Hotel Investment Expected to Increase in 2025

The DJIA fell 207 points while Nasdaq was down 123, the S&P 500 was down 36 points, and the 10-year treasury yield was down .03 to 4.42%. Lodging stocks were mostly lower. HLT and TNL both hit new highs today with TNL able to manage a gain while HLT was hit with some modest profit-taking.

JLL’s Hotels & Hospitality Group released their Global Hotel Investor Sentiment Survey, which unveils a wave of renewed optimism in the hotel investment sector. With recent interest rate cuts by major central banks, an unprecedented 80% of investors plan to maintain or increase their capital investment in hotels over the next 12 months. More takeaways from this year’s survey include: cross-border hotel investment has surged thus far in 2024, and global investors expect to inject even more capital in 2025. 57% of investors expect to invest more capital into regions other than where their capital is sourced from over the next 12 months, with Asian and North American investors expected to be the most active. 2024 has seen a notable increase in new investors entering the hotel sector, with a record 27% of YTD September investment volume driven by first-time buyers. In fact, 52% of investors surveyed report an expected growth in their hotel industry allocation relative to other commercial real estate over the next 12 months. Global hotel investors report that rising cost of capital, namely debt market volatility, has been the primary driver behind limited investment activity over the past 12 months, with a whopping 54% reporting that their all-in cost of capital has increased by at least 50 basis points since the start of 2024. Fortunately, 95% of investors expect their all-in cost of capital for hotel acquisitions to either remain the same or decrease meaningfully over the next 12 months. Investors gravitate to hotels on opposite ends of the spectrum - luxury assets, buoyed by their robust operating performance and rising yield, and extended-stay hotels, fueled by their consistent returns and lean operating models. Platform acquisitions, often overlooked by traditional hotel investors, have emerged as an attractive investment option as global hotel supply growth slows and brands look to drive shareholder value via net unit growth.

Despite facing challenges from subdued summer demand and a sluggish third quarter, U.S. hotel performance is expected to reaccelerate in the fourth quarter and extend into 2025, according to CBRE’s latest forecast. CBRE now forecasts a 0.5% increase in RevPAR growth for 2024, down from the previously estimated 1.2% in August. This revision reflects a 40 basis point decrease in expected occupancy compared to the prior forecast, with occupancy anticipated to decline by 30 bps year-over-year. The ADR is expected to increase by 0.7%, a reduction of 40 bps from earlier projections. RevPAR growth is expected to reaccelerate beginning in Q4 2024, supported by recent interest rate cuts, easing inflation, and rising stock market trends. In Q3, 2024, hotel demand declined 0.1% year-over-year, coupled with a 0.6% increase in supply, resulting in an approximate 0.8% decline in occupancy. Modest ADR growth of 0.6% fell short of CBRE’s previous expectation of 1.6%, leading to a 0.2% decrease in RevPAR for the quarter. CBRE forecasts a compound annual growth in supply of 1% over the next five years, below the industry’s long-term historical average of 1.6%. The forecast includes GDP growth of 2.6% and average inflation of 2.9% for 2024.

The hostel sector in Mexico City is beginning to position itself as attractive for travelers, representing 7% of available beds, a figure that was 3% two years ago, according to the Association of Hotels of the Capital. The business model of hostels is very much aligned with Mexico City’s main tourist attractions, such as culture, gastronomy, architecture, and history, making them attractive to travelers seeking an authentic experience. The growth of hostels in the city is also related to the profile of travelers; although it may seem contradictory due to the issue of insecurity, women are the main clients of hostels and single-traveler tourism; more women travel alone than men, so it is important that the lodging sector is constantly renewed according to trends, where the expectation is that hostels participate with 33% of the total supply. One of the challenges for the hotel sector, including hostels, is the capacity to absorb the increase in tourists that the 2026 World Cup will bring, where Mexico City will be one of the main venues. Mexico City’s new Tourism Law seeks to level the playing field for the different types of lodging, from traditional hotels to the 21,000 hosts on platforms, guaranteeing fair competition and protecting consumers. Looking ahead to 2025, the Hotel Association will continue to collaborate with the Government of Mexico City to perfect the regulatory framework, cooperating with all those who have a sense of hospitality within the law, whether they are hotels, hostels, or any other type of lodging.

Hilton announced its Board of Directors authorized the repurchase of an additional $3.5 billion of common stock under the company’s existing stock repurchase program. That brings the total amount currently authorized for future repurchases to $4.8 billion.

Hilton Garden Inn Dana Point, in Southern California, announced the completion of a comprehensive renovation that transformed both the interior and exterior of the property. Formerly a DoubleTree Suites, the rebranded hotel has undergone an extensive makeover that includes 198 all-new guestrooms and bathrooms; and redesigned public spaces including a complete transformation of the atrium lobby that features a brand-new lobby bar, an expanded fitness center, upgraded food and beverage spaces, outdoor pool, and renovated meeting spaces.

