Construction companies have been challenged by the rising cost of materials and elevated interest rates their clients have had to deal with. Hotel Business caught up with Aaron Dearborn, president, Amerail Systems; Peter Lanfranchi, SVP, HITT Contracting; and Ben Wallace, president, River Ridge Renovations, to offer insights on the 2025 construction environment and what lies ahead in 2026.
—Adam Perkowsky
How is today’s lending environment affecting your construction pipeline?
Dearborn: With higher interest rates, many ownership groups have been opting to renovate their existing properties rather than pursue new-construction projects or exit the market entirely. Over the last few years, ownership groups have preferred to hold on to what they own and invest in renovations. This is largely because the cost of renovating an existing property is significantly lower than undertaking a ground-up project or acquiring a new property, which would likely also require renovations. This has given us a unique opportunity to capitalize on the current market conditions. By focusing on renovation projects, we can offer our clients cost-effective solutions that enhance the value of their existing properties without the hefty price tag of new construction or acquisition.
Lanfranchi: As contractors, we’re not involved with hotel deals and how they’re financed. However, we’re seeing the current lending environment slow down the hospitality construction pipeline, despite strong operational performance in the hotel sector. Elevated interest rates have pushed borrowing costs up, making many new ground-up projects financially unviable. Renovation work is still stable moving into 2026. If interest rates lower, many new project opportunities will follow.
Wallace: Today’s lending environment has created both challenges and opportunities in building our pipeline. Higher interest rates, along with tighter lender underwriting, has forced some owner financing to take longer than usual with both approvals and funding. Many owners have also reduced scope to help lower project costs and, in some cases, deferred renovating larger box keys into two and three phases. However, projects with solid cash flow located in higher demand markets are securing the approvals and funding more quickly.
What design or material trends are shaping new hotel projects?
Dearborn: We’re seeing a growing focus on bleisure, blending business and leisure to create flexible, comfortable spaces that serve both purposes. Wellness is also taking center stage, inspiring environments that promote rest, mindfulness and balance through soothing colors, soft lighting and spaces for relaxation or exercise. Biophilic design continues to influence new projects, using natural materials and organic textures to foster calm and connection. Authenticity and storytelling are increasingly important, with interiors that reflect local character and individuality. Warmer tones, layered textures, curated art and integrated technology like wireless charging pads and smart lighting create a more personal, home-like atmosphere for today’s travelers.
Lanfranchi: Design and material trends for hotel projects are being shaped by three major areas: the desire for enhanced guest experience, the push for construction efficiency and the demand for sustainability. Cost is also a significant factor. Owners are increasingly open to sourcing alternative materials that deliver a similar look and performance at a lower price point. Design trends also vary by market. For example, what resonates with guests in Miami can differ from what’s prioritized in the Washington, DC, region. Across the board, we’re seeing strong momentum toward flexible meeting and gathering spaces, enhanced guestroom technologies and wellness-focused amenities and spaces.
Wallace: We’re seeing strong demand for designs that feel authentic, as well as wellness-focused designs with in-room fitness options. Technology integration has become a standard, with automated lighting, smart climate control and touchless features enhancing the guest experience.
What steps are you taking to make projects more sustainable?
Dearborn: We work closely with hotel owners to find sustainable ways to liquidate any FF&E that cannot be repurposed. Our commitment extends to collaborating with both national and local organizations, as well as donation centers, to ensure that anything that can be given a second life is not thrown away. We have actively participated in several projects where all old materials are meticulously recycled.
We are also heavily involved in LED lighting conversions and the installation of new thermostats in guestrooms. These upgrades significantly help in limiting unnecessary energy consumption, making our projects more efficient and sustainable. One aspect of our business is handling exterior renovations. In these projects, we have successfully introduced several different recycled materials, elevating the sustainability of our work.
Additionally, we’ve integrated newer energy-efficient windows and PTACs, which are game changers in creating more energy-efficient properties. These modern technologies not only enhance the sustainability of buildings but also substantially reduce operating costs for owners.
Lanfranchi: Sustainability remains a priority for both us and our clients. We collaborate early with clients and designers to incorporate low-carbon materials, energy-efficient systems and prefabricated components to minimize waste. We’re also committed to diverting as much jobsite waste from landfills as possible. Our goal is to build hotels that are not only operationally functional and beautiful for guests, but also responsible and resilient.
Wallace: We have been taking several steps to make our projects more sustainable. We prioritize using locally sourced and recycled materials and low-VOC finishes to reduce our environmental footprint. Energy-efficient upgrades like exterior and interior LED lighting and smart HVAC systems help cut long-term operating costs. Our goal is to deliver renovations that not only look great and are convenient for the guest but also support our clients’ sustainability and energy goals.
What’s your outlook for hotel construction in 2026?
Dearborn: Going into 2026, we have several exciting projects slated for starts through the first three quarters, as well as multiple pending. We are seeing some hesitation in the decision-making process as owners seem to be in a wait-and-see mode regarding the overall economy. From our perspective, occupancy levels remain strong in the select-service and luxury hotels we work on across the country. We are remaining positive that corporate and group travel will continue to be consistent over the next 12 months while the economy begins to show signs of stabilizing, with hopefully lower interest rates and some tariff relief. This will allow FF&E and construction costs to cool, and, subsequently, overall renovation costs to come down.
Lanfranchi: We expect hotel renovations in 2026 to be steady, with an overall outlook of continued supply and growth. Financial pressures persist, however. While many projects are progressing through design and preparing for construction, the current economic environment continues to impact those that ultimately move forward with construction activity. We are seeing the greatest opportunity in the midscale to luxury hotel segments within our 2026 pipeline.
Wallace: Looking ahead to 2026, I’m optimistic that renovations will increase as hotel renovation cycles continue due to the many change of ownership PIP transactions taking place as buyers and sellers are feeling more comfortable. While construction labor, FF&E demand and tariffs have been difficult to navigate this past year, there’s still a strong demand for renovated hotels by owners and brands. Overall, 2026 will be a year where careful planning, budgeting and skilled labor management are going to be key to staying competitive. We will continue to execute any and all aspects of a project from design, brand negotiation, procurement and general contracting as our clients request.
