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Hospitality, think that cap rates will rise, but not on the interestrate thesis; rather, because hotels thirst for CapEx spend.“ Hotels are for sale because they are capital starved,” Hamilton said.“ Risk goes up and cap rates go up with it.”
The same thinking is shared by Michael Torres, EVP of Fulcrum Hospitality.“ Cap rates will move up slightly as hotels push off renovations. These are coming up on their hold and there will be pressure to sell,” he said.
Jim Butler, a founding partner of Jeffer Mangels Butler & Mitchell LLP, and who recently joined Blank Rome, is in the higher-cap-rate camp.“ Values are all over the place,” he said. Little CapEx drags values down.”
There are those confident among the group, including Greg O’ Stean, chief development officer of Hotel Equities, who said cap rates will fall.“ I’ m an optimist,” he said.
TRAVELIN’ MAN Beyond cap rates, one theme driving the hotel industry is upmarket strength versus poorer performance returns in lower-segmented business.“ The American middle class is dying and doesn’ t have discretionary income,” Cahill said.“ It’ s a world of have and have-nots, where the former aren’ t price-conscious.” He cited, for instance, the some 42 million Americans on the Supplemental Nutrition Assistance Program or SNAP.“ They aren’ t traveling and the rich are getting richer.”
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The Lodging Industry Investment Council meets three times a year to discuss the hottest topics and trends in the hospitality industry.
Red Roof Inn is one brand that sits at the lower end of the market. It is owned by Canada’ s Westmont Hospitality Group. During COVID, it and its budget peers performed admirably. That’ s changed, fiveplus-years on.“ We are suffering the most of all the segments,” said Dorraine Lallani, senior director of asset management at Westmont Hospitality Group.“ Our customers are not traveling.”
Many customers are traveling and staying at short-term rentals, eschewing traditional hotels.“ The desire to travel hasn’ t gone away,” mentioned Isaac Collazo, senior director of analytics at STR, but there is growth in STR, he added( the lodging product, not his company). Aperture’ s Oswald added that many transient travelers are turning to extended-stay products and
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that“ STRs are picking that [ business ] up.”
“ It’ s all supply and demand, and there is a lot of demand, and we let STRs take a lot of it,” said Jonathan Falik, founder of JF Capital Advisors. He called the Airbnb business model brilliant.“ It turned every host into a highly committed marketing agent,” he said.
Multi-generational travel is also a boon for the likes of Airbnb, Vrbo and other STR accommodation companies, which have better pricing and more unique accommodations, argued Tiffany Cooper, head of development in the Americasfor Mandarin Oriental Hotel Group.“ Hotels don’ t have the communal spaces, like at Airbnb,” she said, adding that hotels, also, are typically more expensive to book. Mandarin Oriental, she said, is looking at how to add or curate more
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multigenerational spaces in its hotels.
One of the biggest catalysts that drives demand in the hospitality industry is the powerful brand loyalty programs. One problem, noted O’ Stean, is that younger travelers aren’ t brand loyal, which he said is a win for Airbnb and its peers.“ There is zero brand loyalty for the young,” he said, adding that it’ s cheaper to get one Airbnb rather than four separate hotel rooms.“ It’ s a generational thing,” he said.
Frank Nardozza, chairman and CEO of REH Capital Partners, concluded the proceedings on a more sanguine note.“ We need to think about accommodations and what it means in the future,” he said.“ Airbnb is an OTA. The hotel industry has transformed many times before and will transform again.”
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May / June 2026 hotelsmag. com 79 |