Wave of renewed US investment optimism

NATIONAL REPORT – An unprecedented 80% of investors plan to maintain or increase their capital investment in hotels over the next 12 months, according to JLL Hotels & Hospitality Group’s Global Hotel Investor Sentiment Survey.

In recent months, global hotel investment volume has strengthened, with year-to-date Q3 liquidity reaching $40.9 billion, up 10.2% from 2023. This optimism is largely driven by expectations of stabilizing interest rates, with 95% of investors anticipating their all-in cost of capital to remain stable or decrease in the coming year. This follows recent rate cuts by The Federal Reserve (Fed) and aligns with the broad macroeconomic viewpoint that most central banks are at the end of their tightening cycles.

The survey, which compiled over 8,200 data points from global hotel investors with more than $50 billion in hotel assets under management, highlights several promising trends for the U.S. hotel sector.

Major takeaways from this year’s survey include:

Appetite for cross-border hotel transactions strengthens as global investors target urban markets

• Following more than three years of limited activity stemming from border closures and geopolitical volatility, cross-border hotel investment has surged thus far in 2024 and global investors expect to inject even more capital in 2025.
• Urban markets, in particular, are emerging as prime targets for hotel investment in 2025, with 78% of investors planning to deploy the bulk of their hotel investment capital into cities over the next 12 months.
• San Francisco is attracting attention from Asian, Middle Eastern and some European investors due to its lagging recovery and potential for growth, especially given the surge in tech performance and increasing international travel. On the other hand, cities such as New York City have seen robust performance, attracting Middle Eastern and Asian investors who hope to capitalize on continued growth, particularly in the luxury sector.
• 57% of investors expect to invest more capital into regions other than where their capital is sourced from over the next 12 months, with Asian and North American investors expected to be the most active.

Rush of first-time hotel buyers enter the sector as hotels emerge as a preferred asset class

• 2024 has seen a notable increase in new investors entering the hotel sector, with a record 27% of YTD September investment volume driven by first-time buyers.
• In fact, 52% of investors surveyed report an expected growth in their hotel industry allocation relative to other commercial real estate over the next 12 months.

Hotel investors expect their cost of capital to decrease in 2025 fueling a meaningful growth in transaction activity

• Global hotel investors report that rising cost of capital, namely debt market volatility, has been the primary driver behind limited investment activity over the past 12 months, with a whopping 54% reporting that their all-in cost of capital has increased by at least 50 basis points since the start of 2024.
• Fortunately, 95% of investors expect their all-in cost of capital for hotel acquisitions to either remain the same or decrease meaningfully over the next 12 months.

Top three best investment opportunities across the broader hospitality sector over the next 12 months: Bifurcation in investor interest

• Investors gravitate to hotels on opposite ends of the spectrum—luxury assets, buoyed by their robust operating performance and rising yields, and extended-stay hotels, fueled by their consistent returns and lean operating models.
• Platform acquisitions, often overlooked by traditional hotel investors, have emerged as an attractive investment option as global hotel supply growth slows and brands look to drive shareholder value via net unit growth.