may lead to cap rate decreases , this relationship is not guaranteed or strictly proportional and cap rates do not always mirror interest rate fluctuations precisely .
The gap between SOFR / LIBOR and cap rates typically expands during low-interest periods and contracts when rates are higher . This occurs because hotel cap rates are influenced by various factors beyond interest rates , including market conditions , risk assessment , supply-demand balance and property-specific attributes .
While there is potential for cap rates to decrease when interest rates are cut , it is not advisable to forecast exact cap rate adjustments based solely on interest rate cuts . A comprehensive analysis of multiple factors is necessary for more accurate predictions in the hotel real estate market .
DEVELOPMENT New hotel construction is expected to remain constrained in the near future , with a significant increase in hotel supply unlikely until late 2027 or early 2028 . Interest rate hikes have only been part of the reason that new development has been limited .
High construction costs have been equally , if not more , impactful . The Turner Building Cost Index saw an 8 % increase in 2022 , followed by a 6 % increase in 2023 . Construction costs maintained their upward trajectory in 2024 , with the index showing a 4.10 % year-over-year increase in the second quarter of 2024 compared to the same period in 2023 . The persistent elevation in construction costs continues to act as an obstacle for new hotel development projects , with these challenges expected to persist for at least another 12 months .
Additionally , the average time from groundbreaking to opening for a new hotel is 18 to 24 months , with the time needed for planning and approvals extending the timeline even further . Consequently , considering the typical development timeline , a substantial impact on hotel supply growth is unlikely to materialize for approximately three years , placing us in the late 2027 to early 2028 timeframe for a potential uptick in new hotel openings .
LOOKING AHEAD The Fed ’ s recent interest rate cut , following years of aggressive rate hikes , marks a significant shift in monetary policy that is likely to have a positive impact on the hotel real estate market . As the hotel industry navigates this changing economic landscape , investors and developers must remain vigilant to market conditions , balancing the opportunities presented by lower interest rates against other economic factors . The coming years may see a gradual return to more robust transaction activity , but the full impact of these changes will likely unfold over an extended period .
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Save resources while maximizing efficiency and hygiene with the world ’ s first automated refill system for sustainable hotel amenities . ADA Cosmetics Refillution enables hotels to reuse dispensers , cutting down waste and operational costs without compromising quality .
The patented refill system is designed for fast , easy , and intuitive operation , refilling a 300ml dispenser in just seconds . It is fully compatible with ADA Cosmetics ’ hygienic and easy-exchange SmartCare , SHAPE , and patented mono-material hygiene pump dispenser systems , further optimizing housekeeping efficiency . The system features a peristaltic pump that guarantees maximum hygiene , paired with a one-piece elastomeric duckbill valve , that prevents backflow and potential liquid contamination while also eliminating dripping .
Each proprietary 10-liter bag-in-box container replaces up to 34 single-use bottles , cutting liquid waste by 30 %. By switching to refillable dispensers , hoteliers can reduce plastic waste by 95 %, saving an average of 4.5 kg of plastic per hotel room annually and significantly lowering the environmental footprint .
ada-cosmetics . com / refillution
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