Macroeconomic noise is everywhere — anyone taking even a passing glance at the news will see stories about elevated interest rates, sticky inflation, global tension and tariff-related uncertainty.
However, those headlines aren’t providing the nuance that the current market deserves. While national sentiment may have cooled, many hotel submarkets continue to outperform, offering real opportunities for developers and capital providers who know where and how to look.
Throughout the country, local fundamentals are defying the broader narrative. The question is finding how to focus on these resilient submarkets to find the right opportunities.
Here is what developers need to keep in mind during this cycle.
Micro-drivers’ massive impact
While broad indicators make compelling headlines, local demand is what tells the real story. Developers looking for their next project should tune in to their desired market’s micro-drivers.
Micro-drivers can take many forms, such as university expansions, hospital systems and government projects, cruise terminals and convention calendars. These drivers are producing results that the macro story simply doesn’t capture, including consistent demand and sharp increases in ADR.
Let’s look at some real-world examples. In Palm Beach, Florida, a combination of pent-up global wealth, minimal new full-service supply, and the entry of new ultra-luxury flags such as Oetker’s Palm House are driving aggressive rate growth. Sparse new industry combined with concentrated global demand is keeping ADRs high and booking windows long. In fact, CBRE forecasts Palm Beach hotel RevPAR in 2025 to land 28% above 2019 levels.
Another example is Tampa, where hotel tax revenues are breaking records and RevPAR is up double digits across nearly every chain scale. The local drivers in this upper-midscale and economy market include infrastructure crews, an active event calendar and booming cruise traffic out of Port Tampa Bay. It’s also worth noting that the strong weekday business from workforce travel combines with weekend cruise spikes to produce sold-out conditions across price points.
Finally, let’s briefly discuss New York City. In the fourth quarter of 2024, hotel occupancy hit 89%, with year-over-year RevPAR growth of 9% driven by international arrivals, conventions, and a wave of reopenings. The New York City market is the most unique in all the world, but it’s just one more example of the impact of market-specific demand drivers can.
These markets are just a few examples that show that developers that they need to understand how their products can perform in specific demand ecosystems.
Opportunities among industry pressures
While there are hotel opportunities out there in these resilient markets for focused developers, there are also obvious obstacles to finalizing a deal in the current market. As of the publication of this piece, interest rates remain elevated, construction costs are high and capital is more cautious. Lender appetite also continues to be selective. These industry pressures can be so severe that some developers are choosing to sit this cycle out, which means that viable sites are sitting idle because developers are struggling to make the numbers work. If you’re one of the few still able to underwrite confidently and structure creatively, the path to long-term rate power is certainly less crowded. In fact, some of the country’s best-performing markets are gaining strength even as national averages flatten.
Getting deals done in resilient markets
The current hospitality development environment requires developers and lenders who take a solutions-oriented and a precise approach to deal underwriting, and who deliberately factor in potential hazards and setbacks. The deals that make it through right now will be developed with maximum flexibility, budget for multiple operating scenarios, and, as previously discussed, a focus on specific local drivers, not general market assumptions.
Developers must also become experts in the minute details of their desired markets. The bottom line is that the more knowledgeable you are about your market, its demand drivers, comp set and guest profile, the more attractive you are to lenders. Don’t be afraid to dig deep! Here are some sample questions you should keep in mind as you build your proposal:
- What specific events or institutions are driving this market?
- How much new supply is really in the pipeline?
- What has been paused, and what happens if I’m the only new product in 2026?
Remember, deals are still getting done, especially for sponsors who can tell a story that connects real demand to an actionable business plan.
Final word
Hospitality development is in a macro-heavy moment, no doubt. But we’re also in a lending environment where submarket clarity offers an enormous competitive advantage. Markets like Palm Beach Tampa, and New York are thriving not because of broad economic tailwinds, but because of targeted demand, smart supply dynamics and strong local operators.
For developers and capital providers who can block out the noise and dial in on the fundamentals, the opportunity isn’t fading – it’s getting sharper. In this cycle, clarity beats consensus and local conviction wins.
Ryan Bosch is principal at Arriba Capital and a seasoned expert in hospitality debt and structured finance, managing a portfolio exceeding $2 billion across 140 deals.
The opinions expressed in this column do not necessarily reflect the opinions of CoStar News or CoStar Group and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to contact an editor with any questions or concern.