How Much Does It Cost to Build a Hotel?

The hotel industry is a good investment for many people, especially if you have a good location to monetize. Based on Statista's projections, the market volume for this industry is expected to reach $473.20 billion by 2026 based on an annual growth rate of 7.99%.

Consequently, hotel construction projects will increase, growing the demand for general contractors to estimate the construction costs and manage the project. If you’re a general contractor or estimator looking to speed up the cost estimation of your hotel project, then this article is for you. 

With numerous factors that impact hotel construction costs, such as hotel type, location, scope, and the complexity of the project, the takeoff and cost estimation process continue to be time-consuming and prone to error. For large-scale hotel projects, seasoned estimators report that they still take weeks or months on the preconstruction process alone.

In this guide, learn the different factors that impact hotel construction costs along with an AI estimating software that can streamline the cost estimation process.

Disclaimer: The pricing stated here is based on average data from third-party research. Prices may still vary due to differences in seasonality and supplier.

What Makes Hotel Construction Different? 

Building Permits 

While typical building permits only take around two weeks and cost between  $1,200 - $2,000 to process, large projects such as hotels can take months or even years before the actual building permit process begins. Hotels have many layers to the project that can be more complicated, especially if the building is being constructed from the ground up. 

Requirements for Hotel Room Size

Americans with Disabilities Act (ADA) accessibility standards do not apply to dwelling units. Although rental properties and apartments are required to provide equal opportunity for access, it only applies to the public spaces surrounding them such as:

• Common areas, such as rental offices, and recreation spaces
• Building amenities such as drinking fountains and laundry rooms
• Elevators 

In contrast, the ADA requires hotels to offer guests with disabilities a range of equivalent guest room options available to other guests. This means accessible rooms need to be dispersed among various room classes (e.g. deluxe, standard, and more) and types (number of beds, amenities, and more). 

For ADA-accessible hotel rooms, here are some of the requirements you need to consider: 

• The hotel room must have doorways and hallways that are a minimum of 32-inches wide inside the room and 36-inches wide outside of the room.
• A minimum of 30 inches is required around each bed
• Turning radiuses must be 60 inches in bathrooms and other small spaces

Cost to Build a Hotel in the U.S.

Below are the construction costs of hotels in the U.S. as of the 1st quarter of 2022. They are organized by hotel type and city. As evident in the chart below, 3-star hotels cost less to build than 5-star hotels.

Compared to 5-star hotels that strive for a luxurious ambiance and high-end services, they use standard materials and provide basic amenities which impact the overall construction costs.

Hotel Construction Costs per City

Source: Statista

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Cost to Build a Hotel per Star Rating

There are two common ways to determine hotel construction costs, the square footage and the number of rooms. Square footage makes it easy to estimate hotel costs by looking at the size of the building. By contrast, the number of rooms can also make it easy to forecast construction costs based on the number of occupants. 

Motel

A motel is typically a 2-3 story building with a few amenities. The rooms are often entered outdoors, thus eliminating shared indoor areas and lowering construction costs.

3-Star

A 3-star hotel is often located near business centers and airports, offering brief but comfortable stays. It provides standard amenities, such as phone services and public WiFi.

4-Star

A 4-star hotel offers higher quality services and features that are considered optional for a 3-star hotel, such as spas, restaurants, in-house gyms, and communal areas.

5-Star

A 5-star hotel is considered luxurious. It offers similar or more features and amenities compared to a 4-star hotel but with better quality. Rooms are also typically larger.

Cost to Build a Hotel per Type

Building a hotel also varies in cost based on its type. Because different types of hotels cater to specific needs and purposes, their construction costs will vary based on the amenities they offer.

Average Cost Per Square Foot

Boutique Hotel

Boutique hotels offer great amenities within a reasonable price range. They are usually smaller than the average hotels but have very distinct characteristics such as offering a unique theme or offering a specific amenity that can't be found elsewhere, such as a hotel that caters to pets. 

