Microtel Williston, N.D.

According to The Wall Street Journal, hotel construction, which dropped precipitously during the economic downturn, is making a turnaround in both major and secondary markets, including New York and areas crowded with workers due to oil-shale formations.

According to the article, and citing data from Lodging Econometrics, in the past four quarters, construction starts for U.S. hotels are up 32 percent by room count from the same period a year ago, and new-project announcements are up 22 percent.

Why the jump? Lenders are now more willing to make loans for hotel projects due to rising occupanies and average rate growth.

STR reports that the average U.S. room rate in the first seven months of this year was $105.53—a 6.6-percent increase from the same period in 2009.

But will new construction lead to oversupply? Unlikely, said analysts The Wall Street Journal spoke to. At the end of the second quarter, developers had 474 hotels, totaling 60,000 rooms, under construction in the U.S. That is up from 437 hotels and nearly 55,000 rooms in the previous year.

"Very modestly and very quietly, a new [construction] cycle has begun," Patrick Ford, president of Lodging Econometrics, told The Wall Street Journal. The company predicts a steady rise in new hotel openings through 2014.

New York remains the No. 1 market for hotel construction with 7,248 rooms being built, amounting to roughly 11 percent of the national total. "New development is not catching up with the increase in demand," said Issac Hera, chief executive of Brack Capital Real Estate USA, which is developing three hotels in Manhattan, to The Wall Street Journal.

Likewise, smaller markets are seeing a jump in hotel starts, particularly the aforementioned regions that are rich in oil from shale formations. According to the article, of the top 10 U.S. markets for hotel construction in the past year, three are in oil-shale areas: North Dakota, with 2,088 rooms under construction; the greater Corpus Christi area in Texas, with 1,491 rooms; and rural Oklahoma, with 1,242 rooms.

However, unlike New York, where development is mostly in the upper and upper-upscale segments, these areas are prime for building budget and midscale hotels to accommodate oil-shale workers and other energy-industry employees.

Braxton Development, based in Bozeman, Mont., built Microtel Inns in the small North Dakota towns of Williston and Dickinson last year and opened a Hampton Inn in Williston last August. "When we first started, we were the second hotel in Williston to get built," Braxton principal Jon Braxton said. "But more competition came along quickly. It's as crazy as ever. Hotels still are running fairly full."

Overall, two-thirds of new hotels under construction in the U.S. are either upscale or upper-midscale, according to Lodging Econometrics.

All this is being made possible due to financing for hotel projects, which was bone dry during the recession. However, banks are still cautious and not any time soon will we see the prospect of getting a hotel loan for upwards of 90 percent loan-to-value. Joe Hoesley, VP of commercial real estate for U.S. Bancorp USB in Minneapolis, told The Wall Street Journal that "underwriting criteria remains fairly stringent for hotel developments. Most banks refuse to issue loans covering more than 50 percent to 60 percent of a project's cost, and interest rates on those loans still are higher than loans to build offices or apartments."