At the beginning of this year with the 2024 elections in the rearview mirror polls indicated that Americans were hopeful for what 2025 had in store. The Fed appeared to have achieved a soft landing for the economy, the stock market hit record highs, and investors were anticipating additional interest rate cuts. Entering Q2 2025, an emerging trade war startled investors and volatility enhanced the notion of uncertainty and a dimmed outlook overall. In just a matter of days, financial markets went from orderly to chaotic. The S&P 500 dropped to its lowest level in nearly a year, and the Chicago Board Options Exchange's (CBOE) Volatility Index often called Wall Street’s “fear gauge”—spiked to levels not seen since the beginning of the pandemic. Consumer confidence has pulled back, recession talk has intensified, early estimates of GDP growth are negative, and the inflation outlook is mixed. Additionally, equity markets have been on a roller coaster. Politics completely aside, the U.S. President Donald Trump’s agenda of tariffs, immigration policy, border security, reducing the size of government, and annexing foreign land are all issues based upon which he campaigned for office. Given the new administration in Washington DC is executing a previously known agenda, it should not have been a surprise to anyone. With this said, I am intrigued by the swift and stark reaction(s) by markets throughout the world.

Within commercial real estate, including the lodging sector, loan maturities remain a constant refrain, and the total amount of debt extended into 2025 exceeded that of the previous year. The ‘kick the can down the road’ phenomenon continues with many lenders pushing loan maturities into the future. Distress focused investors are anxiously awaiting opportunities to deploy capital to rebalance capital stacks or acquire lodging assets outright.

A deteriorating outlook for the U.S. economy, and declines in corporate and consumer sentiment as well as the adverse effects of trade wars and negative rhetoric have already led to declines in spending on flights and hotels. Furthermore, travel advisories to the U.S. are negatively impacting inbound international travel, which will likely have an outsized impact on gateway markets.

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The LWHA Q1 2025 Major U.S. Hotel Sales Survey includes 83 single asset sale transactions over $10 million which totaled nearly $2.8 billion and included approximately 13,900 hotel rooms with an average deal size of $33.7 million, and an average sale price per room of $202,000.

  • In comparison, the LWHA Q4 2024 Major U.S. Hotel Sales Survey included 103 sales that totaled over $3.4 billion and included approximately 17,200 hotel rooms with an average deal size of $33.4 million and an average sale price per room of just under $200,000.  Comparing Q1 2025 with Q4 2024, the number of trades decreased approximately 19 percent while total dollar volume decreased roughly 18 percent and sale price per room increased one percent.
  • By further comparison, the LWHA Q1 2024 Major U.S. Hotel Sales Survey included 66 single asset sale transactions over $10 million which totaled $2.5 billion and included approximately 10,700 hotel rooms with an average deal size of $37.9 million and an average sale price per room of $230,000.  Comparing Q1 2025 with Q1 2024, the number of trades increased more than 25 percent while total dollar volume increased 14 percent and sale price per room decreased by roughly 12 percent.

Newsworthy Q1 2025 observations include:

  • Twenty-five trades, or roughly 30 percent of the national Q1 2025 total, occurred in California and Florida. These transactions total over $923 million of investment activity or 33 percent of the national Q1 2025 aggregate.
  • Thirteen major hotel sale transactions in the State of California represented $292 million of investment activity or 10 percent of the national Q1 2025 aggregate. 
  • Twelve major hotel sale transactions in the State of Florida represented $630 million of investment activity, or 23 percent of the national Q1 2025 aggregate.
  • In a deal valued at $425 million, a joint venture between Henderson Park, South Street Partners and Salamander Hotels & Resorts acquired from an affiliate of Brookfield Asset Management, the PGA National Resort & Spa in Palm Beach Gardens, Florida. The 807-acre complex includes six championship golf courses with 99 holes, a 339-room hotel, several restaurants, a 40,000 square foot spa and a 33,000 square foot sports and racquet club.
  • Investment firm Gencom acquired from WH Holdings, the 528 key Ritz-Carlton, New Orleans and the connected 230 room Courtyard by Marriott New Orleans French Quarter/Iberville for $195 million or roughly $257,000 per unit.
  • DLJ Real Estate Capital Partners sold the 292 key Kimpton Hotel Eventi in New York, NY for $175 million or nearly $600,000 per unit to Blackstone.
  • Highline Hospitality Partners purchased the 510 room Hilton Atlanta Airport in Atlanta, GA for $111.3 million or $218,000 per key from Wheelock Street Capital.
  • For the first time in more than 40 years, the iconic 160 room Hotel Boulderado in Boulder, CO sold for $102 million or approximately $638,000 per unit. AJ Capital Partners acquired the property from Frank Day and reportedly intend to renovate and reposition the asset into a Graduate by Hilton Hotel affiliate.

