At the March 16 general session, brothers Teague and Lee Hunter welcomed attendees to the Hunter Conference at the Signia by Hilton Atlanta, its new home. Now in its 37th year, the venerable event continues to deliver learning sessions and networking opportunities targeted to hotel owners, developers, and investors. “Our father, Bob Hunter, believed that the hotel industry deserved a place where people can come together, share ideas, and do business face to face—not just listen to panels [but have] real conversations, form real relationships, and ideally get a few deals done along the way,” said Teague, president and chief executive officer, Hunter Advisors. “And that’s exactly why this conference exists. … When this industry gets complicated, when markets shift, when everyone tries to figure out what’s coming next … people come here to discuss it.”
The industry climate is indeed complicated now, given the war with Iran, new tariffs, stock market volatility, and overall macroeconomic uncertainty. The general session panel, led by Stephanie Ricca, editorial director at CoStar News Hotels, addressed the challenges and opportunities for hotel investors and developers in that environment. Participants included Carolina Bernal, senior director, JLL Hotels & Hospitality Group; Brian Waldman, chief investment officer, Peachtree Group; Robert J. Webster, vice chairman and president, CBRE; and Evan Weiss, co-founder, chief operating officer, principal, LW Hospitality Advisors.
A Buyer’s Market
Webster, a seasoned veteran who’s been in hotel real estate since 1985, noted that the current environment is the second best he’s seen for buying hotels, the first being the early ‘90s. Last year saw a 15 percent increase in transaction volume, Webster observed, and he expressed optimism that this year will also see robust activity. “The fact that the cost of capital is lower … helped prices, and sellers were able to transact,” he said. “So, it will depend on that cost going forward. Anytime there’s a spike in risk to investing, typically, rates will go down, and if rates go down, it will help hotel values and probably really help the transaction market.” Weiss agreed that the conditions are favorable for buyers. “Ultimately, it’s a highly cyclical business right now, but … it’s a phenomenal buying opportunity, and I think that there are going to be a fair bit of transactions,” he said, adding that many investors “tend to go very quickly from fear of making a mistake to fear of missing out [FOMO].”
Waldman gave credence to the idea that FOMO is driving some investors and developers. “It takes something [positive] to happen, and then everyone wants to jump on the bandwagon,” he said, using certain down-market areas of San Francisco as an example. “A small private equity firm, a household name, bought some properties there. And … my understanding is that now every private equity shop out there is trying to figure out and understand those markets and capitalize on the opportunities.” In general, “We’re definitely seeing private equity step up,” said Bernal, adding that debt capital costs have dropped since September 2024. “We’ve seen international capital come in, and that’s something that’s going to be very interesting to see how that evolves.”
Despite an environment that is conducive to buying, macroeconomic uncertainty makes calculating the risk of investment more crucial than ever. “At the end of the day, there are deals that can be done, but are you getting the right risk-adjusted return?” said Waldman. “And as the market moves, it’s making sure that we’re leaning to the right places where you’re getting the right risk-adjusted return.” He also advised not to overly rely on “what the model tells you, because I can give you a model that tells you whatever you want. The only thing that I know about models is that every model in my career has been wrong. You’re either too conservative or too aggressive—but you never get the underwriting exactly. And it’s just making sure that you have the confidence when you’re wrong, when the markets move, that you’re taking on the right risk, and you’re getting paid the right returns.”
Performance Metrics and Projections
While the FIFA World Cup and America’s 250th anniversary are expected to drive the U.S. hotel industry’s performance this year, Weiss noted that the .6 percent projected RevPAR growth is “quite a low number. It’s one of the first times in history we’ve seen a decoupling of GDP growth and RevPAR growth. And by the way, that’s with the World Cup, which is expected to have a 1 to 2 percent bump in overall RevPAR,” he said. “So, without the World Cup, it may be negative for the prognostication for this year. And in addition to that, we’re seeing margin erosion in the bottom line with cost of goods and labor, especially labor, as well as taxes and insurance increases.”
Looking to the recent past, Waldman maintained that in the context of the performance of other asset classes, such as office and multifamily, the overall hotel industry’s performance “hasn’t been terrible. Where I think a lot of the pain comes is on the balance sheet side. … You borrowed at 70 percent leverage. You haven’t done a renovation, you haven’t had any RevPAR growth, and now the best you can get is 60 percent. You don’t have the cash to bridge the gap. By the way, during that time, you didn’t do your PIP, and you haven’t been reinvesting in your properties, and that becomes very expensive. Are those assets fundamentally good assets in a lot of cases? Yes, but it’s the balance sheets, the capital stack, that’s broken.”
Yet because the assets are fundamentally good, they can attract buyers “comfortable with the risks associated with those opportunities,” he said. “Everyone in here who’s an investor wants to buy low and sell high. … I feel like we’re at the start of a new cycle. And I think there are some really interesting opportunities out there.”
