Hotel Appraisal Trends in Recent Years

Luxury hotels age faster than their balance sheets. Design cycles are now shorter than ownership horizons. What once lasted 15 years feels tired in seven. Guests notice. Brands notice sooner. Owners pay either way. CBRE data shows luxury hotels now require major refurbishment every 6–8 years to stay rate‑competitive, driven by evolving brand standards, sustainability retrofits, and guest tech expectations (#CBRE Hotels, 2024). Cornell research links deferred renovations in upscale assets to measurable RevPAR erosion versus renovated competitive sets within the same market (Cornell Johnson Graduate School of Management 2023). The real tension sits in the middle. Owners want capital discipline. Brands push refreshes to protect flag value. Designers chase novelty. Operations just want rooms they can sell without shutdowns. Sustainability raises the stakes. Energy systems, water reuse, and materials are no longer optional. They extend asset life but front‑load CAPEX. JLL notes lifecycle‑driven retrofits increasingly outperform cosmetic renovations on long‑term value, even when initial returns look softer (#JLL, 2024). Luxury today is not marble. It’s relevance over time. Hotels that can’t evolve quietly age loudly. Question: Is your luxury asset designed to last—or just to open strong? #AI #HOSPITALITY #DEVELOPMENT

A big thank you to Rod Clough, MAI for a great conversation about where hospitality investment stands at the start of 2025. This discussion was particularly exciting for me because it connects two key areas: tourism trends with real, actionable implications and a deeper look into the US real estate market—both highly relevant for many of our clients. In a market where smart capital deployment and operational flexibility make all the difference, understanding these dynamics is critical. A small caveat before diving into the conclusions: Recent trade tensions and tariff disruptions are adding uncertainty to the outlook, with inflation still a potential risk. At the same time, deregulation efforts, potential tax policy shifts later this year, and lower long-term interest rates could create tailwinds. The investment case for hospitality remains strong, but market conditions could shift quickly—something investors will need to watch closely. Here are some key takeaways from my discussion with Rod: ➡️ Occupancy & revenue growth: U.S. hotel occupancy rates are projected to inch up to 63.1% in 2025, while average daily rates (ADR)—the average price guests pay per night—are expected to rise 2-3% annually. Stable but steady. ➡️ Cap rates & transaction market: Capitalization rates are stabilizing at 8%, with full-service hotels trending lower and limited-service hotels rising toward 8.5-9%. The transaction market is set for takeoff, as the buyer-seller gap narrows and deal volume accelerates. ➡️ Value creation through renovations: The cost of hotel renovations is averaging $30,000-$60,000 per room, but the upside is clear: repositioning properties to maximize gross operating profit (GOP) at 35%+ unlocks significant long-term value. ➡️ Market-specific bright spots: New York City, San Francisco, and Seattle stand out—NYC’s growth benefits from regulatory changes in short-term rentals, while San Francisco and Seattle are fueled by convention demand and return-to-office trends. ➡️ Smart capital allocation: Investors are moving beyond simple revenue multipliers. Success lies in unlocking net operating income (NOI) through repositioning, smart brand conversions (like Marriott’s Tapestry Collection), and adding new amenities like co-working spaces and wellness facilities to boost asset value. Discount rates gravitate toward 10%, providing a more predictable financing environment. With interest rates stabilizing, the runway for well-structured deals is widening. For those investing in or operating hospitality assets, now is the time to get strategic. #hospitality #hotelinvestment #realestate #privateequity #assetmanagement #capitalmarkets 1BusinessWorld HVS Cambridge Judge Business School

The hospitality market sorted itself out in 2025, and there are fewer assets that really matter now. That sets the stage for a remarkable year ahead. Large parts of the industry spent the year under pressure. Mid-market and down-market hotels saw margins compress, occupancies soften, and ADR growth stall. Even disciplined operators felt the squeeze. But boutique ultra-luxury kept doing something very different. For properties with ADRs north of $1,200 a night, demand held, pricing increased, and the right assets continued to produce real cash. That resilience has always existed at the very top end of the market. What changed in 2025 is that a much larger slice of the investment community finally noticed it, and based on our closed deal flow, they started reallocating accordingly. Another major driver has been the commoditization of big-box “luxury.” When the same brands show up on every corner, pricing power diminishes. Some are already feeling it, and allocators can see it coming for others that are expanding aggressively. That recognition has pushed investors to look for new places to deploy capital, where differentiation still holds and the probability of asymmetric returns is higher. Who is showing up has changed as well. Family offices continue to write meaningful checks, as they always have. Private equity is now joining the space by extending its horizons of time so structures resemble long-hold family office capital. REITs that built their platforms in the mid-market are moving up the curve in search of protection from economic volatility. Those investor classes bring scale, process, and patience. But supply was insufficient. There simply weren’t enough finished sub-100-key trophies to buy, so investors funded greenfield instead. The biggest checks we closed this year were written to build from the ground up. That’s good news for the industry. It means new, exquisite hotels are coming online, financed by investors who value longevity rather than strip-and-flip economics. The year 2026 is shaping up to be transformative for ultra-luxury hospitality. Extraordinary properties will change hands without being diminished, remarkable new hotels will be built, and the way these projects are financed will evolve in ways that strengthen the industry, elevate the guest experience, and create better long-term outcomes for the people who operate them. If you want to see these trends unfold in real time, read Unspoken Hospitality: https://lnkd.in/gRc4FKKA

After several years of sunbelt and leisure dominance, urban hotel markets are making a strong comeback, and it’s about time. Group, corporate, and international travel are all rebounding in force. Markets like New York, San Francisco, and Chicago are once again showing signs of strength, buoyed by renewed interest in business meetings, conventions, and long-haul inbound travel. The dynamic has shifted. Resort demand is normalizing as consumer savings decline, but our major cities are picking up the slack, and then some. For those of us who have invested through cycles, this is a moment we’ve seen before: high-barrier-to-entry urban assets poised for growth while new supply remains constrained. In a market where construction costs still far exceed acquisition costs, it’s no surprise that investors are circling around quality, existing assets in top-tier metros. 2025 may prove to be the most compelling year in a decade to double down on urban. Data from JLL's Hotels & Hospitality Group's Global Hotel Investment Outlook: https://lnkd.in/gWVQVgMw #Hotels #UrbanRecovery #HospitalityLeadership #HotelInvestment #GatewayCities