Hospitality market trends and outlook: Key insights for 2025

The hospitality sector continues to evolve as investors navigate market shifts, economic uncertainty, and changing consumer behaviors. According to Walker & Dunlop experts Jay Morrow, Senior Managing Director, Hospitality; Adam Schwartz, Senior Managing Director, Capital Markets; Sean Reimer, Managing Director, Capital Markets; and Carter Gradwell, Senior Director, Hospitality, certain trends are shaping how capital is being deployed and where growth opportunities exist. Key takeaways include a flight to high-performing markets, an ongoing bid-ask gap between buyers and sellers, and liquidity constraints for underperforming assets.

"Many of these groups want to stay in the markets they know well and have conviction in," says Adam Schwartz. "So, New York, Nashville, Charleston—those growth markets are attracting the most interest. Meanwhile, cities like San Francisco and Chicago are seeing some contrarian investors who have a differentiated view."

Insights from ALIS: The state of the hospitality sector

The ALIS conference served as a key touchpoint for industry leaders, providing insights into the current state of hospitality CRE. According to Sean Reimer, the event underscored a few major trends: "The preeminent takeaway was that there is a significant amount of capital ready to invest, but a lack of actionable inventory is keeping deal flow constrained."

The bid-ask spread: Buyers vs. sellers

One of the biggest challenges in hospitality CRE today is the disconnect between buyers and sellers. "Buyers are asking when sellers will become more realistic, while sellers want to know when buyers will come up to their asking prices," says Morrow. "This has been a key friction point in deal-making."

The hospitality sector has experienced volatile performance since the pandemic, with strong growth in leisure travel markets but ongoing challenges in some urban and business-centric locations. While investors are eager to deploy capital, many are hesitant due to lingering uncertainty in specific markets.

Liquidity and access to capital

Despite a strong appetite for new acquisitions, the availability of capital remains selective. "There's a lot of liquidity for good deals in the right markets," says Sean Reimer. "But for non-cash-flowing deals or assets in struggling markets, it's much harder to secure financing."

This has led investors to search deeper into secondary markets and tertiary leisure destinations. "If buyers keep losing out on deals in top-tier markets, do they start looking elsewhere? That’s a key question, and where value can be unlocked for both buyers and sellers alike," adds Gradwell. Groups are equally underwriting the owner/seller as much as they are the opportunity."

Strong demand, constrained supply

While hospitality fundamentals remain solid in many areas, the biggest constraint on deal volume is the lack of available inventory. "Everyone we met with wants to be active—doing new deals, buying new assets," says Gradwell. "But there’s just not enough supply to meet that demand."

The evolving role of hospitality financing

Higher interest rates have changed the financial landscape for hotel transactions. "In 2021, a borrower could take on debt in the mid-4s [interest rate], which is effectively in line with today’s base rate," notes Morrow. "That’s fundamentally reshaping how deals are underwritten and what returns investors expect."

This shift has also impacted credit markets, creating a unique challenge. "Investors can earn mid-teen returns on preferred equity with far less risk than taking full equity positions in new acquisitions. That lack of spread keeps the market in a holding pattern," Morrow explains.

What’s next for hospitality CRE?

Looking ahead, investors will likely need to adapt to continued market tightness and evolving financial conditions. The focus will remain on high-performing growth markets, potentially expanding into secondary cities as top-tier opportunities become more competitive. Meanwhile, financing strategies will continue to evolve in response to interest rate conditions and credit market trends.

One thing is clear: while challenges persist, investor appetite for hospitality real estate remains strong. "There’s a lot of dry powder waiting to be deployed," says Morrow. "As market fundamentals continue to solidify and the gap between credit returns and equity returns gap out, we expect deal volume to pick up."

Final thoughts on ALIS and industry outlook

Reflecting on ALIS, the event remains a cornerstone for hospitality investment discussions. "Even though attendance was slightly lower this year, it was still an invaluable opportunity to meet with key players and gauge market sentiment," says Reimer. "We were able to condense months of conversations into just a few days, giving us a high-level read on where capital is flowing."

Jay Morrow agreed, emphasizing that while macroeconomic concerns remain, the industry’s outlook is becoming clearer. "The question is no longer just about market distress—it’s about where to invest next. That shift in sentiment is telling. Investors are looking for hospitality opportunities for outsized yield as compared to other asset classes."

Walker & Dunlop: Your partner in hospitality CRE

Our team at Walker & Dunlop provides expert guidance in navigating the hospitality CRE landscape. Whether you’re exploring acquisitions, financing options, or investment strategies, we’re here to help you identify and capitalize on the best opportunities in the market. Learn more and connect with our experts today to explore tailored strategies for your portfolio.