The hotel debt markets have demonstrated remarkable resilience through the third quarter of 2025 and into the fourth quarter, maintaining robust capital availability despite evolving operational challenges across the lodging sector. Hotel loan originations totaled $27 billion in the first half of 2025, reflecting a continued strong appetite from diverse capital sources. Unlike previous market disruptions, liquidity has not been constrained, though the lending landscape is characterized by heightened attention to nuanced asset performance, sponsor balance sheet strength and existing cash flow or the ability to execute on pro forma cash flow with certainty.
With $114 billion in hotel loans maturing through 2027 and the potential for additional Federal Reserve rate cuts through 2026, the financing environment presents both strategic opportunities and refinancing pressures that will drive significant transaction activity.
Performance Bifurcation Shapes Lending Strategies
Though revenue per available room (RevPAR) reached record highs in the first half of 2025, growth decelerated to just 70 basis points year-over-year as performance bifurcation intensified across hotel segments. Luxury hotels posted 24.1% growth compared to H1 2019, while economy segments declined 1.2% over the same period. This divergence reflects broader consumer spending patterns and has influenced lender appetite across different hotel categories.
Capital Sources Remain Diverse and Competitive
Debt liquidity continues to improve, with the depth of the lender pool reigniting optimism across the hotel financing landscape. There is substantial hotel debt available for cash-flowing assets, leading to compressed credit spreads as banks, CBMS and insurance companies compete. For assets in transition, the majority of hotel debt available has been floating-rate debt provided by an ever-growing pool of debt funds and private capital.
For loans under $150 million, debt funds and private equity investors have been the most active participants over the past 18 months, followed by select money-center banks and insurance companies. The commercial banks, which were historically the largest source of hotel debt, remain selectively active with their best customers and are increasing their volume for high-quality, cash-flowing hotels.
For larger transactions exceeding $200 million, the single-asset, single-borrower CMBS market has maintained steady execution throughout 2025. Over the past 18 months, the SASB market has provided exceptional debt liquidity for large single-asset trophy properties and hotel portfolios, though there haven’t been as many hotel SASBs this year as last year. Institutional investors continue demonstrating a sustained appetite for high-quality hotel collateral. The tightening of spreads for new issue CMBS bonds are following tightening corporate bond spreads more so than secondary market appetite for CMBS bonds, which haven’t narrowed as much due to noise surrounding delinquencies. This has provided competitive non-recourse fixed-rate alternatives, with five-year structures remaining popular among borrowers seeking to match financing terms with business cycle expectations.
Strategic Timing Outweighs Rate Optimization
The market expects the Federal Reserve to implement additional interest rate cuts through late 2025 and continuing into 2026, but industry experts caution against timing strategies focused solely on rate optimization. Credit market dynamics operate on dual axes of pricing and availability, meaning that while modest rate improvements may benefit borrowers, simultaneous shifts in credit parameters, such as maximum leverage ratios or debt service coverage requirements, can have significantly greater financial impact than incremental rate decreases. Additionally, credit spreads can widen, offsetting index decreases.
Market windows can change suddenly based on economic indicators, lender appetite or regulatory changes. The 45- to 60-day underwriting timeline means borrowers initiating processes now can position themselves to benefit from potential rate decreases during closing periods while ensuring financing certainty rather than gambling on future market conditions.
Underwriting Standards Emphasize Transparency and Performance
Lender underwriting has evolved significantly, with the era of readily accepting above-market RevPAR assumptions to justify loan metrics largely concluded. Today’s underwriting models typically apply more conservative RevPAR growth projections and require longer stabilization periods for repositioned assets. Stabilized hotel debt yields in today’s market typically range from 11.5% to 12% (or higher), with select premium properties potentially achieving more favorable metrics when supported by comprehensive business plans.
The most critical factor for successful financing execution remains transparency early in the process. Lenders increasingly value borrowers who proactively address potential concerns—whether personal credit challenges, anticipated cash flow changes or market dynamics—rather than allowing issues to surface during due diligence. This approach builds credibility and trust, creating stronger foundations for financing relationships than attempting to manage narratives by withholding potentially concerning information.
PIPs Drive Strong Lender Interest
Lender enthusiasm for financing property improvement plans and major renovations is strong, recognizing these investments as essential for maintaining competitive positioning. This favorable reception stems from multiple factors: fresh capital deployment signals ownership commitment, renovations directly address physical deterioration risks and updated properties typically outperform competitive sets in both occupancy and average daily rate.
Properties failing to invest meaningfully within five years face deteriorating guest experiences and declining online reputations that create direct net operating income impacts. In today’s lower-growth market environment, negative reviews become particularly damaging and persistent, making proactive capital investment a defensive necessity. Current economic conditions offer strategic timing for these investments, with potentially more competitive contractor pricing as vendors seek to fill project pipelines.
Maturity Wave A Transaction Catalyst
The approaching debt maturity cycle represents the most significant market catalyst ahead, with $26 billion in hotel loans maturing in 2025 alone, according to RCA. This refinancing requirement coincides with rising operational costs and potential capital expenditure pressures, particularly for properties that have deferred maintenance during recent market volatility.
Early engagement in refinancing discussions maintains negotiating leverage with lenders, while delayed decisions erode borrower positioning as maturity dates approach. The combination of maturity pressures, deferred capital expenditure needs and substantial dry powder among buyers should accelerate both refinancing activity and investment sales volume throughout the remainder of 2025 and into 2026.
Recovery Expectations Support Forward Planning
Initial 2026 revenue budgets from hotel operators suggest a return to positive RevPAR growth of 1% to 1.5%, driven primarily by average daily rate increases, with occupancy levels stabilizing. This improvement trajectory reflects easier year-over-year comparisons, potential World Cup benefits in host cities and anticipated improvements in international travel patterns supporting group and leisure segments.
The “Experience Economy,” which JLL research forecasts will drive global hotel spending to nearly triple over the next decade, provides fundamental long-term support for the sector. Combined with constrained supply growth and secular shifts toward experiential spending, these trends create favorable conditions for strategic financing initiatives.
Current hotel owners and prospective borrowers can access debt financing on high-quality, moderately leveraged properties throughout the remainder of 2025 and into 2026. Success requires comprehensive preparation, transparent communication and early engagement to capitalize on the liquid lending environment while maintaining flexibility as market dynamics continue evolving.
Story contributed by Adrienne Andrews, managing director, JLL Hotels & Hospitality Group.