Data centers are sparking a wave of crappy hotel makeovers
The boom in data center construction is unexpectedly driving up the acquisition and renovation of dilapidated hotels across the U.S. Developers are capitalizing on increased demand for rooms from construction workers involved in major data center projects. The trend involves revitalizing neglected properties, such as the Hilton Garden Inn in downtown Austin, Texas, to meet this demand.
The rapid growth of the data center industry in the U.S. is leading to an unforeseen boost in the real estate sector, particularly concerning the acquisition and renovation of struggling hotels. According to reports citing data from MSCI, U.S. hotel sales increased by 28 percent year-on-year in the first six months of 2026, with mid-tier hotels showing significant improvement after a slump in 2024.
This trend is attributed to the heightened demand for lodging from itinerant construction workers who travel to build the large-scale data centers often located on the outskirts of cities and towns. The surge in data center construction is fueled by the increasingly digital economy and the explosion of AI and cryptocurrency subsectors.
Developers are purchasing rundown hotels and investing in necessary renovations to capitalize on this demand. The Wall Street Journal highlights the Hilton Garden Inn in downtown Austin, Texas, as an example, which was bought by JMI Realty for $25.4 million. Drew Bridges, an executive at JMI Realty, stated the company plans to spend an additional $16.5 million on upgrades, guided by negative guest reviews to identify properties in need of revitalization.
This willingness to restore older hotels comes amidst stagnant new hotel construction, with new room additions at 0.5 percent of existing supply this year, below the typical 1.6 percent average. Overall, $15.96 billion in hotel sales were conducted in the U.S. during the first two quarters of the year.