Castle Peak exec optimistic about M&A, robust consumer

NEW YORK CITY — Castle Peak Holdings’ David Better invoked what he called every investor’s favorite cliché when he said he was “cautiously optimistic” about where the hotel investment landscape was headed in the second half of 2025.

“We play in a fairly narrow landscape with a very targeted thesis, and for us it’s about finding the right deals, not necessarily at some deep discount, but at the right price,” said Better, partner, investments for New York City-based Castle Peak Holdings. “Certainly, over the past couple of years, deals have been hard to find at the right price.” 

Castle Peak is the investment arm of the outdoor-focused and Marriott-supported Trailborn hospitality brand and focuses on converting assets in outdoor destinations that include national park gateways, beach towns, lake towns, ski and wine country destinations, where it’s difficult to build hotels and where people can’t find a strong 4-star lifestyle product. Hotel Investment Today (HIT) talked to Better last week about its first USDA Business & Industry (B&I) loan for the refinance and renovation of two historic hospitality assets in Mendocino, California.

Whether that’s lenders who are holding out for sunnier days, or limited partners forcing their sponsors to realize the liquidity event, it feels like the tides are starting to shift a little bit.

David Better

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Like other hotel investors HIT has talked to in the past few months, Better said it feels like the transaction market is starting to loosen up and headed to more liquidity, which he chalks up to a combination of the psychological benefits of an interest-rate cut from the Federal Reserve (with potentially more coming), a generally pro-business administration, combined with some level of fatigue.

“Whether that’s lenders who are holding out for sunnier days, or limited partners forcing their sponsors to realize the liquidity event, it feels like the tides are starting to shift a little bit,” Better said. “While it remains a foggy environment, we are focused on what we’ve been doing, which is being very selective and trying to turn over a lot of stones.”

Like the USDA financing Castle Peak did this past summer, Better said it also means investors have to get more creative.

“That’s what tougher transaction environments require… Deals are just harder to do and that just means you have to think incrementally harder and more creatively to make things work and find good outcomes for both parties,” he said.

HIT also asked Better where the bid-ask spread stands in the second half of 2025 and what Castle Peak is seeing from its customer base right now.

Hotel Investment Today (HIT): Was there anything you saw as a turning point for the bid-ask spread closing?

David Better: I don’t know that there was a single turning point that we have observed, and I’d say, while we are optimistic that the gap has started to narrow, if you look out at the landscape, there still hasn’t been all that much that’s actually transacted. So, hopefully the underlying capital markets actually start to bear out what I think a lot of us are feeling… Sentiment has gotten incrementally more positive. I will say what we’re starting to see and hear from folks as well is that there’s probably a little bit more of a concern now about the real economy and performance on the ground. Whereas previously, it was a capital markets concern.

We are seeing guests who otherwise would have taken a trip to Italy last summer now make the three-hour drive to the beach twice instead of the one big overseas trip… On the flip side, we’re seeing some of our more aspirational guests probably filter out. But ultimately, net-net, we’re pretty encouraged by what we’re seeing.

David Better

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HIT: What is your chief thesis for hotel investment as a company?

Better: We are targeting that mass affluent customer, someone who is outdoor adjacent. We are not trying to fill a void for your hardcore backpacking enthusiast… That mass affluent outdoor adjacent customer covers a pretty wide spectrum, ranging from young millennial groups of friends and couples to older baby boomers who want to go for a more mild walk, but at the end of the day want to come back to a property where they can have a great cocktail around a fire pit, exchange stories with other guests, have a great room with good WiFi, bathroom and modern creature comforts.

HIT: So what is the state of that consumer right now?

Better: We’ve been encouraged by what we’ve seen from our customer base. We tend to play in these destinations that have attracted generations of guests with a pretty durable demand cycle and as a result of that, in the price point we play at, you get a little bit of a substitution effect, both in good economies and bad, in terms of resilience of our consumers… We are seeing guests who otherwise would have taken a trip to Italy last summer now make the three-hour drive to the beach twice instead of the one big overseas trip… On the flip side, we’re seeing some of our more aspirational guests probably filter out. But ultimately, net-net, we’re pretty encouraged by what we’re seeing, but, like everyone, the booking window has gotten shorter… We are building a base in anticipation of 2026, which we are certainly optimistic about as it relates to some major tourism catalysts in the U.S. with the World Cup and America’s 250th anniversary. As a business focused on America’s preeminent destinations, we hope to be the beneficiaries of [that business].