Financing

• Both debt and equity markets are accepting the higher for longer interest rate narrative. There should generally be capital available for deals its cap rates are at least ~7.00%-8.00%.
• Most market participants see continued sideways chop in 2025 with similar slow transaction volume.
• Slight yield compression is expected as interest rates should be less volatile going forward.

Operations

• Renovation and PIP costs will continue to be an issue. Increasing operational costs are placing pressure on margins.
• Insurance costs are being closely monitored after the recent increases over the past few years and given the recent natural disasters along both coasts.
• Immigration policy will have an influence on the hospitality industry, but the administration’s emphasis on deregulation could be a boon to the industry.
• The new administration may alter other countries perception of international travel to the United states which could have a significant impact on the industry as a whole. Potential tariffs are also being monitored by the industry.

Trends for 2025 and beyond

• The hospitality industry will continue its trend towards providing experiences and uniqueness as a differentiating factor for individual properties.
• There is an increasing willingness by consumers to pay a premium for nostalgia, adventure, & experiential venues.
• Distressed markets will remain distressed (i.e. SF, Portland, DT LA).
• Pockets of the country with atypical risks will be avoided.
  (i.e. unions, Cities/Counties with unfavorable regulations in place)
• Extended-stay is expected to remain the most favored asset class in the near term. Many in the industry are shying away from full-service properties however trophy assets are more likely to trade this year than in previous years.
• Hotel values and pricing are not facing the same issues as multifamily properties as hotel cap rates did not compress as far after COVID-19.