Hotel investors stay cautiously optimistic despite uncertainty of US policy impact

For the past 20 years, the members of the hotel industry’s preeminent think tank, LIIC, The Lodging Industry Investment Council, are annually surveyed to develop a list of the major hotel investment opportunities and challenges for the coming year.

This exhaustive survey results in the LIIC Top Ten, a highly regarded profile of investment sentiment and attitudes for the lodging industry for the forthcoming 12 months. Altogether, the members of LIIC represent direct acquisition and disposition control of well over $60 billion of lodging real estate.

The hospitality industry’s leading influential investors, lenders, corporate real estate executives, REITs, public hotel companies, brokers and significant lodging equity sources are represented on the Council. LIIC serves as the leading industry think tank for the lodging real estate business (www.liic.org).

Mike Cahill, LIIC co-chairman, produced this year’s survey. Mr. Cahill is CEO and Founder of HREC – Hospitality Real Estate Counselors, a leading international hotel and casino brokerage and advisory firm (24 offices nationwide) specializing in lodging property sales, debt financing and consulting (www.hrec.com). George Davis and Olivia Brenner, Associates in HREC’s Denver office, assisted throughout the process.

2025 LIIC Top Ten Survey Results:

Overall, the 2025 LIIC Survey presents cautiously positive predictions for the next 12 months. Investors remain eager to buy, and lending is available from a variety of sources. Going-in cap rates may increase slightly, but more sellers have reconciled to selling at current pricing, resulting in anticipated increases in both dollar volume and number of transactions. Uncertainty around the impact of the Trump Administration policies, especially tariffs, has created a hazy cloud for both existing assets and new hotel development.

I. Interest Rate Costs for Acquisition Debt: Similar to last year’s survey, interest rates are the number one threat, although the impact softened from 68% last year to 38% this year.

II. Availability of suitable acquisition assets in your targeted IRR range: The ability of buyers to find premium purchase opportunities that achieve targeted IRR pro formas is still challenging. However, conditions have improved over the last year as some sellers are becoming more open to moving their assets due to the wide bid-ask spread.

III. Change-of-ownership PIP mandates from brands: Hotel investors are still struggling with the high cost of change-of-ownership PIPs from the major brands. Sixty-three percent believe that brand PIP requirements continue to become more demanding, even compared to the last several years of hardship.

IV. Tariff-driven construction costs: New to the list, the impact of tariffs on construction costs for new builds and renovations is now a top four concern.

Hotel going-in acquisition cap rates are predicted to increase by 63% of respondents, albeit the majority anticipate only a slight increase of less than 50 basis points. Approximately half of LIIC anticipate the total dollar volume of U.S. hotel transactions will increase overall by year-end 2025 relative to year-end 2024. This represents a slowing from last year’s 75% prediction, including 43% seeing only a modest increase of 1% to 10%. In terms of the total number of transactions, the dollar volume expectations are essentially mirrored.

Hotel mortgage financing availability appears positive over the next 12 months, with 35% seeing an improvement and 37% anticipating stability. Fifty percent still plan to refinance their existing debt in the next 12 months. The top three anticipated sources of hotel debt (total volume) are: debt funds, CMBS and regional banks.

Eighty-eight percent of LIIC plans to purchase hotels over the next 24 months. Hotel packages (five or more) have become less favorable over the last several years, with 43% unwilling to pay a package premium, and astonishingly, 31% actually expect a purchase price discount for a bulk acquisition.

Upper Upscale is the preferred target scale for buyers today, mirroring the 2024 survey. Over the next 12 months, transaction volume is expected to be strongest in the Upscale and Upper Upscale segments.

Quantity: 43% estimate that the quantity (number of hotels) on the market is better than 2024, a reversal of trends since Covid.

Quality: Compared to previous surveys, hotel investors are also finding that the desirability of hotels suitable for purchase is improving, with 32% seeing an improvement over 2024. For a select-service hotel acquisition, investors are targeting hotels under 15 years old, with 6-10 years as the preferred “sweet spot.”

LIIC members were asked to pick which of the top 25 markets they “would consider buying a hotel.” The four most desirable markets are as follows:

1. Boston, Massachusetts (also first last year)
   
2. New York, New York (up from third)
   
3. Tampa, Florida (down from second)
   
4. Dallas, Texas (new to top list)

Where NOT to buy? #1 Los Angeles, CA; #2 Chicago, IL; #3 Minneapolis, MN and St. Louis, MO (tied)

Hotel investors appear worried about the impact (market and property-level) by the end of 2026 if the Trump Administration enacts significant tariffs. Eighty-five percent of respondents believe the negative impact on existing hotel investments will be moderate or substantial. Relative to new hotel development, 89% believe significant tariffs will decrease new hotel development, with 42% predicting the decrease will be substantial.

Future corporate demand has turned negative from last year, with only 32% cautiously optimistic. More revealing, 31% are “uncertain” and another 31% are “pessimistic.” Fifty-one percent believe that group demand (RevPAR) will be the strongest segment relative to transient and contract. Thirty-six percent of LIIC investors have redlined markets that rely heavily on government-generated hotel demand.

• The Trump Impact: By 2027, 66% of LIIC predict the current actions of the Trump administration will make hotel property investments less profitable. Eighteen percent believe Trump will make hotels more profitable.

• SNL – Saturday Night Live: Two-thirds of LIIC do not regularly watch Saturday Night Live.

• Hotel Owners Tech Flexible! Fifty-four percent of LIIC have rapidly embraced mobile check-in and digital keys, actively utilizing these options.

For additional information, please contact:

LIIC – The Lodging Industry Investment Council

www.liic.org

Co-Chairmen
Mike Cahill, CEO & Founder, HREC: mcahill@hrec.com

Jim Butler, Partner, JMBM - Jeffer Mangels Butler & Mitchell, LLP: jbutler@jmbm.com

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