Q1 2026 Hotel Investment Outlook

After eighteen months of bid-ask gridlock, the first six weeks of 2026 produced more select-service trades than all of Q4 2025. Cap rates have compressed roughly 50 basis points off the 2024 peak in the categories where buyers can underwrite stable cash flow today, and the bid for resort and lifestyle assets has returned with conviction. The story is no longer rate-cut anticipation; it is the realization that the best-in-class operators have stabilized.

Select-service is leading. The chain-scale segments where construction lending was effectively closed for the past three years now trade in a 7.75 to 8.50 percent cap range for properties with clean ADR comp sets and renovation reserves funded. We are seeing PIP-current Hampton Inns and Holiday Inn Express boxes change hands at high-7s when the underwriting room-night growth is plausible, low-8s when there is a story to tell about the comp set.

Texas secondary markets are the most active in the country right now. College Station, Lubbock, Tyler, Waco — the markets the institutional bid wrote off in 2023 — are producing the strongest ADR recovery curves in our internal database. Twelve-month trailing ADR in those four markets is up 6.4 percent on average, with occupancy holding above 70 percent. Family offices and developer-sponsors are paying current cap rates for those assets while institutional capital is still recalibrating.

Full service has bifurcated. Trophy urban assets in the top ten DMAs are clearing the market with multiple competitive bids — the Westin Austin Downtown trade in late 2024 was the leading edge of that thesis. Outside of those flagship markets, full service remains a workout exercise; PIP overhang and food-and-beverage labor cost have not stabilized in tertiary CBDs.

Resort and lifestyle is the most under-allocated category in the institutional book. The transaction volume we are forecasting in this segment for 2026 is materially above 2024 and 2023 combined, driven by destination-resort recapitalizations from sponsors who held through the cycle and now want to crystallize equity into a more flexible structure. Our conviction here is high enough that we are tracking eight separate recap conversations actively as of this writing.

Looking forward, our base case for 2026 transaction volume is 1.4 to 1.6 trillion dollars across all hospitality categories, with select-service representing 38 percent of that total — a return to the pre-2022 mix. Debt is available again, with hotel CMBS spreads tightening through Q4 2025, and the construction-loan freeze has thawed for sponsors with track records. We expect the second half of 2026 to be the strongest two consecutive quarters for hotel investment sales since 2019.