Navigating the Hotel Investment Market During Turbulent Times

Key takeaways:

  • Headwinds remain for the hotel sector as Inflation, a lingering Pandemic, War, Supply Chain issues, Labor availability and cost all remain as challenges to the Sector.
  • The current pricing of most investment sale offerings will discourage a large share of the hotel investment market, but today’s pricing may be realistic in the long haul.
  • A decrease in new hotel starts due to construction cost inflation will help balance the hotel market in the medium to long term.
  • A recession may be inevitable, but it might be short-lived.
  • The Gold Rush of hotel capital in 2020 and 2021 looking for distressed deals gives way to a wait and see perspective by Private Equity hotel investors.
  • Hotel Investors are sitting on Billions of dry powder, but there will be limited investment opportunities until later in the year, as some markets and demand sectors will be slow to recover.
  • Increases in interest rates will affect the underlying economics of hotel investment, as the increased cost of capital will erode hotel values.
  • Are the days of the Road Warrior over? Thus, impacting business travel. That sector and group/conference business is not projected to fully recover until 2024 to 2025.
  • Leisure travel is set to explode, with tremendous pent-up demand for travel.
  • Resorts and Extended Stay hotels will continue to out-perform the market and will lead a hotel recovery.
  • Some distressed investment opportunities will emerge this year and next, but by and large most hotel owners have benefited by Lender reluctance to foreclose and the influx of PPP dollars to boost the sector.
  • The availability of debt for the hotel industry continues to loosen up, but Lenders remain cautious and will be conservative on their underwriting.