Rising Rates and Tight Credit May Hold Back Hotel Dealmaking
Photo Credit: Aerial view over a river in Miami of the upcoming Miami Riverbridge project anchored by a Hyatt Regency hotel. Gencom
Skift Take
Times are good for deals overall, but some hotel markets will struggle.
Hotel property sales may face headwinds in rising long-term interest rates and tight credit markets this year. Those forces could pressure asset valuations, raise development costs, and make it harder for some buyers and sellers to agree on transactions.
"The acquisitions market in 2025 is going to be challenged on the hotel front,” said Greg Friedman, CEO of Peachtree Group, which manages over 100 hotels.
Despite the Federal Reserve cutting interest rates last September, the current yield on the U.S. 10-year Treasury note is above 4.5% — up nearly a full percentage point from when the central bank began cutting short-term rates. Short-term and long-term rates have different effects. Short-term interest rates have been dropping, which benefits hotel construction loans. But long-term rates have been rising, affecting relative valuations of assets.
A Looming Wall of DebtA few billion dollars' worth of single-asset hotel loans are set to mature by the end of 2026, according to the brokerage JLL.
Many of these loans face stress because they will be replaced by loans at significantly higher interest rates.
Hotels that seek loans tend to be more exposed to financial stress. Unless hotel owners need liquidity, most don’t need to sell or seek loans, says Michael Bellisario, senior research analyst at Baird.
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