- The hotel investment industry shows cautious optimism for 2025, with transaction activity potentially increasing by 25 to 30% from 2024 levels.
- Factors such as large-size deals, sales from 2024, brand-mandated renovations, strong buyer interest in extended-stay hotels, and a higher number of loan maturities are expected to drive this increase.
The team at HVS filed their report from the Annual ALIS Conference in Los Angeles. The conference revealed a cautiously optimistic outlook for 2025, with some predicting transaction activity could rise by 25 to 30% from 2024 levels.
The driving forces behind this increase encompass a variety of factors. Full-service hotel sales will likely take precedence over limited and select-service assets, a shift from the post-pandemic years. A carryover of sales from a sluggish 2024, coupled with brand-mandated renovations, could also boost transaction volumes.
Owners may also list their properties due to the high costs of mandatory upgrades for 10—to 15-year-old properties. Furthermore, buyers continue to show strong interest in extended-stay hotels and properties less than a decade old that do not require major Property Improvement Plans. Lastly, a rise in loan maturities is anticipated to increase transaction volume.
Predictions also suggest that the gap between buyer and seller expectations will narrow, with cap rates hovering in the low 8s. Sun Belt markets are expected to remain robust, while cities like San Francisco and San Diego are emerging as attractive markets for private equity.
However, the effects of the new administration’s policy on hotel performance and the transaction market remain uncertain. Despite this, analysts project 1 to 3% RevPAR growth in 2025, driven by currency fluctuations and a resurgence in corporate travel post-election.
Rising labor costs and GOP growth are becoming key considerations for investors, while independent and economy hotel segments are expected to offer investment opportunities due to supply contraction. Despite the uncertainties, the hotel investment industry appears poised for slow but steady progress in the coming years.
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