Despite economic uncertainty and tighter lending conditions, the Sunbelt continues to shine as a beacon for many hotel investors.
“The Sunbelt region generally continues to show strong demand for hotel investment and development, driven by population growth, economic resilience and favorable business climates,” says Phil Mader, president of Kingsbarn Capital & Development. “The region's appeal is bolstered by its attractive weather, tourism and business-friendly environment.”
The fact of the matter is these fundamentals have turned the Sunbelt – spanning from southeastern California to Florida – into a beacon for many since the pandemic. This includes residents, commercial developers and key industries.
Over the past decade, the Sunbelt has accounted for 80 percent of total U.S. population growth, with states like Texas, Florida and Arizona drawing millions of new residents, per Moody’s Analytics. Employment in the region has also grown by 20 percent, more than double the rate of non-Sunbelt states.
The increasing demand from more businesses, residents and visitors has created a need for more hotel supply. The problem is, many traditional lenders have hit pause during this period of high costs, high rates and uncertainty. However, as many who have invested in the Sunbelt already know, there are still opportunities to be had.
Why So Attractive?
Before we dive into the financing aspect, let’s take a closer look at why this “Southern smile” has been booming for a while.
This region occupied six of the top 10 spots on PwC's “Top Markets 2025 for Overall Real Estate Prospects,” with the accounting firm noting that migration patterns continue to benefit the Sunbelt.
The region is also emerging as a manufacturing powerhouse, with domestic and foreign companies committing nearly half a trillion dollars to build semiconductor, electric vehicle and related-product factories, according to Green Street.
Phoenix, for example, is the planned home of the $65 billion Taiwan Semiconductor Manufacturing Co. (TSMC) facility. Less than 50 miles northeast of Memphis, construction is underway in BlueOval City on the $5.6 billion Ford electric pickup truck plant.
Financing the Dream
Hotel developers who want to remain active in the Sunbelt sometimes come up with creative solutions to do so.
“The economic and political forces at play nationally are making financing more complicated and uncertain,” says Anne Hill, senior vice president of Bayview PACE. “This is where private credit and alternative finance often play a critical role.”
Yes, it seems hospitality investors (and commercial developers, manufacturers, residents, etc.) aren’t the only ones eyeing this region. Private credit and capital providers are eager to play in this space, too…when the stars align.
For Mader, this starts with strong market fundamentals.
“We like projects in high-growth markets with robust economic indicators,” he says.
It then segues into analyzing the borrower.
“We want experienced operators – borrowers with a proven track record in hospitality development,” he continues. “We also want to see financial wherewithal - borrowers with a strong balance sheet and financial capacity.”
Peachtree Group is also active in the Sunbelt – both as a private credit lender and as a hotel developer. The Atlanta-based vertically integrated investment management firm is particularly bullish on Texas where it has three hotel developments underway in Dallas, Austin and San Antonio.
These include a new 171-room studio-suite Residence Inn by Marriott in downtown San Antonio near the Riverwalk. Offered as a direct investment opportunity, this asset will succeed an older-generation property when it opens in the second quarter of 2026.
"San Antonio is a unique market with a growing need for extended-stay hotels," said Greg Friedman, managing principal and CEO of Peachtree. "The Residence Inn will cater to the diverse demand drivers of San Antonio, including its thriving tourism sector and extensive corporate presence. Positioned within easy reach of the city's popular attractions, restaurants and business hubs, this hotel will provide guests with a prime location for both work and leisure."
Extended-stay brands in general seem to be doubling down on high-growth Sunbelt markets that tout steady logistics, medical and manufacturing demand.
Peachtree also recently broke ground on a 19-story, dual-branded hotel development featuring Marriott brands AC Hotel and Moxy Hotel in Uptown Dallas, as well as a 28-story, dual-branded Embassy Suites and Tempo Hotel in Austin. The firm’s executives have cited population growth and Texas’ business-friendly climate as key reasons they continue to build, operate and lend in the state.
In addition to dual-branded assets, Mader believes a couple other categories are positioned to do well in many Sunbelt markets, particularly when private credit’s involved.
“Luxury and boutique hotel projects benefit from the tailored financing solutions offered by private credit,” he says. “Private credit can also provide the necessary funds for development and converting existing buildings into hotels, offering innovative financing solutions.”
Going Further Outside the Box
Private credit may have captured much of the spotlight, but it’s not the only option gaining traction with the Sunbelt’s top hotel projects. Industry experts note a few other structures have also garnered favor as of late.
For the rest of this article, visit our sister site Hospitality Investor.