Lodging/resort REITs were a top performer in August, but negative returns year-to-date reflect the sluggish overall demand backdrop facing the sector. Yet analysts stress that the picture is nuanced. The group segment, for example, shows healthy growth and luxury resorts retain pricing power—with high-end consumers still willing to spend on discretionary travel.
Analysts also note that due to lodging REITs trading at discounts to net asset value, they have shifted focus away from acquisitions in favor of dispositions and are reinvesting proceeds into share repurchases and/or capex projects.
REIT.com spoke with Chris Darling, senior analyst, head of U.S. lodging and gaming research at Green Street, Patrick Scholes, managing director, lodging and leisure equity research at Truist Securities, and Chris Woronka, senior research analyst, lodging REITs / leisure, at Deutsche Bank Securities, for their views on how the sector is performing.
How would you characterize the overall state of fundaments for lodging REITs for the rest of 2025 and into 2026?
Chris Darling: While the industry enjoyed a solid start to 2025, travel patterns have slowed in recent months. This is due to a combination of factors including a pullback in government-related travel, a decline in international visitors to the United States, and incremental weakness among a large swath of U.S. consumers that is weighing on discretionary spending patterns.
Broadly speaking, our expectation is for subdued RevPAR growth (flat to slightly positive) over the remainder of 2025 and 2026. With operating expenses set to outpace revenue growth, we expect a modest decline in hotel EBITDA over this period. That said, there are meaningful differences across major markets and segments of the industry.
Patrick Scholes: Operating fundamentals are currently unfavorable as costs are growing at a faster rate than revenues. Stocks are trading at lower valuation multiples than the individual assets within the portfolios (in other words, the parts are greater than the sum).
Chris Woronka: Overall, fundamentals are mixed. The outlook for new competitive supply in most markets remains muted, and we expect it to largely remain that way in 2026. We do have some concerns about the impact of shadow supply, which includes independent to soft brand conversions, as well as non-traditional lodging outlets such as short-term rentals.
On the demand side, we think 2025 has a good chance to end a touch stronger in Q4 relative to Q3, and we currently anticipate modest demand growth in 2026 with more uncertainty as we head through the year. While upward pressure on operating costs (especially labor) won’t completely dissipate, we do think the breakeven RevPAR growth level for flat margins will be lower in 2026 than it’s been in any year of the post-Covid era.
How do the subsectors of group, business, and leisure stack up against each other today?
Woronka: For the most part, we continue to see group delivering generally healthy RevPAR growth, although there is quite a bit of variance by market and group type. There was a brief pause in booking close-in events during the height of tariff noise back in the spring. Out of room spend, particularly amongst corporate groups, is holding up well.
The corporate transient segment has been growing fairly consistently for most of 2025, and it’s an area we believe could gain strength, at least through the fall months, as sectors like tech and finance are seeing a lot of activity. Leisure is likely to remain the laggard, likely in part due to some loss of share to the cruise industry, and also fewer aspirational vacations and weekend trips among budget-conscious consumers.
Darling: Group has been the healthiest segment year-to-date with lodging REITs and major hotel brand companies indicating that group revenue on the books for future periods remains in solid shape. This backdrop is further supported by a favorable citywide event calendar in many major metros. Business transient demand is also growing, albeit modestly and off a low baseline. However, lower government-related travel and broad economic uncertainty following April’s tariff announcements are key headwinds to monitor.
While leisure demand has broadly been the weakest segment this year, performance varies across markets and chain scales, with higher-end resort hotels faring relatively well lately.
Scholes: The financial demographic of the customer within these subsectors is the real differentiator of performance. Within these subsectors, the luxury/upper-end customer, be it leisure, corporate transient, or group, is the outperformer and performance weakens the further one moves away from luxury in the financial demographic spectrum.
Which markets are benefitting from the most demand, and resilience, in this environment?
Scholes: New York City continues to benefit from post-COVID catch-up and from strength with the higher-end customer. San Francisco is seeing very strong year-over-year growth rates, albeit off of a very low base.
Darling: Many major urban markets are enjoying industry-leading mid-single-digit RevPAR growth due to a combination of factors depending on the specific market. San Francisco is among the more notable markets, experiencing a sharp uptick in RevPAR (+9% YTD) coming off an exceedingly low baseline. An improved citywide event calendar in the city should help to sustain this momentum through the end of the year.
Chicago (+3%), Miami (+3%), and New York (+7%) also stand out as among the better performing markets this year. Given that many lodging REITs are heavily concentrated in many of the major urban metros experiencing above-average RevPAR growth, this should moderately aid REIT fundamental performance relative to the overall U.S.
Woronka: In terms of specific markets, there is a more varied range of RevPAR performance than we have seen in recent years. A handful of global gateway markets, including San Francisco, New York, and Chicago, are amongst the best performers year-to-date but are still catching up post-Covid relative to certain other markets.
Silicon Valley is also benefiting from continued growth in AI-related developments. And “small big markets,” including Tampa and St. Louis, are doing quite well. On the other side, Las Vegas has really struggled thus far in 2025, with widespread weakness in both occupancy and rate. Nashville is another down market, mostly due to supply absorption and pushback on leisure rates at boutique hotels downtown.
To what extent are lodging REITs acquiring and disposing of properties, and what does that indicate to you?
Darling: Most management teams have slowed their pace of acquisitions and/or shifted their focus towards incremental dispositions. In recent months, several companies have successfully disposed of non-core properties with proceeds reinvested into leverage-neutral share repurchases and/or capex projects.
