Navigating Hotel Financing in a World Eager for New Travel Experiences

Although the coronavirus pandemic is in the rearview mirror, the hotel industry is still rebounding from the financial distress caused by the severely reduced number of travelers during that time. Years later, some positives have emerged for the industry. Lenders are cautiously optimistic about the potential for growth in hotel and hospitality investments. Increased consumer confidence, a rise in domestic travel, and a growing interest in experiential tourism are driving demand for new supply. Spread between cap rates and borrowing costs are narrow, attracting both institutional and non-institutional investors. Even though the gap between borrowing costs and cap rates are narrow, positive trends in hospitality along with projected interest rate declines make hotels an attractive investment compared to a lot of other real estate asset classes that are either overbuilt or suffering due to macro trends.