The hotel industry is poised for significant shifts in 2025, with private- equity (PE) firms continuing to play a prominent role in hotel asset acquisitions. As economic conditions evolve, emerging trends in experiential travel, asset positioning and new investor demographics will shape the market. Here are seven key trends to keep on the radar as the year progresses.
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Private Equity’s Continued Prominence in Hotel Asset Acquisitions
Private equity firms remain the largest segment of buyers in the hotel sector, leveraging their vast institutional dry powder and access to debt financing to optimize long-term returns. These firms act as value-added investors, strategically acquiring distressed assets and repositioning them for improved performance with an eye to strong realizable returns upon exit. PE groups have been known to implement defensive strategies such as opportunistically acquiring discounted debt to secure assets at optimal valuations. Rapid decision-making capabilities and experience in navigating market cycles also continue to make PE firms attractive buyers.
PE firms utilize sophisticated asset-management expertise to drive operational efficiencies and financial structuring. Their investment horizon typically ranges from six to 10 years, ensuring disciplined performance metrics. Institutional investors favor hospitality as part of diversified portfolios, reinforcing strong PE sponsors being well-positioned in the sector.
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Experiential Consumption and a Shift Toward Group Travel
While experiential travel remains a post-pandemic priority, the shift from leisure-based discretionary spending toward structured group travel is becoming more pronounced. Consumers are pivoting toward corporate events, destination weddings and group retreats and hotels must adapt in their offerings to remain competitive. Some of the strategies to achieve this include flexible event spaces with cutting-edge technology, personalized experiences tailored to group needs and strong sales and service teams focused on group travel.
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Strength in Urban Markets Creating Appeal to Business and Group Travel
Large cities are experiencing robust hotel performance, particularly in business and group travel segments. Uniquely positioned assets with distinctive characteristics are particularly attractive to investors, such as historic landmarks, retro-style urban hotels and niche-focused hotels catering to wellness, adventure or cultural experiences.
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Strong Performance of Non-Urban Destination Resorts
Hotels outside major cities are outperforming traditional urban-centric expectations as boutique resorts and high-end retreats in scenic locations are drawing significant demand. Examples include luxury farm resorts for premium retreats, ultra-luxury desert retreats catering to affluent travelers and experiential coastline resorts with the ability to accommodate group bookings.
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Factors Beyond High Interest Rates Impacting Deal Volumes
While high interest rates continue to be a primary driver influencing deal volumes and cap rates, other factors are playing a role in slowing transactions. Key headwinds include economic uncertainty and potential recession concerns; disparities in buyer and seller price expectations; deferred capex and required reinvestment to ensure competitive “look and feel” dynamics; and uncertainties about the long-term impact of remote work on business travel.
However, there are potential catalysts on the horizon which could increase transactional activity:
- Easing of interest rates and improved financing conditions
- Increased economic clarity and investor confidence
- Resolution of remaining distressed asset backlogs from the pandemic
- Institutional investors seeking new hotel investment opportunities create a pent-up demand from fresh capital sources.
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Growing Interest from Family Offices, High Net Worth Individuals and First-Time Buyers
A notable trend in 2025 is the rising participation of family offices, high-net-worth individuals (HNWIs) and first-time buyers in the hotel market. These groups offer distinct advantages in asset acquisition as they look for diversification of real-estate holdings, more stable income generation across economic cycles and the establishment of a long-term footprint in hospitality.
These buyers may have distinct advantages over PE firms, making them an emerging trend worth observing. They rely less on high levels of debt leverage, making them more competitive in high-rate environments, and may also be less constrained by exit horizons, allowing them to invest with a longer-term perspective—holding assets as legacy investments or trophy properties and potentially paying a premium to secure winning bids in competitive sale processes.
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Increased Interest in Select-Service and Luxury Hotel Segments
Investors are showing heightened interest in both select-service and luxury hotel asset segments due to each having their own distinct advantages in cash flow stability and investment potential. Select-service hotels appeal to investors driven by lean operating models, steady revenue streams, and manageable capital expenditure needs, along with their strong performance in suburban and secondary markets. These lower capital investment requirements make them attractive for first-time buyers.
Luxury assets remain attractive to HNWIs and family offices seeking trophy properties as they command premium ADR and RevPAR. Investors view them as long-term appreciation assets with prestige value and the public exposure with buying marquee assets certainly positions these asset investors well for future deal flow.
Monitoring these trends will be crucial for stakeholders navigating the evolving hospitality sector on value capture via strength in operational performance and success in potentially heightened transactional activity.
Story contributed by Raoul Nowitz, senior managing director, SOLIC Capital Advisors.