With most lodging REITs trading at a significant NAV discount (about a 25% recent sector-wide NAV discount), exploiting visible pricing differences for hotels in the public and private markets makes plenty of strategic sense and represents one of the most straightforward, low-risk paths towards creating shareholder value.
Woronka: We are seeing the public hotel REITs continue to be net sellers of assets, though the reason for selling is generally because the property is in a non-core market/and or needs a costly renovation where the returns just aren’t there. It probably isn’t the right time to be selling trophy assets, because lower interest rates tend to have positive implications for cap rates.
At the same time, we do not anticipate that most hotel REITs will be aggressive on the acquisition front. That’s because sellers’ expectations remain high, and hotel REIT equity valuations are generally too far below NAV to use stock as a currency. Additionally, there are precious few high quality distressed hotels in the market, and we believe many hotel REIT management teams see enough macro uncertainty out there to give them pause when it comes to potentially taking on more debt for an acquisition.
Scholes: Transaction activity is fairly minimal by historical standards, though at the moment hotel REITS are generally net sellers. Rather than acquisitions, hotel REITs have stepped-up share repurchases. The implication is that share repurchases are more accretive to earnings than are hotel purchases and shareholders prefer accretion to dilution.
Does a certain market segment have more pricing power than others?
Darling: High-end, luxury hotels are still enjoying a degree of pricing power with average daily rates up mid-single digits for the segment year-to-date. On the other hand, select service /limited service hotels have struggled to meaningfully push pricing. This dynamic appears to reflect U.S. consumer trends. In general, high-end consumers are healthy and still willing to spend on discretionary travel, whereas lower-end consumers are struggling with the accumulated effect of higher inflation in recent years.
Scholes: Clearly luxury. There is no pricing power at the moment further down the chain scales.
Woronka: The best pricing power is within the luxury segment, particularly in urban markets. We think this can largely be traced back to continued strength in premium corporate transient and high-end corporate group demand. These segments are, by definition, much less price sensitive than, say, leisure customers who might be brand or location agnostic.
We also view luxury hotels to be less commoditized when compared to the growing number of two to four star hotels, inclusive of many newer soft brand entrants within upper upscale. From a location standpoint, we see less pricing power in a lot of airport and interstate markets where there has generally been less capital invested in the hotels, and you tend to see more budget-conscious travelers.
What are some of the biggest opportunities and challenges for lodging REITs today?
Scholes: The biggest opportunity is to sell hotels and repurchase shares at accretive multiples, whereas the biggest challenge is to find accretive acquisitions.
Woronka: One of the most attractive opportunities available to hotel REITs today is working with their management companies to rethink the operating model. We are seeing lines increasingly blur between the definition of full service and limited service hotels. In an operating environment currently characterized by relatively anemic RevPAR growth and stubborn costs, we believe hotel owners need to identify areas ripe for additional efficiency, while not significantly impacting the guest experience.
In terms of challenges, current trading multiples make it exceedingly difficult for most hotel REITs to execute the classic REIT playbook of growing via accretive equity-financed acquisitions. So, at the moment, this means focusing on protecting or growing same-store RevPAR/margins and looking for ways to possibly monetize excess land parcels, or add things like additional meeting space, where applicable.
Darling: Unfortunately, the lodging REIT sector has tended to trade at a meaningful NAV discount for some time, which has historically made it difficult for companies to successfully pursue external growth strategies. That said, this creates ample opportunity for lodging REITs to recycle capital via dispositions into share repurchases and/or targeted capex projects.
On the latter aspect, several lodging REITs are investing capital into redevelopments or renovations to proactively drive outsized EBITDA growth. These types of endeavors, if executed well, can create meaningful value for shareholders over time.
Can you point to successful strategies being used in the lodging REIT sector to maintain or increase occupancy?
Woronka: “Grouping up” is one of the most tried and true strategies when it comes to growing occupancy. You potentially give up a small amount of rate, relative to corporate transient, but this is likely to be mostly—or perhaps even more than—offset by the incremental out of room spend groups typically generate in the form of banquets, catering, and meeting space rental.
The other options, almost certainly less desirable from a profitability perspective, would be to either make additional room inventory available via deeply discounted (often opaque) channels or take on additional contract business (generally at deeply discounted pre-agreed upon rates), which is often represented by airline crews. All else equal, having a recently renovated property affiliated with a strong brand can help drive occupancy.
Are there other trends or developments you expect to be watching closely in the next six to 12 months?
Darling: The direction of international travel into and out of the U.S. is an important subset of overall lodging demand (+/-10% of total demand) that may carry implications for the future direction of fundamentals. Foreign visitation to the U.S. has yet to fully recover to pre-Covid levels and has declined modestly year-to-date, contributing to a sluggish overall demand backdrop for the sector recently.
However, a depreciating dollar may spur incremental demand from foreigners going forward. To the extent that international travel patterns revert to pre-Covid norms over time, this could help kickstart a re-acceleration in U.S. lodging demand broadly. The lodging REITs would also be well-positioned in this regard given a heavy concentration to major gateway cities frequented by international travelers.
Scholes: The recently announced sale process of Braemar Hotels & Resorts Inc. (NYSE: BHR) is the most interesting development at the moment. It will be interesting to see what type of valuation multiple such a sale can command in relation to where the company was trading prior to the announcement.
Woronka: There could be some interesting developments in terms of a possible flow of international leisure visitors back into the U.S. We’re also thinking about how things like a potential ramp up in infrastructure and commercial construction might stimulate lodging demand, particularly for the extended stay segment.
We will also be monitoring the pace at which independent hotels continue to affiliate, either via a full brand linkage or via a soft brand. As more do so, it may create a flywheel effect whereby there is a greater sense of urgency for remaining independents to affiliate.