As Wall Street’s caution becomes Main Street’s opportunity, hoteliers need to think strategically. With revenue growth faltering and costs staying stubbornly high, now is the time to act. Protecting every basis point of Gross Operating Profit (GOP) today could pay off twofold when RevPAR levels out in the coming months.
Let’s break down what the latest Wall Street signals mean for hotel owners like you—and how you can stay ahead.
Hotels Still Undervalued: A Buyer’s Window
Hotel REITs (Real Estate Investment Trusts) are showing signs of life, finally trading above their 50-day moving averages. But here’s the catch—they’re still 10% below their longer-term trends.
What that means for you: Hotels are still being undervalued in financial markets. Appraisers will likely continue using higher cap rates through the fall, which is great news if you’re buying—but could limit refinancing options if you’re already holding. If you’re eyeing an acquisition, this might be your golden window.
Debt Is Easing Up: Time to Talk to Your Lender
Analysts expect earnings across the broader S&P 500 to fall about 4% in 2025. But for hotel REITs, the drop is only about 1%. That’s encouraging lenders to look more favorably at hospitality—and they’re increasingly open to financing hard assets like hotels.
What to do next: Loan spreads could shrink by 15–25 basis points if this trend continues. Don’t wait—reach out to your lender now. Ask them directly: “Have your margins shifted since April? What would make them move again?”
Focus on Efficiency, Not Just Occupancy
Recent consumer spending reports show a drop in hotel and airline spending. That’s a red flag, especially for a business like ours with high operating costs.
Why it matters: A small 2% drop in Average Daily Rate (ADR), combined with just a 1% rise in wages, could slash 70 basis points off your bottom line. In this environment, efficiency is king. Trimming operational fat can matter more than just boosting room nights.
Chase Reliable Revenue Like the Big Players
Investors are pouring money into storage units and data centers—why? Because they generate steady, recurring cash flow.
How to pivot: If you run extended-stay or limited-service hotels, think of them as the “self-storage” equivalent of the hospitality world. Think: reliable income, longer stays, lower turnover and steady cash flow. Highlighting those benefits speaks volumes to partners, investors and lenders.
Deals Are Brewing—Be Ready
Hotel transactions are still slow, but deals under contract are on the rise. That means more activity is coming—it’s just bottled up for now. Simple triggers, like interest rate drops and costs of materials, can promote a flurry of transactions in a short amount of time.
Your move: Get your ducks in a row. Have your equity lined up, due diligence docs ready, and capital partners on speed dial. Deals can collapse quickly, and when they do, you want to be first in line.
Follow the Travelers: Target Booming Markets
Global inbound travel is down overall—but not everywhere. Brazil is up 14%, and China is up 9%. That’s a big opportunity.
Get creative: Translate your online listings into Portuguese and Chinese. Offer bundled perks like free Wi-Fi upgrades, late checkouts, or dining credits to attract these high-growth traveler segments.
Budget Smarter: Inflation’s Not Done Yet
Construction costs are still 55% higher than they were in 2015, and labor expenses keep climbing—up 3–5% per year.
Protect your budget: Add a 5% buffer to every CapEx project and try to lock in vendor prices for at least 90 days. It’s a small move that could save you big if prices spike again.
Final Thoughts: Take the Lead While Others Wait
As Wall Street’s caution becomes Main Street’s opportunity, hoteliers need to think strategically. With revenue growth faltering and costs staying stubbornly high, now is the time to act. Protecting every basis point of Gross Operating Profit (GOP) today could pay off twofold when RevPAR levels out in the coming months. Stay connected with us for ongoing insights and updates that help you stay ahead of the curve in today’s shifting hospitality landscape.