Pivot, the lifestyle operating vertical of Davidson Hospitality Group, has been tapped by Park Hotels & Resorts to manage Royal Palm South Beach Miami, A Tribute Portfolio Resort in Miami, Florida. The property currently features 393 rooms, two pools, a fitness center, five restaurant & bar outlets, and nearly 8,000 square feet of indoor and outdoor event space. Under Pivot stewardship, Royal Palm South Beach Miami will undergo a comprehensive renovation during 2025.

EVEN Hotels, part of IHG Hotels & Resorts, celebrates the opening of EVEN Hotel Bozeman Yellowstone International Airport, the first EVEN Hotel in The Treasure State, and announces the first EVEN Hotel in Beaverton, Oregon. The 120-room EVEN Hotel Bozeman Yellowstone International Airport, owned by ERES Yellowstone Hospitality, LLC and operated by O’Reilly Hospitality Management, LLC, and the 90-room EVEN Hotel Portland - Beaverton, owned by Timberland Hotel Ventures & Holdings, LLC and operated by Maps Hospitality, are the latest openings announced in the EVEN Hotels portfolio to feature elements of the brand’s refreshed prototype including a refreshed restaurant concept and new in-room fitness options.

Making its grand entrance on the palm-fringed, sugar-soft sands of Costa Mujeres is SLS’s first-ever all-inclusive wonderland, SLS Playa Mujeres. According to eHotelier, the resort boasts 498 rooms and suites, 18 distinctive culinary and mixology experiences, Ciel Spa, kids, teen, and full-family experiences, five pools, nine versatile spaces, and an almost 10,000 square foot ballroom, all located just 30 minutes from Cancun International Airport.

Choice Hotels International, Inc. continues upscale category growth, the new Cambria Hotels openings, and key groundbreakings across the U.S. The newly opened Cambria destinations include the 108-room Cambria Hotel El Centro-Imperial, the newest Cambria Hotel in California; the 118-room Cambria Hotel Pigeon Forge is the fourth Cambria to open in Tennessee; and the 91-room Cambria Hotel Spokane Airport, the first Cambria hotel in the state of Washington. The upcoming groundbreaking Cambria properties include the 131-room Cambria Hotel in Bend, Oregon, and the 118-room Cambria Hotel in O’Fallon, Missouri, the first Cambria Hotel in the state of Missouri. Both properties are expected to open in 2026.

The historic St. James Hotel in Cimarron, New Mexico, closed its doors earlier this year, but is now coming under new ownership. According to Nexstar Media, Inc., the hotel has been acquired by M Vacation Properties & Resorts who say they will keep the property mostly as it was when it shut its doors, with the addition of new menu items in the hotel’s restaurant. They also plan on holding various events and concerts during the summer. They are hoping to reopen for booking on December 20.

Westgate Resorts broke ground on Rive Country Water Park, a new addition to the Westgate River Ranch Resort & Rodeo located in River Ranch, Florida. Set to open in the summer of 2025, River Counties Water Park will offer three heart-pounding waterslides. The oversized, island-inspired lagoon pool with shallow-water sun shelves and lounge seating will provide the ultimate escape to unwind between rides. There will also be an expansive aquatic play area for younger guests featuring a splash pad with mini slides, dump buckets, spray cannons, a whimsical waterfall shower, and additional kid-friendly activities.

Wyndham Hotels & Resorts has teamed up with investment firm Lafayette Square to provide diverse hoteliers with improved access to capital. Through an exclusive relationship, Wyndham will vet and directly connect qualified owners with Lafayette Square, aiming to help hoteliers with up to $100 million in combined financing from the firm over the coming years. While not all hoteliers will qualify, viable candidates can use the funds to move forward projects that would otherwise stall due to lack of traditional financing. Lafayette Square’s investment is the latest component of Wyndham’s BOLD and Women Own the Room initiatives, which aim to bolster hotel ownership by Black and women entrepreneurs by addressing the unique challenges faced by each community. From networking and educational opportunities via the newly launched Accelerator Circle to operational support and complimentary services to help maximize revenue, each program offers tailored solutions to help entrepreneurs on their path to hotel ownership. Together, BOLD and Women Own the Room have resulted in more than 100 hotel deals with Blackand women hoteliers, of which more than 20 are now open.

Shamin Hotels will move its headquarters out of the Richmond Times-Dispatch building next month and relocate to a building in Chesterfield County, Virginia. The company plans to operate in a five-story office building it purchased in August while it figures out a long-term plan. Earlier this year, Shamin, which owns The Times-Dispatch building, agreed to lease most of the building to the City of Richmond’s Department of Social Services. The city signed a 15-year lease and is expected to move in next year.

Personnel Moves

DoveHill announced the appointment of Charles Paloux as its new Chief Investment Officer. Paloux joined DoveHill in 2021, bringing a wealth of experience from his previous roles at Jones Lang La Salle and Hersha Hospitality. As CIO, Paloux will oversee DoveHill’s entire investment process, from acquisition to asset management and property dispositions, ensuring the firm continues to make smart, value-adding investments in the hospitality sector.

Kolpin Hotels announced the appointment of Bo Nylandsted Larsen to the newly established role of Chief Commercial Officer. Bo brings over 20 years of commercial leadership experience from the global market, having begun his career at Scandinavian Airlines, followed by Cruise Baltic and Cruise Copenhagen.