At the Lodging Conference this month, industry leaders spoke less of growth than of endurance. Operating costs are rising 5–6 % annually while deal volume barely moves. Executives described a market “stuck between confidence and costs.” Buyers want discounts to offset higher interest rates; sellers still benchmark 2019 values. The result is a transaction freeze stretching through Q3 2025. Capital waits on clarity—either lower rates or clearer earnings momentum—before resuming deployment.

National RevPAR has essentially recovered ( ≈ $96 in 2025 vs $86 in 2019 ), but GOP margins average 35 %—still below the pre-pandemic 38 %. Labor shortages force premium wages and overtime bonuses. Utility and insurance costs run above 5 % YoY. Even with record ADR (~$150), profit per room lags. In practice, operators prioritize rate over occupancy to preserve cashflow. This keeps headline KPIs healthy but conceals margin erosion. EBITDA discipline is now the core competitive skill.

By contrast, capital markets remain unsettled. Hotel cap rates have expanded 200 bps since 2019 while debt costs hover near 8 %. Few deals pencil unless pricing drops 20–25 %. Private equity and REITs report dry powder but no urgency. A $730 M urban sale today requires equity returns once reserved for distress. As a result, Q3 sales barely hit $4 B nationwide. Still, selective recycling continues: Braemar’s sale of The Clancy in San Francisco illustrates how owners prune weak assets to protect stronger ones. Liquidity exists only for clarity.

Meanwhile, performance diverges sharply. Drive-to and Sunbelt resorts show 80 % summer occupancy and record rates; urban convention hotels hover near 65 %. International travel remains ≈ 20 % below 2019 levels, muting gateway markets like SF and NYC. Leisure demand sustains Miami and Vegas, but corporate transient lags by ~15 %. In turn, select-service franchises at highways and airports post stable NOI and steady valuations. Investors see a two-tier industry—resilient cashflow vs rate-dependent risk.

An operator of four hotels put it plainly: “Our interstate Hampton runs full, the downtown boutique still struggles.” Staffing shortages mean selling 80 % of rooms at premium rates beats 100 % at discount. Brand renovations are deferred; energy retrofits and outsourced services bridge the gap. Such pragmatism defines 2025’s hospitality cycle—operational resilience over growth. On balance, ownership focuses on service consistency to protect rate power when volume wavers.

Tourism still feels policy friction. Visa processing delays and strong U.S. currency temper inbound travel. Energy prices feed airfare inflation. Meanwhile, many Covid-era loan extensions expire in 2025, creating refinancing risk for older urban assets. Nonetheless, fiscal stability and consumer employment support domestic leisure. If the Fed eases mid-2026, expect transaction volumes to rise ~30 % as bid-ask gaps narrow and refi capital returns. Until then, discipline rules.

CRE360 projects RevPAR to exceed 2019 benchmarks by 2026 in most U.S. markets, with occupancy at ~65 % and ADR > $155. Transaction volumes should gradually lift to $20–22 B as rates decline and NOIs stabilize. Still, GOP margins may stay 200–250 bps below historic averages due to labor costs. Expect asset rotation rather than expansion—selling urban laggards to fund resort growth. Conversion plays (older hotels to multifamily or student housing) will define the next wave of value recovery.