Lodging Real Estate: A Sector Quietly Regaining Momentum
The narrative surrounding lodging real estate has changed dramatically. After the pandemic, hotels were viewed as one of commercial real estate’s biggest recovery stories. Today, many investors see a sector benefiting from record operating performance, favorable supply-demand dynamics, and growing institutional interest. In a recent whitepaper, Lodging Real Estate: A Sector Tested and Reforged, NexPoint explored why lodging may be entering one of its most attractive periods in years.
From Recovery Story to Attractive Sector
For the past several years, lodging real estate was often viewed through a single lens: recovery. The sector experienced significant disruption during the pandemic, and much of the subsequent discussion focused on whether hotels could regain occupancy, revive business travel demand, and return to pre-2020 performance levels. That conversation may now be outdated. Today, the more relevant question is whether lodging has quietly become one of the more attractive sectors within commercial real estate.
Record Hotel Performance and Broadening Demand
We believe the sector’s recovery is largely complete. U.S. hotels posted record nominal Revenue Per Available Room (RevPAR) in 2024, surpassing prior highs, and operating fundamentals have continued to strengthen.1 While the initial rebound was fueled by leisure travelers eager to return to the road, demand has broadened considerably.
Business travel, group demand, and international inbound travel have contributed to improving hotel fundamentals across many U.S. markets.2 Industry-wide ADR and RevPAR have surpassed pre-pandemic highs, while many major hotel markets continue to report improving operating fundamentals.3
Demand: Travel Remains a Spending Priority
What makes the lodging story particularly compelling is that the sector’s momentum is being supported by both sides of the supply-demand equation. On the demand side, travel remains a spending priority for many consumers, with U.S. travel spending to exceed $1.3 trillion in 2026.4 Even during periods of economic uncertainty, many consumers have shown a willingness to make trade-offs in other spending categories before reducing travel expenditures.5
At the same time, business travel spending, group demand, and convention-related activity have strengthened, contributing to hotel performance across many major markets.6
Supply: Why New Hotel Development Has Slowed
Yet the supply story may be even more significant. Historically, strong hotel performance encouraged developers to build new properties, eventually increasing competition and moderating growth. This cycle has been different. Elevated construction costs, higher borrowing costs, and more selective lending standards have significantly reduced new hotel development activity. In our view, these factors have made new hotel development less attractive than in prior cycles. As a result, new supply growth is projected to remain below historical averages.7
We believe this creates a favorable backdrop for existing hotel owners. When demand continues to expand while relatively few new rooms are added to the market, pricing power tends to remain with operators of existing properties. We believe that dynamic has helped support revenue growth across the sector and could continue to benefit hotel owners in the years ahead.
Institutional Investors Are Returning to Lodging
Perhaps the strongest endorsement of the sector, however, is coming from institutional investors. NexPoint’s whitepaper illustrates how private equity firms, family offices, REITs, and other institutional buyers have increasingly returned to lodging real estate as confidence in the sector’s long-term fundamentals has improved.
Institutional investors tend to focus on sectors where long-term fundamentals appear favorable, and lodging appears to check many of the boxes they seek: resilient demand, constrained supply, inflation-responsive revenue, and opportunities for value creation through professional management.
Lodging's Next Chapter
The narrative surrounding lodging has evolved considerably over the last several years. Record operating performance, resilient travel demand, constrained new supply, and increasing institutional participation have helped transform what was once viewed primarily as a recovery story into a sector with increasingly attractive fundamentals. For advisors and investors evaluating opportunities across commercial real estate, lodging appears well positioned for its next chapter.
1. CoStar, U.S. hotels post record ADR, RevPAR in 2024, January 2025.
2. CBRE Hotels Research Q1 2026 U.S. Hotel Figures, May 2026, CBRE, Hotel Occupancy & RevPAR Post Modest Gains, Q1 2026.
3. CoStar, U.S. Hotels Post Record ADR, RevPAR in 2024, January 2025, CBRE Hotels Research, Q1 2026 U.S. Hotel Figures, May 2026.
4. U.S. Travel Association, U.S. Travel Forecast, May 2026.
5. Deloitte, 2026 Travel Industry Outlook.
6. U.S. Travel Association, U.S. Travel Forecast, May 2026, CBRE, U.S. Real Estate Market Outlook Midyear Review 2026.
7. CBRE, U.S. Real Estate Market Outlook Midyear Review 2026, Marcus & Millichap, 2026 Hospitality National Investment Outlook.
This article is provided for informational purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, any securities or investment products. The information contained herein is based on sources believed to be reliable but is not guaranteed as to accuracy or completeness. Past performance is not indicative of future results. All investments involve risk, loss of principal, including the potential loss of your entire investment. Real estate investments are subject to various risks including, but not limited to, fluctuations in property values, changes in interest rates, changes in supply and demand, and changes in government regulations. This document is intended for qualified investors and financial professionals only and is not for public distribution. NexPoint and its affiliates do not provide tax, legal, or accounting advice. Prospective investors should consult their own tax, legal, and accounting advisors before making any investment decisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results may differ materially from those described in forward-looking statements.
