Contrarian investors typically find opportunities in markets most other investors would rather not discuss: where there is a sharp disconnect between a market’s performance and its reputation. Prices still reflect yesterday’s headlines, while the fundamentals have already improved.
San Francisco, for example, was red-lined by many investors. The Hilton San Francisco Union Square and Parc 55 San Francisco sold together in November 2025 for $408 million, or about $138,000 per key, roughly 75% below their $1.5B peak value back in 2016.
The discount was short-lived. Perceptions changed dramatically, with new political leadership, demand generated by the next tech revolution, and the natural beauty of the city combining to anchor the largest gain in inflation-adjusted RevPAR of all 30 markets I tracked – up 14% – over the two years ending June 2026. The result was that the Hyatt Regency Embarcadero traded hands in June 2026 for about $340,000 per key, nearly two and a half times the trades seven months prior. Pricing is “normalizing” in this market and the window for getting a steal is closing quickly.
Gating Factors
Cheap does not necessarily mean contrarian. Often, the cheap hotel is priced fairly, reflecting a real decline in the market, the property’s operations or its physical state. That’s not a discount, but realistic valuation. In contrast, pricing for a contrarian hotel lags a turnaround that is already underway.
To identify promising markets for contrarian hotel investment, I established five gating questions that any market must meet:
- Is sentiment broken? Do full-service hotels sell for a significant discount to their historical trend value? How do the investment community and media reporting portray the market? Are institutions net sellers?
- Is demand turning around? Is room night demand higher now than two years ago? If so, is ADR following suit?
- Has the basis reset? Are prices per key at least 25% lower (inflation-adjusted) than they were in the previous cycle? Are current prices per key still reasonable relative to current room rates?
- Is supply constrained? How much inventory exists compared to the supply pipeline (under construction or final planning)? Does that new capacity stay within 6% of total inventory?
- Is there a significant demand catalyst? Does anything exist that would bring demand that wouldn’t otherwise be expected? Will that demand catalyst be sustained or is it a one-time event?
The Data Points to the Midwest
To test out this approach, I ran a broad data set, including well-regarded proprietary sets subscribed to by RobertDouglas, against the above factors for 30 markets across the nation. The only passing markets landed in the Midwest.
This shouldn’t surprise anyone. The region experienced a long, painful downturn as manufacturing declined, and several of its cities have found new sources of growth since then. Â Regardless, the real challenge is finding true investment opportunity amidst a crowded room of lookalikes.
Let me clarify that this isn’t a call to invest in the Midwest recklessly. The following examples are representations of my present analysis. The discipline is the takeaway: gather your data, apply your tests and identify how markets match up with key criteria.
Which Markets Passed the Test?
Columbus scores highest, one of the few markets that does well across all categories. Full-service occupancy is up 6.0% over two years, making it the greatest increase among all 30 markets I tracked, and rooms sold throughout the entire metro area are 14.5% above 2019. The area enjoys job and population growth above national averages. Catalysts include Anduril’s Arsenal-1 defense technology plant, an Amazon Web Services’ $13.5 billion investment and Meta’s data-center campus.
Columbus might not seem like a dowager market, but its pricing tells a different story: full-service hotels have sold for nearly three-fourths of trend value and at nearly half the inflation-adjusted price per key recorded in 2018–19. Although Columbus just clears the supply test, it remains one of the strongest markets when price is measured against performance.
Chicago may be the clearest example of a contrarian market whose reputation lags its performance. The negative narrative is familiar: crime, high property taxes and a projected $1.16 billion budget gap. Yet the operating data tell a different story. Over the past two years, full-service occupancy has risen 3.9%, ADR 9.5%, and inflation-adjusted RevPAR more than 9.0%. Supply pressures have also eased: the metropolitan area posted a net decline in hotel rooms during that period, one of the five largest reductions among the 30 markets analyzed. Meanwhile, full-service hotels have sold for about 59% of trend value, with institutional capital being net sellers. Among full-service hotels sold both before 2020 and after 2024, the later transaction price was 56% lower than the prior sale.
Pittsburgh is what we might call a false contrarian market. It has the smallest construction pipeline among the 30 markets analyzed, with projects equal to just 0.2% of total inventory, while inflation-adjusted full-service RevPAR has risen nearly 11% over the past two years. But pricing remains near 91% of trend value, suggesting sentiment has not broken. Strong fundamentals and attractive pricing rarely coincide.
Which Markets Failed?
Detroit, Cincinnati and Indianapolis are three markets that failed, and the primary reason was supply-related. The new supply pipeline shows approximately 16% of full-service inventory in Detroit, 18% in Cincinnati and 25% in Indianapolis.
Not only is demand weak in Cincy and Indy, but only two full-service hotels have sold in Cincinnati since 2024, and they sold at or near their trend, indicating fair compensation for declining fundamentals. Faux contrarian territory. Meanwhile, no full-service hotel has sold in Detroit since 2024, so there is no resetting basis to purchase into.
We usually see good news or good prices, rarely both. By the time a market’s story has turned, so has its price. The contrarian’s task is to find markets where the numbers have turned and the story hasn’t, test them with rigor and then have the conviction to buy when everyone else is selling—plus the discipline to sell once everyone else is buying. These markets exist. Are we willing to buy into one while its reputation still makes us uncomfortable?
Joseph Langley is a senior vice president at RobertDouglas, a hospitality capital advisory firm.