Section 02: Hospitality
U.S. Commercial Real Estate
Investing Outlook

Hospitality Outlook

Our outlook for hospitality recovery is relatively positive, but we expect a few bumps along the way. According to CoStar, the national Average Daily Rate (ADR) experienced significant growth in 2023, reaching an all-time high with a 4.5% annual increase. Hospitality occupancy levels have not fully recovered to pre-pandemic levels in 2023. Revenue per available room (RevPAR) growth, however, sustained throughout most of 2023 due to strong ADR, which suggests that hotel operators are prioritizing margins over occupancy when making pricing decisions.5

Figure 3: Hospitality Revenue per Available Room & Average Daily Rate  by Year
Figure 14 (8)
Source: Hospitality, United States, CoStar Group Data, December 2023.

The good news for hospitality recovery is that travel, which was down after the pandemic, picked up last year as we saw, based on TSA checkpoint travel numbers, the average number of travelers post-Labor Day and pre-holiday season surpassed 2019 numbers in 2023.

Figure 4: TSA Travel Numbers
Frame 347
*Select Time Period; Average of the time period between Sep 15th - November 15th for each year.
Source:, TSA Travel Volumes, TSA checkpoint travel numbers, Data exported November 30th, 2023.

The increasing appetite for travel is also showing up in hotel performance data. After increasing by 5.1% on average in 2023, a report by CBRE states that RevPAR is expected to grow by 3.0% in 2024 (which would be 14% greater than 2019 levels).6 Although nominal recovery is healthy for hotels, the latest forecast by Tourism Economics & CoStar shows that real recovery in RevPAR will happen sometime in 2025. This suggests that the sector is still recovering, with likely more room to run.

Figure 5: Hospitality Performance Metrics Recovery Forecast
Figure 14 (9)
Source: Tourism Economics Forecast, STR, CoStar Group, 2023.

Business travel is still in its early recovery phase. According to Hospitalitynet, business travel made up roughly 52% of hotel revenue in 2019, which is still far off of those levels due to the spill-over effects of a hybrid working environment.7

The business recovery picture isn’t bleak, however. As stated by the U.S. Travel Association, “business travel is accelerating,” especially at the heels of group demand related to conferences, in-person meetings, and other corporate events. The CEO of Hyatt reportedly said that “group bookings are booming.”8 We expect continued demand for business travel going into 2024, but we expect the recovery to remain slower, considering that many offices are still operating remotely and businesses are generally pulling back on in-person events. We’re also keeping in mind that the sector must absorb the effects of a decreasing savings rate and some lagging effects of high inflation on operations, both likely to affect hotel revenue in H1 2024. However, there is commonly a need for these events and business collaboration, and we expect this to continue to bolster business travel while adding wind to hospitality recovery in 2024.


CrowdStreet’s Strategy

The pandemic had a unique impact on the hospitality industry when occupancy hit 24.5% in April 2020.9 Following this blow, we observed that the sector's pricing deviated from its trend, which we believe hindered the possibility of appreciation under normal circumstances. Just as the distress from the pandemic started to burn off, spiking debt costs and overall illiquidity in the capital markets exerted even more downward pressure on hotel deal pricing. After facing the pandemic and additional downward price pressures associated with turbulence in the capital markets head-on, we believe hospitality pricing may have reached peak suppression. We observed that prices remained mostly flat for hospitality deals in 2023. In our experience, with similar pricing to last year, yet with an outlook of continued RevPAR growth over the next few years, we believe the sector presents better overall value, on average, than it did last year.

With the current state of play in the hospitality sector, we are rethinking how we evaluate risk profiles. We believe in a “don’t overthink it” mentality when choosing the risk profile of projects today - for example, if the price is discounted enough from its historical trendline, performance metrics are recovering, and the market has a strong draw from leisure and business travelers, we will consider those projects for listing on the Marketplace instead of finding opportunities to develop. Until construction projects become more favorable again, we will consider deals for existing hotels in markets demonstrating a resurgence in RevPAR. Generally, we will scrutinize ground-up developments and distressed situations in hotels. In a market exhibiting continued recovery, we look for opportunities that are acquiring quality assets that could benefit from this demand over those that may exert a high risk of repositioning or execution.

Regarding geography, we are looking for markets recovering in occupancy, revenue, and average daily rates. We are observing that discounted deals in these types of markets are in relatively high demand. According to CoStar Group's recent data, the U.S. hotel market revenue is being led by Washington, D.C., specifically for hotels that rely on business, government, and education-related travel. The expectation is that the metro area will also experience an increase in travel during the 2024 election season.10 

We are also paying attention to international travel into the U.S. International inbound travel has been weak over the past few years. However, research from Lodging Analytics Research & Consulting reported that due to a relative weakening of the U.S. dollar, there is an expectation of an increase in inbound international travel from countries with a stronger currency.11 We think this will increase attendance in markets with high general exposure to international inbound travelers, such as Miami, Los Angeles, and New York. We also expect the rise in demand for drivable leisure destinations that followed the pandemic will wane in favor of outbound international travel as people become more comfortable traveling abroad. However, the consumer’s overall inclination towards budget-friendly spending and away from high ticket prices may keep overall traveling to moderated levels.

7. ”Will business travel spending return to the pre-pandemic level soon?” hospitalitynet, September 2022.
8 ”Business Travel Accelerating.” US Travel Association, October 2023.
9. “U.S. hotel performance for April 2020,” STR, 2020.
10. “Washington, DC, Leads US Top 25 Hotel Markets in Growth”, CoStar Group, November 2023.
11. “International Travelers Could Return to the US in 2024”, CoStar Group, December 2023.

Disclaimer: Investing in commercial real estate entails substantive risk. You should not invest unless you can sustain the risk of loss of capital, including the risk of total loss of capital. All investors should consider their individual factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. An investment in a private placement is highly speculative and involves a high degree of risk, including the risk of loss of the entire investment. Private placements are illiquid investments and are intended for investors who do not need a liquid investment.
CrowdStreet, Inc. (“CrowdStreet”) offers investment opportunities and financial services on its website. Advisory services are offered through CrowdStreet Advisors, LLC (“CrowdStreet Advisors”), a wholly-owned subsidiary of CrowdStreet and a federally registered investment adviser. CrowdStreet Advisors provides investment advisory services exclusively to privately managed accounts and private funds and does not otherwise provide investment advisory services to the CrowdStreet Marketplace or its users.

This article was written by an employee of CrowdStreet Advisors and the contents of this publication are for informational purposes only. Neither this publication nor the financial professionals who authored it are rendering financial, legal, tax or other professional advice or opinions on specific facts or matters, nor does the distribution of this publication to any person constitute an offer, recommendation, or solicitation to buy or sell any security or investment product issued by CrowdStreet Advisors, its affiliates, or otherwise. The views and statements expressed are based upon the opinions of CrowdStreet Advisors. All information is from sources believed to be reliable. This article is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance or success. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. CrowdStreet Advisors assumes no liability in connection with the use of this publication.

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