Hotel construction in the Bay Area saw a significant decline in 2025, according to data from Atlas Hospitality Group reported by the Mercury News. Only 15 hotels with a total of 1,610 rooms were under construction last year, compared to 21 projects and 2,452 rooms in 2024. This marks a decrease of over one-third in new hotel rooms and nearly 29 percent fewer hotels being built.
Alan Reay, president of Atlas Hospitality Group, told the Mercury News: “The financing market is still tough. Construction costs for new hotels remain high.”
San Francisco experienced the most pronounced drop, with no hotel rooms under construction in 2025 after having 169 rooms underway the previous year. Santa Clara County had only 76 rooms under construction last year, an 86 percent drop from the prior year’s figure of 557. Alameda County recorded a nearly half reduction with just 234 rooms being built in 2025. Contra Costa County also saw a decline to an estimated 115 rooms under construction, down more than half from the previous year. San Mateo County was stable at 92 hotel rooms in development.
Napa County was an exception to this trend. The area had a notable increase in hotel room construction with 626 rooms underway last year—more than double its total from the previous year—highlighting its continued appeal as a tourism destination due to its vineyards.
With new developments slowing down, sales of existing hotel properties have become more common as falling property values attract buyers amid loan defaults and foreclosures across the region. Reay explained: “Hotel developers are really being impacted by the number of existing hotels that are available for sale at prices that are well below their replacement costs. Prices are so low for hotels that the economics don’t work for new construction.”
