MAKING SENSE OF THE CURRENT MARKET IS ABOUT SIZING UP ALL THE OPPORTUNITIES .

Contributed by EVAN HURD , PRINCIPAL & MANAGING DIRECTOR , ROBERTDOUGLAS

here is no discounting the impact of inflation on our current economy . Inflation also has a direct impact on the world of hospitality , from operating expenses to labor costs to transaction activity , to name three .

Those of us in real estate investment are not expecting a softening of interest rates anytime soon . Despite some easing , everyday inflation remains strong in the United States and globally , labor pressures persist in wake of

this persistent inflation and world events aren ’ t helping , either . Overall , we expect the current interest rate environment to continue into 2024 .

As we know and have seen , higher interest rates are having a chilling effect on transactions as they impact mortgage terms and debt financing , causing pressure on valuations . As the cost of debt goes up , so do capitalization rates , which have risen 50-150 basis points since the summer of 2022 .

On the plus side , hotels

are a desired investment compared to several other categories of commercial real estate , including office , retail and , even , multifamily . Many owners are enjoying a favorable current financial structure and high operating yields , but there is a wave of debt coming due in the next two years in most classes of commercial real estate .

CLIMBING THE WALL OF CAPITAL Despite these headwinds , we are finding liquidity and

64 hotelsmag . com Nov / Dec 2023