ATLANTA— Lee Hunter, chairman of the Hunter Hotel Investment Conference, walked on stage to“ Highway to the Danger Zone,” a song popularized in“ Top Gun,” a film about a maverick fighter pilot flying on the edge of peril. The hotel industry hopes its flight path forward is less precarious. And while it’ s not pulling the eject cord yet, a smooth landing won’ t come easy.
“ We’ ve never had this much uncertainty thrown at us,” said Robert Webster, vice chairman of CBRE, during a market overview session at the conference, here at the Marriott Marquis Atlanta. But that doesn’ t mean there isn’ t opportunity for investors if, noted Dan Peek, president of JLL Americas Hotels & Hospitality group, they show conviction to buy. It’ s been a slog to now: Global hotel investment volume reached $ 57.4 billion in 2024 and while an increase of 7 % relative to 2023, it was the
THE LIFE OF A BOX IS 30 YEARS. DON’ T FOOL YOURSELF THAT A HOTEL THAT IS 30 YEARS OLD HAS VALUE
– TEAGUE HUNTER, PRESIDENT AND CEO, HUNTER HOTEL ADVISORS third-lowest total since 2012. Many believe the hotel industry and the broader economy are already there or close to bottoming out, which can present investment opportunities, but higher interest rates and a still-wide bid / ask spread present difficulties. Asset values are off some 20 %, said Teague Hunter, president and CEO of Hunter Hotel Advisors.“ It’ s been a tough last two years,” he said, with interest rates a headwind to hotels transacting. Still, he noted, there are dynamics in the market that could prove propitious for eager buyers.“ The sellers are the institutions that are, for example, at the end of a fund,” he said, citing Blackstone and Brookfield.“ They are at capitulation. Our book of business is thick and the capital is out there.”
Blackstone, as example, except in rare cases has pivoted away from hotel investment into areas including data centers and housing.“ They like those products better,” said Peek.
DRYING UP Hotels have always been a risky asset class and the potential of recession would stunt travel demand, on both the corporate and leisure sides. GDP has a high correlation to hotel demand and according to a recent CNBC Fed survey, the average GDP forecast for 2025 declined to 1.7 % from 2.4 %, a sharp markdown that ended consecutive increases in three prior surveys dating back to September.“ The risks to consumers’ spending are skewed to the downside,” said Neil Dutta, head of economic research at Renaissance Macro Research.“ GDP is likely to come down, not go up,” said Webster.
At the same time is a stock market in correction territory that has upset retirement funds and stock portfolios. Credit card data recently released by Citi showed U. S. spending on top luxury brands dropped 5 % in February compared with a year ago, following two months of positive
THEY LIKE THOSE PRODUCTS BETTER
– DAN PEEK, PRESIDENT OF JLL AMERICAS HOTELS & HOSPITALITY, ON PRIVATE EQUITY SHIFTING TO ASSET TYPES SUCH AS DATA CENTERS AND MULTIFAMILY HOUSING
growth in December and January. It could be a harbinger of gloom for luxury hotels. A recent Wall Street Journal headline summed it up: Consumer spending is highly dependent on the affluent, who are highly dependent on the stock market.
Higher interest rates have proved a stumbling block to getting deals done.“ There will be higher rates for a while,” said Greg Friedman, CEO of Peachtree Group, but believes there are buying opportunities, as owners decide whether to renovate or sell or sell due to loan maturities.“ People are forced to sell assets and owners get more realistic on the value of their asset,” he said, which is helping bridge the bid / ask gap.
Though interest rates remain elevated, they are far from their highest peaks and, and as Hunter pointed out, people are getting more comfortable with 6 % rates.“ It’ s where we spent much of our careers
May / June 2025 hotelsmag. com 7