported growing interest from property owners in suburban markets that are benefiting from the rise of AI data centers, battery plants, and chip manufacturing facilities. These industries are reshaping local economies and indirectly stimulating lodging demand by creating employment, corporate travel, and extended-stay requirements.

Amit Sripathi, executive vice president and chief development officer at Wyndham, highlighted that while data centers themselves may not directly attract tourists, their presence transforms market dynamics. Nearby areas see increased investment, an expanding workforce, and improved infrastructure—all of which translate into long-term lodging opportunities.

Infrastructure Investment as a Catalyst

At Hilton Hotels, Chief Development Officer Christian Charnaux pointed out that historical data demonstrates a clear link between non-residential fixed investment and hotel room-night demand growth. When businesses invest heavily in physical assets—such as factories, energy facilities, and logistics centers—hotel occupancy typically follows.

Charnaux emphasized that new industrial developments generate supporting infrastructure such as power plants and construction hubs, leading to the formation of new micro-markets. These developments ultimately expand the footprint of travel demand in emerging regions across the United States.

The Allure of Tax-Free States

In the search for high-performing markets, tax-free states have surfaced as prime targets for hotel growth. Areas without state income tax—such as Tennessee, Texas, and Florida—continue to attract both business and population migration. The influx of corporate expansions and relocations into these states creates strong, sustainable demand for lodging facilities, particularly within the midscale and extended-stay segments.

David Pepper of Choice Hotels noted that these regions are experiencing a steady rise in manufacturing and residential activity, creating a fertile environment for long-term hospitality investments. Developers view these states as offering both financial incentives and consistent market resilience, supporting stronger portfolio growth in the years ahead.

Expanding Along the U.S. Borders

Another notable development trend involves border states, particularly along the southern U.S. regions. Choice Hotels has identified expanding demand in areas like Texas, Arizona, and California, where cross-border business activity and migration patterns contribute to growing accommodation needs. The southern border corridor, often characterized by industrial zones and logistics centers, has become a hotspot for both domestic and international travel-related growth.

Beyond the U.S., Choice Hotels’ operations in Canada have demonstrated encouraging performance, with double-digit growth in revenue per available room (RevPAR) across all provinces. This uptick is attributed to Canadians favoring domestic travel options over international destinations, further strengthening North America’s hospitality performance.

Investment Potential in Secondary and Transitional Markets

In addition to new construction, investment opportunities are surfacing in markets considered temporarily undervalued. IHG Hotels & Resorts, represented by Kevin Schramm, senior vice president of development for its mainstream brands in the U.S. and Canada, has observed increasing attention on cities like Austin and Nashville. Although these destinations have witnessed high levels of supply, temporary factors such as renovations to major facilities—like Austin’s convention center—are creating entry points for investors to acquire properties at advantageous rates.

These long-term sustainable metropolitan areas (MSAs) are viewed as strategic anchors for future development once current cycles stabilize. Developers see such periods of market transition as opportunities to secure assets at lower costs, positioning them advantageously for future tourism rebounds.

A Balanced Outlook for 2026 and Beyond

As the hospitality industry advances toward 2026, executives remain aware of external headwinds, including geopolitical uncertainty and potential tariff adjustments. Yet, the prevailing sentiment across major hotel brands remains optimistic. The easing of construction costs, combined with sustained economic diversification, continues to reinforce growth across the U.S. tourism and hospitality sector.

Brand development leaders across Hilton, Hyatt, IHG, Wyndham, and Choice are channeling their efforts toward identifying durable, economically linked demand sources rather than short-term booms. Their strategies emphasize adaptability, data-driven market evaluation, and alignment with long-term urban and industrial trends shaping travel across the United States.

With this calculated approach, the American hospitality landscape appears poised for steady expansion—anchored in infrastructure, strengthened by demographic shifts, and driven by a renewed confidence in the resilience of travel demand across both traditional and emerging destinations.