Institutional investment platforms, several of whom are lodging centric, were active in the Q1 2025 hotel transaction arena.

  • Examples of buyers include AJ Capital Partners, Blackstone, Columbia Sussex Corporation, Gencom, Henderson Park, Highline Hospitality Partners, Noble Investment Group, McWhinney, Salamander Collection, and South Street Partners.
  • Examples of sellers include American Hotel Income Properties REIT LP, Apple Hospitality REIT, Inc., AVR Realty, AWH Capital Partners, BRE Hotels & Resorts LLC, Brookfield Asset Management, Chatham Lodging Trust, DiamondRock Hospitality Company, Dimension Hospitality, DLJ Real Estate Capital Partners, Extended Stay America, Lam Generation, and NewcrestImage.

Lodging related Q1 2025 merger and acquisition activity includes:

  • Hyatt Hotels Corporation (NYSE: H) announced that the company has entered into an agreement to acquire all outstanding shares of Playa Hotels & Resorts N.V. (NASDAQ: PLYA, Playa) for US$13.50 per share, or approximately US$2.6 billion, including approximately US$900 million of debt, net of cash. Playa is a leading owner and operator of all-inclusive resorts in Mexico, the Dominican Republic, and Jamaica.
  • InterContinental Hotels Group PLC (IHG) acquired from Ruby SARL, the RubyTM brand and related intellectual property for initial purchase consideration of €110.5m (~$116m). Ruby is a premium urban lifestyle brand that IHG expects to rapidly expand globally.

Debt continues to be widely available for the sector as evidenced by numerous recently announced acquisition financings and property refinancings, including:

  • CIM Group closed a $90 million whole loan to Brookfield Asset Management to refinance the 367 room Downright Austin, a Renaissance Hotel in Austin, TX.
  • TPI Hospitality secured $33.1 million in refinancing proceeds secured by two assets in the greater Minneapolis-St. Paul metropolitan area including the 125-key Homewood Suites St. Louis Park and the 124-key Homewood Suites New Brighton.
  • Related Ross scored a $150 million loan from BDT & MSD Partners to refinance the 400 key Hilton West Palm Beach adjacent to the Palm Beach County Convention Center.
  • Rockaway Hotel Owner LLC obtained $28.75 million of refinancing in connection with the 61room Rockaway Hotel in Rockaway Park, New York.
  • Oaktree-backed Formida Capital provided $19.5 million floating rate non-recourse loan secured by the Wylder Hotel Windham in Windham, NY.
  • TRT Holdings, the parent company of Omni Hotels & Resorts, secured a $300 million fixed-rate, seven-year loan to refinance the 800-key Omni Nashville Hotel. 
  • Peachtree Group originated $114.6 million in bridge loans to recapitalize two Hyatt hotels owned by McWhinney, namely the 246 room Hyatt Centric Congress Avenue Austin in Texas and the 226 room Hyatt Place Denver Peña Station in Colorado.
  • The bankrupt 541 room Signia by Hilton San Jose was refinanced with a $145 million loan from an affiliate of Bridge Investment Group.
  • Benefit Street Partners L.L.C. closed a $135 million loan package to refinance the 427 room Empire Hotel in New York, NY.
  • GFI Hospitality refinanced the 287 room Beekman, A Thompson Hotel for $195 million through Access Point Financial.
  • KKR loaned NexPoint Diversified Real Estate Trust $95 million for the 255-key Marriott Dallas Uptown in Texas.
  • TPI Hospitality obtained a $70.4 million refinancing of a 770-key, seven-hotel portfolio of premium-branded hotels in the Minneapolis-St. Paul metropolitan area submarkets of Maple Grove/Arbor Lakes and North Metro in Minnesota. The portfolio consists of the 96-key Residence Inn Maple Grove/Arbor Lakes, the 84-key SpringHill Suites Maple Grove/Arbor Lakes, the 115-key Courtyard Minneapolis Maple Grove/Arbor Lakes, the 120-key Hampton Inn Minneapolis Northwest Maple Grove, the 119-key Staybridge Suites Minneapolis-Maple Grove/Arbor Lakes, the 136-key Holiday Inn & Suites Maple Grove/Arbor Lakes, and the 99-key Hilton Garden Inn Minneapolis Saint Paul-Shoreview.
  • Barings jointly originated a $113 million debt package alongside affiliates of Apollo to refinance the Westin Indianapolis in Indiana which is owned by an affiliate of KSL Capital Partners. 
  • Access Point Financial provided $126.0 million to American Hotel Income Properties REIT LP (AHIP) to refinance, renovate and upgrade a portfolio of 12 premium-branded, select-service hotels totaling 1,233 rooms across the U.S.
  • Library Hotel Collection obtained a $30 million loan From Metropolitan Commercial Bank to refinance the 72 key Hotel Giraffe in New York, NY.
  • BD Hotels borrowed $46 million from Bank of America for the 175-unit Ludlow Hotel in New York, NY.
  • DolphinBay obtained a $35.5 million loan from Synovus Bank to recapitalize the newly opened 120 room Moxy Miami Wynwood hotel in Miami, FL.
  • A joint venture between Gaw Capital and Button Capital secured $65 million of CMBS debt from Barclays to refinance Soho House Chicago, a 120,000 square-foot private club and 40 key boutique hotel in Chicago, IL.
  • Ashford Hospitality Trust, Inc. (NYSE: AHT) closed on a $580 million refinancing secured by 16 hotels across the nation.
  • Staypineapple obtained a $29.5 million refinancing in connection with the 139-unit Maxwell Hotel in Seattle, WA.
  • Peachtree Group provided Driftwood Capital with a $43 million bridge loan in connection with the 218-room dual-branded Home2 Suites/Tru Fort Lauderdale Downtown in Florida.
  • Everwood Hospitality Partners obtained a $30 million loan to recapitalize the recently converted 128-room Aloft Indianapolis Downtown hotel in Indiana.
  • JPMorgan Chase Bank provided Braemar Hotels & Resorts (NYSE: BHR) $363 million in financing backed by five properties spanning 1,789 rooms in four U.S. states and Puerto Rico.
  • The 125 room Holiday Inn Express & Suites Halton City – Fort Worth in Texas was refinanced with a $14.5 million loan to pay off a high-interest-rate construction loan.
  • Citi Real Estate Funding and JPMorgan Chase Bank agreed to provide MSD Hospitality Partners, L.P. and  MSD Hospitality Partners, L.P., $665 million of financing in connection with the 383 room Four Seasons Resort Maui at Wailea in Hawaii.
  • Chartwell Hospitality and Soundview Real Estate Partners obtained from Citibank a $48 million loan secured by the 182 room Residence Inn New York JFK Airport in Jamaica, NY.
  • Concord Hospitality obtained a $54 million loan to refinance the 211-unit Homewood Suites by Hilton Charlotte Uptown First Ward in Charlotte, NC.
  • Madison Newbond originated a $43 million senior mortgage loan to a joint-venture partnership between Certares Real Estate Management and Monomoy Property Ventures for the Ashore Resort & Beach Club, a newly renovated 250-key oceanfront property in Ocean City, MD.
  • CIM Group closed a $15.6 million whole loan to Ad Astra Capital for the acquisition of the 123 room Hilton Garden Inn Casper in Casper, Wyoming.
  • Trestle Studio obtained a $79 million construction loan from Fortress Investment Group to renovate the 315 unit El Tropicano Riverwalk Hotel in downtown San Antonio, TX.
  • Driftwood Capital secured a $207 million senior construction financing and Commercial Property Assessed Clean Energy (C-PACE) financing for the 502-key Westin Cocoa Beach Resort & Spa on Florida’s Space Coast. The company also obtained a $50 million credit facility for a total of $257 million in financing for the property.
  • Urban Street Development obtained a $38.5 million construction loan to fund a 94 room and 5,500 square foot ground floor retail expansion of the 143-unit Hotel Indigo Tallahassee – Collegetown in Florida.
  • CRISP Hotel Partners, a joint venture between MRA Group and Gulph Creek Hotels secured $23.5 million in construction financing for the development of a 127-unit Residence Inn by Marriott in the Chestnut Run Innovation & Science Park in Wilmington, DE. 
  • Driftwood Capital obtained a $37.9 million construction loan to finance the development of the 148 key Element by Westin Mission Valley in San Diego, CA.