Casino

For most areas, casinos are considered luxury hotels that offer both lodging and gambling facilities. These types of hotels are generally 5 stars with multiple amenities such as restaurants, valet parking, health club, and types of on-site entertainment. 

Guest House

The term guest house refers to any type of accommodation where a traveler stays at a resident's property. This type of lodging offers unique features including a homely atmosphere. Because a guest house can be anything from a small house to a bed-and-breakfast style inn, there’s a wide range of associated costs.

Resort

A resort offers relaxation and recreation similar to a standard hotel, but with  more amenities and activities. They often have lounges, pools, game rooms, wellness facilities, and even adjacent theme parks. Often, resorts can be found near mountains, forests, and ocean shores to provide space for outdoor activities. 

Factors that Impact the Cost to Build a Hotel 

Land

Land prices vary depending on the location. For example, land in New Jersey can cost around $196,000 per acre, but land in Wyoming averages $1,500 per acre. While land costs typically account for about 15% of the project costs, for certain locations, they can reach up to 70% of the total costs.

There’s no doubt that the location of the hotel can greatly impact its profitability long-term. Thus, the price shouldn’t be the only factor to consider when buying land. Certain locations might have cheaper land costs, but they may not have the necessary traffic to sustain the business. Before buying land, first, consider your budget, then assess the curb appeal, accessibility, traffic, feasibility, and competition in your chosen location. 

Material Costs

Read the table below to determine the cost to build a hotel with 155 rooms, 325 sq. ft per room with full bathrooms. The table also shows a great sample breakdown of the percentage spent on specific hotel features. Source: HowMuch.net

Labor Costs 

When working with construction professionals, ensure that they’re specializing in hotels and other similar commercial buildings. General contractors often charge 10% - 20% of the total project costs and they handle cost estimations, provide materials, and employ workers and subcontractors. Source: Fixr, HomeAdvisor, and HomeGuide.

Other Cost Factors

In the table below, learn the other key expenses that you need to consider when building a medium-scale but standard hotel in the U.S.

Source: ProfitableVenture

Hotel Building Cost Calculator

Below are some of the calculators you can leverage to forecast your hotel construction costs. 

Commercial Building Calculator by Bush Construction

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This calculator gives a quick estimate of your commercial building construction costs based on the project type, project complexity, and square footage. In this example, a complex 5000 square feet new commercial building will cost around $1.65 million - $1.82 million to build. 

Calculator for Residential and Commercial Projects by Building Journal

Building Journal provides a calculator that can quickly estimate the cost of both residential and commercial projects in over 160 cities in the United States. You can estimate based on the type of building, project location, cost index, and square footage. 

Construction Cost Indicator by Rider Levett Bucknall

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With this calculator, estimate the cost of your hotel project depending on the location, star rating, and size. Once you’ve input these data, you’ll be given the total estimated low-end and high-end construction costs, as well as the cost per square meter.   

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Togal.AI ROI Calculator

If you’re doing takeoffs and cost-estimations for hotel projects, this ROI calculator can help you identify the total time saved, potential additional bids, and potential new revenue when you leverage our AI estimating software, Togal.AI. 

This specific example shows a construction firm that does 150 bids each year on projects costing $100,000. If they typically spend 4 hours conducting takeoffs per bid, then they can save a total of 450 hours with Togal.AI. Consequently, they’ll have a potential revenue of $5.6 million and 113 potential additional bids. 

Streamline the Cost Estimation of Hotel Projects With Togal.AI

A wide range of factors can impact the cost to build a hotel. Some of these factors include the location, type of hotel, size, materials used, and labor. For faster and more accurate pricing, leverage our AI estimating software, Togal.AI. 

With Togal.AI, you can complete takeoffs of complex hotel construction projects in seconds with 99% accuracy. 

• Save roughly 90-minutes per sheet
• Remove extra overhead and cut down on pre-construction costs 
• Eliminate error-prone manual calculations

To experience how Togal.AI can streamline your workflow and increase the profitability of your hotel construction projects, book a free demo.