NEW YORK CITY — Just before the 2026 NYU IHIF conference got underway here in early June, HREC Investment Advisors held its Lodging Industry Investment Council roundtable, bringing industry pros together to discuss the biggest issues facing hoteliers. Moderated by HREC CEO and Founder Michael Cahill, the roundtable focused on two overarching topics: How artificial intelligence is affecting hotels, and whether hotel acquisition capitalization rates are going higher, lower or staying the same.
Hotel Management shared the panel's comments about AI earlier this month. Here’s what the panelists had to say about capitalization rates.
Upswing
HREC SVP Chris Stein noted cap rates “in the fours and fives” for “per-pound deals or room-revenue multiplier deals.” Cap rates are moving higher “where they're underwriting to on a stabilized basis,” he continued. “So the actual acquisition cap rates are quite low, but the stabilized underwritten cap rates have been moving up.” To illustrate the point, Stein highlighted a current listing of a portfolio—predominately smaller Hilton- and Marriott-branded assets—in smaller markets. “We had a preemptive portfolio offer come in at a sub-four-and-a-half cap, and because of the other preemptive offers we've been getting on an individual asset basis, the seller is passing and is going to continue to market these on an individual basis,” Stein said. “They feel confident that they can beat that number by taking each of these out individually.”
With that in mind, he said, “cap rates are moving up—but it's more of a stabilized, underwritten cap rate, as opposed to the going-in cap.”
Chris Flagg, chief investment officer at TPI Hospitality, which owns and operates hotels in Minnesota and Florida, also expects cap rates to shift higher as more developments open. “I think there's going to be more supply [and] more transactions,” he said, emphasizing the next 12 months as a key time period for properties coming online.
Greg O’Stean, chief development officer at Hotel Equities, agreed that cap rates would go up. “I’m seeing a lot of groups that are trying to raise funds, but they're having a difficult time because they haven't done that well in the previous fund,” he said. The combination of “more supply [and] less demand” will likely “lead to a higher cap rate.”
Access Point Financial Managing Director Nicholas Meli noted “a lot of deferred [capital expenditures],” which means hoteliers’ “all-in basis is going to be that much higher, so you've got to adjust your going-in cap rate.” Also, he added, “rates are up substantially over the last since the war started, which is a little concerning.”
“As far as cap rates, to me it seems like slightly up is the immediate future,” Aperture Hotels CEO Charles Oswald said. At the same time, he added, “I don't see any way around the Fed not raising interest rates.”
Mixed Bag
Lee Kerfot, managing director at HREC Investment Advisors, argued that cap rates are “stabilized, but slipping upwards.”
Mark J. Rosinsky, CEO of Reade Hotel Capital and Reade Hotel Management, said that he has not seen “a lot of transactions,” but added that he doesn’t expect to see many more going forward. “I don't think things [are going] to change all that much,” he said.
While acknowledging that the future of capitalization rates “depends,” Jeffrey Kolessar, chief development officer for GF Hotels and Resorts, said that rates would go up, especially since renovations were factored in. However, he added that cap rates for luxury deals would likely go down. "They're looking at a perceived value, but outside of that, a lot of these deals in the distressed world—the ones that are selling—there is no cap rate, really, on that.”