CBRE: Half of U.S. Hotel Investors Plan to Buy More This Year

(Illustration courtesy of CBRE)

CBRE, Dallas, reported that investors have generally positive sentiment about the hotel market this year.

Half of the investors surveyed plan to increase their hotel investments in anticipation of higher total returns and lower prices, CBRE said in its 2024 U.S. Hotel Investor Intentions Survey.

For those investors who plan to buy less this year, difficulty in securing and servicing debt and strengthening their balance sheets are the top challenges, the report said.

“Increased borrowing costs and labor expenses are the biggest challenges for hotel investment this year, followed by higher insurance costs,” the report said. “These costs likely will lower margins. While we expect traditional hotel demand and pricing may be tempered by competition from alternative sources like cruise lines, short-term rentals and outdoor lodging, only 30% of those surveyed consider this a challenge.”

Central business districts and resorts are most favored location types, while upper-upscale and upscale/upper-midscale are the most popular chain-scale targets, CBRE reported. “We expect revenue per available room growth of 3.1% for urban locations from increased group, business and international travel,” the report said. “We also expect that steady leisure demand and modest ADR gains will support 1.6% RevPAR growth for resort locations.”

Looking at U.S. markets, large cities such as New York and Washington, D.C. are expected to have the strongest hotel market fundamentals this year, along with leisure-focused locations including Miami, Charleston and Austin. “Given limited new hotel supply and restrictions on short-term rentals, New York City is 2024’s most attractive investment market, followed by Miami, Charleston and Boston,” CBRE said. “Perhaps because more distressed assets could enter the market and make pricing more favorable, investors indicated interest in San Francisco—a market that has lagged in recovery since the pandemic.”