Published February 13, 2024
As we enter 2024, the landscape of hotel investments is witnessing a remarkable recovery, signaling a golden era for investors in the hospitality sector. The U.S. commercial real estate hospitality market, having weathered the storm of the COVID-19 pandemic, is now showcasing robust fundamentals that point toward a promising future.
In the third quarter of 2023, the average price per square foot in the hospitality sector was recorded at $191.78. While this figure is a nod to the sector’s resilience, staying above pre-pandemic levels, it also reflects a moderation from the peaks of 2021 and 2022, suggesting a market that is stabilizing and ripe for investment.
The capitalization rate, or cap rate, which provides insight into the potential return on investment, stood at an attractive 8.27% in Q3 2023 for the hospitality sector. This is almost 100 basis points higher than many other commercial real estate assets, underscoring the lucrative nature of hotel investments. The forecast indicates a slight increase in cap rates in the upcoming quarters, providing a window of opportunity for investors to enter the market.
Occupancy rates have also been a key performance indicator to watch. According to Crexi data, the average occupancy rate hovered around 58.77% in Q3 2023. Despite a slight dip from the previous year, this figure demonstrates the enduring demand for hospitality services and the sector’s ability to maintain a steady influx of guests.
Looking ahead, the growth trajectory of Revenue per Available Room (RevPAR) is expected to moderate, aligning with the anticipated easing of U.S. economic growth. However, with business travel projected to sustain occupancy rates and Average Daily Rates (ADR), the foundational elements of the hospitality market remain strong.
The CRE market’s adjustment to the new normal has been noteworthy. With strategic investments in handpicked hotels that boast strong operating fundamentals and market alignment, investors can look forward to capitalizing on a sector that’s adjusting, evolving, and promising sustained growth.
For further insights, explore this analysis on Crexi.
As we observe these quantitative trends, the narrative they weave is clear: hotel investments stand on solid ground, offering a resilient and rewarding path for those looking to expand their portfolios in 2024 and beyond.
Interested in exploring hotel investment opportunities? Contact VBW Ventures today to schedule a consultation and discover how to add the power of hospitality to your portfolio
