Bay Area Sees Dearth of New Hotels

Hotel construction has taken a big hit in the Bay Area.

Just 15 hotels totaling 1,610 rooms were under construction last year, a sharp pullback from 2024’s 21 projects with 2,452 rooms, the Mercury News reported, citing Atlas Hospitality Group data — a 34.3 percent drop in rooms and a 28.6 percent decline in hotels year over year.

Developers have been unable to pay to build those new structures. “The financing market is still tough,” Alan Reay, president of Atlas Hospitality Group, told the Mercury News. “Construction costs for new hotels remain high.”

The problem is most pronounced in San Francisco, which had zero hotel rooms in the works in 2025, down from 169 rooms being built the year prior. In Santa Clara County, 76 rooms were under construction last year, representing an 86.4 percent drop from 557 hotel rooms in 2024. Alameda County had 234 rooms under construction in 2025, down 48.1 percent year over year; and an estimated 115 rooms were under construction in Contra Costa County in 2025, a 52.3 percent decline from 2024. San Mateo County stayed even with 92 hotel rooms in the pipeline.

Napa County, on the other hand, saw an uptick in the number of hotel rooms being built from 2024 to 2025. Last year, 626 rooms were under construction — a 138.6 percent increase from the 262 rooms in Napa County in 2024. The region remains a popular tourism destination for its world-famous vineyards.

Sales of hotel properties, rather than construction of new buildings, have become increasingly popular, especially as a wave of loan defaults and foreclosures across the Bay Area send hotel values plummeting. “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,” Reay said. “Prices are so low for hotels that the economics don’t work for new construction.”— Chris Malone Méndez