The U.S. lodging sector remains structurally sound; however, the industry continues to face challenges as operating costs, particularly labor and insurance, are rising faster than revenues, all of which is exerting negative pressure on profit margins. Immigration policies will disproportionately impact the hospitality industry, which has yet to fully recover to pre-pandemic staffing levels. If the current macroeconomic environment endures, slower growth in room demand and average rates can be expected. Continued rhetoric around the tariffs could make the U.S. a less attractive market to international travelers, particularly Canadians. Job reductions in federal agencies will negatively affect markets such as Washington, D.C. and San Diego which rely on government travelers and related consultants. Furthermore, high tariffs will squeeze margins for many industries, which may seek cost cuts elsewhere, and give their travel and conference budgets extra scrutiny.

A significant volume of hotel financing originated during the past decade is slated to mature during the near term. Much of this debt, originally secured under favorable terms, will need to be either refinanced at higher interest rates exerting strain on borrowers, or assets will need to be placed on the market for sale. Transaction volume will also be catalyzed as many capital starved hotels are now under brand pressure to execute pandemic deferred Property Improvement Plans (PIPs). These stresses will cause many property owners to dispose of properties, while others will “hand keys” to their lender(s). Generally, debt providers are in the business of obtaining market returns on financing, not owning commercial real estate, therefore increased hotel sale transaction activity will result. The good news is that CMBS, private debt funds, and balance sheet lenders continue to seek opportunities to deploy capital and are generally bullish on the lodging sector long term. Finally, an unprecedented amount of equity is primed for deployment as distressed opportunities are brought to the market.

The outlook for the balance of this year remains fluid. During my lifetime I recall many times of great uncertainty including but not limited to the 1962 Cuban Missile Crisis, the 1970s energy crisis, the Stock Market Crash of 1987, the 1990 Gulf War, the September 11 attacks, the Second Gulf War, the Great Recession, and the global COVID-19 pandemic. The fact is we have always, and most likely will continue to live in uncertain times with "Oh my G-D it's the end of the world" shocks. History proves the U.S. economy to be resilient and the world survives uncertainty and generally comes out ahead on the other side of crisis after crisis. While U.S. hotel fundamentals may be challenged in the short-term, longer-term patient capital that seizes acquisition opportunities that offer good locations with diverse demand drivers will realize healthy returns. Perhaps the real “silver lining” amidst todays cloudy skies is the reward that waits for those who remain calm in times of panic.

Daniel H. Lesser is CEO of LW Hospitality Advisors LLC.

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