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Good News for the Hospitality Sector
Not so long ago, few investors were interested in buying hospitality properties. The COVID-19 economic downturn meant higher vacancies and lower RevPAR growth.
What a difference a few years makes. CBRE’s 2025 U.S. Hotel Investor Intentions Survey paints a rosier picture, with 94% of survey participants expected to maintain or increase their hotel investments in 2025.
This was a marked increase from the 85% reported a year ago. “A more optimistic outlook for total returns and distressed investment opportunities were the key reasons cited for increased allocations,” the survey report said.
What They’re Looking For
The survey also explained that the favorite asset types among respondents were value-add and opportunistic hotel investments. On the other hand, fewer respondents indicated they’re looking for distressed opportunities, “despite 25% of those looking to increase their capital allocations to hotels, citing distressed opportunities as the primary reason why,” the report said.
Additionally, respondents explained the reasons why they might be increasing hotel allocations in 2025:
- 24.8% cited more distressed opportunities
- 19.0% indicated they’re more optimistic about hotel return prospects
- 19.0% also noted price adjustments as a reason
- 17.6% said decreasing debt costs
- 15.0% cited expected outperformance relative to other CRE assets
Where They’re Targeting
The survey noted that resorts and central business district (CBD) hospitality assets seem most appealing to investors in the coming year. “Driven by the ongoing recovery in inbound international travel and continued improvement in meetings and group events, we expect RevPAR growth for urban locations to outperform in 2025,” the report said.
Meanwhile, airports and suburban hospitality assets are considered the least attractive for investment.
Anticipated Headwinds
Despite the optimism, survey respondents indicated sector challenges, including rising labor and capital costs and increased insurance expenses. “Investors appear more concerned about weakening demand this year than last, with 65% identifying this as an issue,” the report added.
- ◦Sale/Acquisition
