High Costs and Uncertainty Delay Return to US Hotel Deals

Large private equity firms, including Blackstone, Brookfield, and Noble Investment Group, are delaying their return to US hotel investments due to high capital costs and unstable consumer confidence.

Large private equity investors have indicated they are not yet ready to return to US hotel investments. The sentiment of uncertainty, primarily driven by high capital costs and shaky consumer confidence, keeps investors from engaging in hotel deals.

During the “Wall Street Talks” panel at the Hunter Hotel Investment Conference, representatives from Blackstone, Brookfield, and Noble Investment Group expressed their optimism about the resilience of hotel demand and operating performance in the US. However, they also highlighted the prevailing uncertainty that is discouraging them from making deals now.

Mit Shah, CEO of Noble Investment Group, characterized the current environment as “wonky”. Despite not being ready to abandon Noble’s 2025 plan of selling over $1 billion in hotel assets and buying about $2 billion, Shah noted that transaction activity is “very interesting” at the moment. He further stated that policies from the Trump administration would have “cloudy” short-term effects on the travel industry.

Scott Trebilco, senior managing director of real estate for Blackstone, stated that the cost of capital in the hotel sector is too high. Even though hotel supply is low and demand is strong, larger forces discourage Blackstone from investing in US hotels. Instead, the company has been focusing its investments on hotels in Japan and Europe and domestically in data centers, multi-unit housing, and retail.

Trebilco also noted that the past two years recorded the lowest hotel investment levels in a decade. He suggested that the industry will need firstmovers to revive hotel transactions.

Meanwhile, Shai Zelering, managing partner of real estate at Brookfield, said his firm is comfortable holding onto its assets for now. He expressed no pressure to sell and stated that Brookfield would be net buyers this year. Zelering emphasized the need to manage expenses efficiently and said the status of consumer confidence would drive the willingness to make bold investments.

Zelering also acknowledged the rising costs of labor and insurance but said that the challenge is execution. He expressed his desire to see a refocus on hospitality, stating that this builds the business.

The uncertainty in the hotel investment environment appears to be a combination of high capital costs, shaky consumer confidence, and broader economic concerns. These factors have led to a slowdown in private equity investment in the US hotel industry, as firms prefer to wait for a more favorable investment climate. However, investors remain optimistic about the sector’s resilience and anticipate a return to active investment when conditions improve.

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