Hotels Rise as a Coveted Investment Class Amid Shifting Real Estate Dynamics

Romy Bhojwani, Director of Hospitality Market Analytics, CoStar Group on how the landscape of commercial real estate investing is experiencing a notable transformation, with hotels emerging as a preferred asset class for investors. In recent months, the growth in hotel sales volume has outpaced that of office sales, diverging from the long-term historical average. An analysis of transaction volumes reveals a significant shift, as hotels accounted for an average of 26% of office transaction volume from 2006 to 2019. However, in 2022, this figure skyrocketed to 53%, reaching its highest level in 17 years. Impressively, as of April 2023, hotel transaction volume stands at $12.2 billion, representing a substantial 45% of office transaction volume, far surpassing the long-term average. In this article, Bhojwani explores the driving factors behind this evolution and the implications for investors seeking robust returns amidst a changing commercial real estate landscape. Additionally, he examines the resilience of hotels as an asset class and their ability to deliver strong cash flow, making them an attractive hedge against inflation and high interest rates.