2025 Hotel Transactions: Market in Motion

Every January, the ALIS conference serves as a barometer for the hotel investment landscape, and in 2025, the mood was optimistic yet noticeably more restrained than in recent years. Regulatory optimism and improving labor dynamics were offset by potential tariff headwinds, lack of interest rate relief, and the rising cost of new tech and satisfying evolving guest preferences. These are but a few issues reshaping the industry in ways that demand both strategic foresight and operational agility. While some trends continue along familiar trajectories, others signal a reshuffling of the deck.

The Group Business Resurgence

If 2023 was the year of pent-up leisure demand, and 2024 was a tale of moderation, then 2025 is all about the return of group business. Upscale and large properties are reaping the benefits as organizations and event planners double down on in-person gatherings. Group ADR has outpaced transient rates in most major markets, helping to buoy overall RevPAR growth. However, corporate transient demand growth remains subdued, putting pressure on hotels that historically relied on business travelers to fill their rooms midweek.

A Market of Two Worlds: Experience vs. Economy

Hotel performance is increasingly bifurcated by price class. While high-end travelers are willing to pay a premium for unique experiences and elevated service, the economy and midscale segments face headwinds. Even with weather-related demand spikes in late 2024, hotels in lower price tiers struggled to grow RevPAR, revealing a deeper trend: today’s guests are prioritizing value in the form of memorable experiences over merely securing the lowest rate.

Houston, in the Right Place at the Right Time

As the nation experienced slow but steady growth, Houston surged ahead, thanks to an unexpected stroke of luck. As major Texas convention centers in Dallas, Austin, and Fort Worth undergo simultaneous renovations, the Lone Star State’s largest city is enjoying a windfall of displaced group business. Houston led the nation (by far) with a staggering 15.1% RevPAR growth in 2024, a trend expected to continue in the near term.

Transactions Stagnate, Loans Surge

For investors hoping that 2025 would bring a major uptick in hotel transactions, the reality is that growth will be moderated by interest rates. Transaction volume in 2024 hit its lowest level since 2020, reflecting a cautious approach from both buyers and sellers. However, loan originations tell a different story. A wave of short-term, high-interest bridge loans and accessible CMBS financing at lower spreads has helped stave off a widespread wave of distressed sales. Yet lenders are playing it safer than in years past—loan-to-value ratios have tightened significantly, making it harder for leveraged buyers to strike deals.

Supply Constraints and Interest Rate Realities

New hotel supply has been stuck in neutral for years. While many projects exist on paper, actualized new supply remains at historic lows. Meanwhile, the Federal Reserve’s much-anticipated interest rate reduction in late 2024 failed to move the needle on hotel valuations. Investors had already baked the rate cut into their underwriting models, leaving pricing expectations largely unchanged.

The Bottom Line: Adaptability is Key

With ADR growth struggling to keep up with inflation in key markets, operators must be increasingly creative in controlling expenses and driving profitability. At times like these, the right management company isn’t just an operational partner—it’s a competitive advantage. Understanding hyperlocal demand patterns, optimizing revenue strategies, and uncovering hidden opportunities will separate the winners from the also-rans in 2025’s uncertain landscape.

One thing is clear: while the challenges facing hotel owners and investors are significant, they are not insurmountable. Those who can adapt to the new market realities will find themselves well-positioned for the years ahead.

About the author

Charles serves as CEO of Aperture Hotels, a fast-growing third-party hotel management company, and is a member of Cayuga Hospitality Consultants. He specializes in domestic US hotel operations, though has also touched numerous other industries. His experience covers Leadership, Turn-Key Hotel Operations, Management Approvals (Hilton, Marriott, IHG, Hyatt, Choice, and Wyndham brands), Hotel Rebranding / Repositioning, Revenue Management, Capital Improvement Planning, Underwriting and Market Studies/Feasibility, Capital Raising / Creating Successful JV Partnerships, Off-Market Hotel Deals, Hospitality Asset Management, Strategic and Financial Planning, and dealing with matters of Corporate Governance.

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