PHOENIX — Hotel sellers may need to give a little bit when it comes to pricing.
That was the sentiment U.S. hotel real estate investment trust executives and other hotel owners handed down from the stage at this week’s Lodging Conference in Phoenix.
The main roadblock is the bid-ask gap between the price sellers want and the price buyers are willing to give.
“Buyers have been looking for opportunity and being thoughtful about where they’re putting capital, and sellers are very connected to their valuations from 2019,” said Stephen Zsigray, president and CEO of Ashford Hospitality Trust, on a panel discussion dissecting current and future hotel deal flow in the United States.
But something’s got to give soon, speakers said.
“If you are out on the market with an aspirational price, the deal is probably going to languish,” said Michael Bernath, senior vice president of acquisitions and dispositions for private equity hotel owner Peachtree Group. “If you have a hotel deal that is around $40 million and under, the metrics make sense to sell; you’ll have a sizable bidder pool.”
The longer deals languish, the more pressure builds, and that might be the spark that ignites larger, more significant hotel transactions, said Kate Henriksen, co-chief investment officer of lodging REIT RLJ Lodging Trust.
“It does depend on the catalysts — the narrowing of the bid-ask spread, what does a refinancing look like? Are you going to have to put capital back into it? Those are catalysts pushing people toward a sale,” she said. “And the longer deals fester or hotels fester out there, there is more pressure to transact.”
And that pressure hits the sellers, said Justin Leonard, president of DiamondRock Hospitality Company, a publicly traded REIT.
“We’re going to have to trade things at a slightly higher yield in order to get the buyers to come,” he said.
Who is buying
So, what will it take to get hotel buyers off the sidelines? It’s a combination of factors, speakers said, some scientific and some less so.
“I think now is a good time to get back into [acquisitions],” said Azim Saju, CEO of non-traded REIT ARK Holdings. “I wish I had done more deals and been more aggressive post-Great Recession. Looking back on it, my miss then was that I wasn’t bold enough.”
Leonard agreed that at the last hotel industry downturn, buyers “earliest off the sidelines had the biggest wins.” But he added that mindset has burned some investors who tried the same thing in this recovery, picking up hotels early on at what he called “highly distressed price points.” Some still aren’t hitting metrics they want.
Right now, there’s no single major buyer pool rushing to pick up hotels, speakers said.
“We don’t have a lot of foreign capital in the space. REITs are still on the sidelines, and we haven’t seen the big private equity stepping in; they haven’t been that acquisitive in hospitality,” Leonard said. “They see better opportunities along the real estate spectrum.”
This fragmentation means hotels that do sell are trickling in here and there.
“There’s been more of a portfolio discount than a portfolio premium over the last couple of years, so you just see more onesie-twosie deals,” Bernath said.
Still, hotel REITs continue to be net sellers, said Dan Lesser, president and CEO of LW Hospitality Advisors, which tracks hotel sales.
“We need more realistic sellers for us to be more acquisitive,” DiamondRock’s Leonard said. “Or we need the valuation of stocks to change.”
Henriksen added “you need the investors to come back, too, to boost share price. Lodging REITs are cyclical, and right now there’s been an exodus of investors. But with signs of growth in more major markets where REITs are represented … we’ll come back.”
Peachtree’s Bernath said that in general, “we as an industry go very quickly from fear of making a mistake to fear of missing out very quickly when some of our friends start to do things,” when it comes to buying hotels.
Opportunity markets
Henriksen is bullish on San Francisco’s rebound. The city suffered during and after the pandemic with drops in international inbound travel and cancelled large group events. RLJ owns nine hotels in the Bay Area, according to CoStar data.
Henriksen pointed to the 2026 “catalysts” in San Francisco, including the Super Bowl, FIFA World Cup 26, continued investment around artificial intelligence and what she called “a decent convention calendar.”
Ashford’s Zsigray agreed that San Francisco is an attractive market for buyers and added Washington, D.C., and Austin, Texas, to the list.
“D.C. at current price levels is attractive,” he said. “Austin is similar — they got hit with a convention center renovation, which won’t come back online until 2029, so there’s a lot of opportunity there to get a renovation done quickly and take advantage on the other side.”