Unusual Hotel Dynamics Create 'Attractive Investment Window' Despite Lackluster Performance

The investment thesis for U.S. hotels has shifted — and not because operational fundamentals are improving.

Hotel revenue growth is stagnant or declining amid disappointing international travel numbers and increasing expenses. Hotel owners are also facing a wave of maturing debt and brands that require upgrades to keep their flag, pushing many to sell at prices lower than they would have considered in recent years. 

Forced or pressured sales create a compelling relative value for hotel investors interested in value-add opportunities, sending them flocking to the market where the bid-ask spread has narrowed. As debt markets have strengthened and record amounts of capital are available, U.S. hotel trade volume is expected to increase this year, continuing a trend that began in 2025, according to JLL. 

Investor interest is high despite uneven performance because the investment thesis has shifted from pure operational momentum to structural value-creation opportunities, said Kevin Davis, Americas CEO for JLL's hotels and hospitality group.

“This unusual market dynamic creates an attractive investment window where investors can acquire quality assets below replacement cost while benefiting from improving financing conditions,” Davis said in a statement to Bisnow.

U.S. hotel transaction volume increased last year after plunging from $42.6B in 2022 to $23.7B in 2023, then dropping further to $20.4B in 2024, according to JLL.

Transaction volume totaled $24B in 2025, a 17.5% increase from a year earlier.

Liquidity and debt availability helped boost the numbers, with U.S. hotel origination volume reaching $64B in 2025, the highest since 2019. Even more investment activity is expected this year, as $88B in hotel loans are set to mature through 2027.

Lenders are tired of extending and pretending, and brands require upgrades that current owners may not be willing or able to finance. 

“The pressure has continued to mount,” said Brian Waldman, chief investment officer for hospitality-focused investment firm Peachtree Group.

“The wave of maturities is coming, but we're really at an inflection point this year where that's going to start to break, and people are going to be forced to do something,” Waldman said.

This has forced sellers to be more realistic about their pricing, helping narrow the bid-ask gap that hindered transactions in recent years.

“In 2024, there wasn't a lack of buyers,” said Skyler Cooper, senior managing director of investments for Marcus & Millichap’s Miller-Gomes hotel team. “Everybody was looking for a deal. Capital was off the sideline and actively underwriting deals. Lenders were actively underwriting deals. There just was too big of a gap.” 

Driftwood Capital, a Florida-based investment firm with $3.5B of hospitality assets under management, is budgeting to acquire four to six hotels this year after making just one annual acquisition in recent years, co-founder Carlos Rodriguez Sr. said. 

Driftwood is also raising money for a new debt fund, beefing up its development pipeline and handling numerous new management contracts.

“This is one year where we expect all areas to be busy,” Rodriguez said.

He said he can’t pinpoint one factor to explain the surge in investment activity, but it is likely a combination of lower interest rates, compressed margins, sellers bringing down their prices, and pressure from lenders and franchisors. 

Hotel owners face pressure from maturing debt and brand-required performance improvement plans, or PIPs, HVS Senior Managing Director Eric Guerrero said. Property values are likely lower than when owners took out a five-year loan, so they would have to pay more to refinance and find money to do the items required by a PIP.

The decision to sell may be hard to swallow for owners, who would have to list their properties at a lower price than they would have several years ago. But prices likely bottomed out last year, Guerrero said.

“You're going to see a lot of hotels being sold because of debt and because of PIP, but pricing is still going to be relatively the same as it was last year,” he said. “We don't think pricing is going to get any better, but it's not going to get any worse.” 

Meanwhile, the value of a hotel is based on income. Revenues are flat or declining, while expenses are up, Guerrero said. 

“Hotel performance has been down, and they're really tricky animals,” he said.

The expected 2025 rebound for hotels never materialized. The year instead brought a 1.2% year-over-year decline in occupancy and a 0.3% decline in revenue per available room. The U.S. was the only major destination with a decline in international travelers last year, coming up 11 million visitors short of expectations.

“International travel has gone down drastically,” Rodriguez said. “That's painful, and that has affected everybody.”

International travel will be punitive in specific markets, such as some in Florida and California, where Canadian tourism is consequential. The World Cup is expected to bring significant tourism to some U.S. markets, but it is described as a “nice shot in the arm” that won’t substantially impact industry performance.

Potential foreign visitors cite immigration enforcement, rigorous border vetting, tariffs and political rhetoric as reasons to forgo trips.

“I hope that the government will see the light and start changing things so that we can improve relations and the image of the United States with international travel,” Rodriguez said. 

Driftwood’s portfolio performance was down 0.5% to 3% last year, depending on the market. It wasn’t terrible, but it cut into profits, he said. 

While personal interaction is paramount to the guest experience, labor and payroll are the largest expenses for the hospitality industry, said Channing Henry, managing director of consulting firm PKF Hospitality Group. Union requirements, like breaks that require more staff to be on the clock to handle duties, can exacerbate that.

“We need to get our costs under control, and that means streamlining the service levels and the capacity for employees to deliver service that matches the guest expectations,” Henry said. “That’s tricky.” 

Operators are being tech-friendly and finding ways to balance costs while still delivering great experiences, she said. 

Despite the challenges, lender and PIP pressure will likely drive distressed trades early this year, and activity leads to more activity, Waldman said. 

“We'll start to clear the system and prime the pump,” he said. “By the back half of this year, I think you're going to see an investment activity tick up.”

A black swan event could always cause investors to lose interest in the hotel market again, Rodriguez said, as capital scares easily and “runs away from things the moment that there's any rumor or any turmoil.” 

But Driftwood is optimistic that it will be a good year for hotel investment activity, Rodriguez said. 

“I don’t see anything on the horizon that tells me that it will be a worse year than last year,” he said. “If anything, I think there’ll be an improvement.”