The U.S. hotel market is experiencing an "attractive investment window" as investors acquire quality assets below replacement cost, benefiting from improved financing conditions. Transaction volume increased by 17.5% in 2025 to $24 billion, and is expected to continue rising, driven by strengthening debt markets and record capital availability. The bid-ask spread has narrowed due to forced or pressured sales, with $88 billion in hotel loans maturing through 2027, compelling owners to sell.
This trend is fueled by various factors including lower interest rates, compressed margins, and pressure from lenders and franchisors on hotel owners who face maturing debt and mandatory property improvement plans (PIPs). Property values are often lower than when original loans were taken out, making refinancing difficult and forcing owners to sell. Despite flat or declining revenues and rising expenses affecting hotel income, prices likely bottomed out last year.
One significant aspect of this investment strategy is the conversion of underutilized hotels into workforce studio apartments. Firms like Kirkland, Washington-based Sudeck acquire distressed properties, sometimes paying less than $0.50 on the dollar, and convert them into fully amenitized studio units by adding kitchens and upgrading common spaces into amenities like fitness centers and lounges. This approach allows them to pay more than traditional hotel operators due to the higher value of multifamily properties compared to hospitality assets.
Mergers and acquisitions (M&A) in the U.S. travel, leisure, and hospitality sector saw a 106.8% increase in deal value to $39.6 billion in the first half of 2026, despite a 7.6% decrease in the number of deals. This indicates a focus on "bigger, higher-conviction" deals, with buyers prioritizing assets that offer customer ownership, loyalty ecosystems, and pricing power. Private equity and high-net-worth investors are intensifying competition, particularly for high-profile and resort segments, leading to sharper bids and wider bid-ask spreads for core assets.
While overall deal volume has slowed, investors are concentrating on luxury, wellness, and "data-rich" platforms, with upscale, upper upscale, and luxury assets accounting for 73% of deals in the last six months. This shift reflects a focus on segments with strong pricing power and repeat engagement. Luxury RevPAR is projected to increase by 5.4% in 2026, outperforming other segments. Investors are also pursuing recapitalizations and repositioning premium assets, as new ground-up construction faces financing difficulties, and a significant share of activity involves distressed capital structures.
