This is part two of a three-part story. To read part one, visit here. Part three is here.
We asked a variety of financing experts to share what owners and operators need to know about the hotel financing right now as well as their opinions on the best hospitality investments currently, how to make the most of the current economic climate and if lenders are financing PIPS and renovations right now.
What is the Best Hospitality Investment Right Now?
During periods of economic uncertainty, investments in segments that historically provide downside protection and stable cash flows—such as extended-stay and upper midscale select-service hotels—remain prudent, Driftwood Capital Chairman and CEO Carlos Rodriguez said. The luxury segment is durable and resilient despite high barriers to entry, he said, and the segment has tailwinds for sustained RevPAR growth.
Michael Sonnabend, CEO and co-founder of PMZ Realty Capital, believes that investors see the best investment to be irreplaceable assets, such as oceanfront locations. Furthermore, assets that have reduced fixed costs are the most highly sought-after.
Stan Kozlowski, principal at CooperWynn, agreed that, in a volatile economic climate, the most resilient hospitality investments are typically well-located, select-service hotels affiliated with a strong, market-appropriate brand. “This asset class offers a superior risk-adjusted return profile due to its lean operating model,” he said. “Select-service hotels have fewer full-time employees and ancillary services compared to full-service assets, resulting in a lower fixed-cost base. This operational efficiency provides significant downside protection and preserves cash flow during periods of economic contraction.
“Furthermore, when market conditions improve, this efficient structure allows for exceptional operating leverage. As demand and [average daily rate] recover, a greater percentage of top-line revenue flows through to the bottom line, leading to rapid margin expansion and value creation. This combination of defensive characteristics and high-profit potential in a recovery makes select-service hotels a preferred strategy for navigating cyclical uncertainty.”
Ryan Bosch, principal at Arriba Capital, agreed that select-service and extended-stay hotels have been the most resilient through recent cycles—but also noted that urban full-service hotels in major markets are coming back into favor. “The rebound of group, business and international travel is helping [revenue per available room] recover, and valuations in these markets are still well below peak levels, creating room for appreciation,” he said. “Investors with patience and access to flexible capital see this as a long-term opportunity.”
Brian Waldman, chief investment officer at Peachtree Group, warned that, while premium-branded select-service and compact full-service hotels tend to be among the most stable assets across market cycles (even during periods of volatility), the smartest plays are often opportunistic and not confined to a single chain scale or technology. Every owner has a unique capital structure, cost basis and set of challenges. That opens the door to compelling opportunities for investors who are ready to act decisively when the right deal emerges.
Investing in technology that enhances operational efficiency—such as integrated property-management systems, revenue-optimization tools and guest-facing digital services—can materially impact profitability by improving margins and enhancing guest experience, Rodriguez said.
But Adrienne Andrews, managing director in JLL’s Hotels & Hospitality Group, had a different way at looking at investment: The best priority investment is in both people and strategic technology integration across all chain scales. “Investing in your team remains the time-tested cornerstone of hospitality success, regardless of economic conditions,” she said. “Your staff creates a direct connection with guests that technology alone cannot replicate. In challenging markets, exceptional service delivery becomes an even more powerful differentiator as guests scrutinize value more carefully while paying elevated ADRs.”
Andrews believes this human investment should focus on enhanced training programs that emphasize personalization, the creation of career pathways that reduce turnover and empowering staff with decision-making authority that improves the guest experience. “Complementing your people investment, the strategic adoption of AI-powered technology—particularly in sales, marketing and revenue management—provides the competitive edge needed during volatility,” she continued.
The technology stack should:
- Enable precision targeting that reaches potential guests at exactly the right moment
- Personalize the guest journey before, during and after their stay
- Optimize pricing strategies that respond to rapidly changing market conditions
- Create operational efficiencies that allow your staff to focus on meaningful guest interactions
“The true power comes from the integration of both elements,” she said. “Even in the seemingly traditional world of hotel finance, this dual approach is transforming how successful organizations operate. Whether industry veterans are comfortable with the pace of AI advancement is largely irrelevant—it's happening, and competitors are already leveraging these tools to gain market share.
“The guest expectations haven't declined with economic uncertainty—if anything, they've increased alongside sustained ADRs. Meeting these expectations requires both technological sophistication and genuine human connection.”
How To Maximize the Value of Your Investment
Waldman described 2025 as the year of asset management, and emphasized that owners must dig deeper to simultaneously drive revenue in what is essentially a flat market and manage costs aggressively. “Before COVID, rising tides lifted all boats,” he said. “You could buy an asset and count on market growth to increase its value. That doesn’t cut it today. Now, you must actively unlock value through smarter operations, stronger revenue strategies and disciplined expense controls.”
If you haven't meaningfully invested in your property within the past five years, the current economic climate presents a strategic opportunity to do so, Andrews said. While conventional wisdom might suggest postponing capital expenditures during uncertain economic periods, this approach can severely impact long-term asset value through deteriorating guest experiences and diminishing online reputation.
“The impact of negative reviews in today's lower-growth market environment is particularly damaging and persistent,” she said. Once a property begins receiving consistent criticism for dated interiors, malfunctioning systems or worn appearances, this digital footprint becomes increasingly difficult to overcome and directly affects net operating income through:
- Downward pressure on ADR as you're forced to discount to maintain occupancy
- Higher customer acquisition costs as you spend more on marketing to offset reputation issues
- Increased operational expenses from addressing guest complaints and service recovery
In the current economic climate, maximizing long-term value is less about aggressive growth and more about strategic discipline and positioning, Kozlowski said. Hoteliers who are best positioned to not only survive the cycle but to emerge from it with a competitive advantage are those who focus on two core principles, he added:
- Fortifying the balance sheet: The primary opportunity lies in maintaining a resilient capital structure. Operators who are conservatively leveraged and have strong liquidity are not forced into making suboptimal decisions driven by debt-service pressure. This financial strength provides the operational runway to weather periods of compressed cash flow and, more importantly, preserves the owner's equity and control over the asset's long-term strategy.
- Exploiting operational dislocation: Economic uncertainty often creates operational gaps in the market. Hoteliers can capitalize on this by relentlessly focusing on operational excellence. This includes aggressive revenue management to capture market share from weaker competitors, stringent cost controls to protect margins and an unwavering commitment to guest experience to build loyalty. An asset that outperforms its competitive set during a downturn is fundamentally de-risked and will command a premium valuation when the market recovers.
Bosch said hoteliers can maximize value by optimizing the capital stack. Many lenders are capping leverage, so bringing in fresh equity or exploring creative solutions like C-PACE or preferred equity can improve debt terms and reduce risk.
Bosch also said hoteliers need to tackle CapEx with intention. “Completing a [property improvement plan] or renovation now, while competitors may still be on the sidelines, can help capture rate, drive market share and enhance exit value,” he said. “If major upgrades aren’t feasible, even targeted refreshes that improve guest experience can yield strong returns.”
He also suggested staying proactive with lenders. “Whether you’re approaching a maturity or considering a repositioning, early and transparent engagement gives you more flexibility,” he continued. “Waiting too long can limit your options or force unfavorable terms.”
This article was originally published in the July/August edition of Hotel Management magazine. Subscribe here.