The 2025 Hotel Investment Lens
The U.S. hotel outlook for 2025 has been revised down: CoStar/STR now expect ~flat to slightly negative RevPAR and margin pressure from higher expenses (particularly F&B and labor). That means underwriters should lean into expense truthing and risk-transfer costs as much as top-line modeling. CoStar+2STR+2
Five underwriting disciplines we use (and you should, too):
RevPAR realism, not “trend-line hope.” Use the latest forecast ranges (occupancy ~62.5%–63.4%) with scenario bands instead of single-point assumptions; stress ADR by ±2% and occupancy by ±100 bps. Hotel Dive+1
Insurance as a core driver of yield. Price CP, GL, WC, EPLI, and Excess explicitly with line-item breakouts and a three-year path (property softening vs. casualty stickiness). Don’t bury it in “other G&A.” Brown & Brown+2RPSIns+2
PIP and brand math. Compare flag vs. independent on after-fee NOI, not just RevPAR premium; include PIP timing, QA/tech subscriptions, and assessment fees from the FDD. eCommons+1
Labor & margin guardrails. Bake in higher wages and staffing constraints—AHLA projects record wage outlays and lingering shortages—then test GOPPAR with a ±100–200 bps margin swing. Asian Hospitality+1
Debt service durability. With flattish RevPAR, underwrite DSCR at stressed NOI (post-insurance & brand fees) and assume refi proceeds off conservative cap rates. Give yourself an operations-first break-even occupancy test.
Bottom line: 2025 is an operator’s market. Deals pencil when you (a) right-size revenue, (b) get precise on expenses—especially insurance and labor—and (c) let brand/PIP decisions be math-driven, not logo-driven.