NEW YORK — The U.S. hotel transaction market has undoubtedly taken a hit amid the macroeconomic headwinds tied to President Donald Trump's administration's policy activity, but, according to finance and hotel executives, hope is not lost for the rest of this year.
At a 2025 NYU International Hospitality Investment Forum panel titled "Capital Talks: Anticipating market shifts, leading tomorrow’s returns," experts acknowledged how the uncertainty in the market has slowed down hospitality real estate transactions. But the second half of the year has the potential to look quite different from the first half.
"I think there's going to be some degree of flow over the course of this year, but nothing particularly accelerated relative to what we've seen," said Sean Gormley, managing director at Morgan Stanley.
Gormley pointed to the broader transaction environment — more than just hospitality and real estate. Big initial public offerings, or IPOs, are happening, he said.
"There's a lot of capital," he continued. "Capital markets are healthy on both the equity and the debt side. They're looking for growth and they're looking for value, and when you apply that to this industry, I think you're going to see, especially in the near-term transactions, in one of those two themes. But as we get into '26, I think an opportunity for a broader base of growth across lodging — that's really what's going to drive increase in activity."
Jeff Dauray, co-chief investment officer at RLJ Lodging Trust, said RLJ is focused on deploying capital and is working on the underwriting side of things.
"I think there is increased discipline, and so the bar is a little higher right now to transact," Dauray said. "I think '25 — in the second half of the year — is going to start showing more assets clearly, and that we are a functioning market."
Assessing the 'challenged' transaction space
Underwriting deals remains a challenge, and hotel owners, particularly real estate investment trusts, have to get creative.
"From a capital allocation standpoint, the expectation is generally that your stock is very attractive at these levels. ... Stock buybacks, which have all been announced by most of the public REITs as they've gone through this earnings call cycle, you expect those to be active," Dauray said.
However, funds from operations is not the key to growing earnings before interest, taxes, depreciation and amortization, Dauray warned.
"[Funds from operations] is not the name of the game if you're trying to create value through expanding EBITDA, so those challenges have to be addressed," Dauray said. "If you want to stay busy, it is a challenging time to underwrite given the uncertainty that's prevailing."
Joel Rosen, president at GFI Hospitality, said he's had luck in raising equity via preferred stock issuance, which offers preferred shares to investors to raise capital. Additionally, he's raised capital through Israel's bond market.
"This has been one of the tightest markets I think I've seen in the five decades that I've been playing in this field," Rosen said.
No one is having an easy time getting hotel deals through, but the deals that are transacting are doing so for a reason.
"It is a challenged transactions market right now, in our space; there are drivers and there are reasons why things are trading," Dauray said, adding that "the math has to line up."
"I've seen other cycles where discipline has waned, both on the credit side and the equity side. I don't see that this time," he said. "It feels like the debt market's still very disciplined. The equity markets are very disciplined and pricing is not as much of a mystery, whereas it should clear and there's a functioning market."
Dauray said that dealmakers "just have to work a little harder to get things done right now."
A 'rough ride' for hotel transactions
Michael Bluhm, managing director and global head of real estate, gaming and lodging at Jefferies, said he sees "pockets of opportunity" and that underwriting variables will hopefully become clearer over the next couple of months.
"There's a lot of a lot of cheapness out there right now," Bluhm said. "And this is broadly across sectors. Transactions can begin picking up, but I think you still have a little bit of rough ride direct to get through."
Along the same lines, Rosen said there's an opportunity to play the long game from an acquisitions perspective.
"This is definitely not a good time to sell," he said. "If you're looking at this, and you have the ability to be there as a longer-term player, the values are there."
Every cycle sees uncertainty, and there's always a part of the market that's upside down, Rosen said.
"From our perspective, we're not looking at this any differently than we have in any other cycle," he said. "Yes, there's chaos in the market, but we're still [going] ahead with doing deals. We have to underwrite them a little bit differently and maybe a little bit more conservatively."
The hotel transaction market is very market-dependent right now, Rosen said. Some markets — New York, Orlando and Canada, specifically — are showing resilience and strength, and that's a function of supply and demand.
"You really have to drill down on what markets you want to be in and whether or not capital will follow you to those markets," he said.
All in all, the executives advised patience and perseverance. The hospitality industry has faced headwinds before, so all signs point to the market bouncing back.
"The U.S. economy has always been resilient. It's probably the most resilient in the world," Rosen said. "So, when you look at what's happening in our market today, yes, it's a little bit in flux, but I think you have to look at the stability long term."