NEW YORK—While lodging faces competition from other asset classes for investment dollars, its strong fundamentals and the underlying real estate still make it a sector to be reckoned with, delegates heard at the NYU International Hospitality Investment Forum in New York on Monday.
Moderator Jeff Horwitz, senior partner and co-head of real assets at Proskauer fielded an impressive panel of investment experts, who weighed up the case for hospitality in the light of 2025’s volatile market conditions.
Michael Bluhm, global head of real estate, gaming, lodging and leisure at global investment bank Jeffries started by comparing “January’s positive animal spirits backed by a variety of demand drivers” to changed sentiment in April “when the formula blew up”. He noted that tariff announcements had upset the outlook on factors including “capital costs, the strength of the dollar, and the cost of development”, but noted that the prognosis wasn’t all bad.
“Even in the past thirty to sixty days, Trump’s negotiating tactics have become clear,” he said. “He’s bringing people to the table that have been ‘eating cake’ for a long time.” Bluhm added that the “stock market was also coming back.” He said: “It’s going to be a rough ride, and harder to underwrite, but we’re heading for lower rates, a weaker dollar - which is good for the economy - and ultimately growth.”
Solid Backdrop
Sean Gormley, head of U.S. Lodging at Morgan Stanley, said that a certain degree of predictability was also likely to creep in, despite “certain challenges on the debt side of the ledger.” With credit spreads “pretty tight,” he suggested that a “solid backdrop” was emerging, where 10-year Treasury bond yields would hover above 4 percent for the foreseeable future, while “the cost of debt is potentially stable for the next three to four years.” All this might cheer “the huge amount of dry powder waiting to invest,” he added.
Yet Jeffrey Dauray, chief investment officer and EVP, RLJ Lodging Trust, suggested the outlook was a little more equivocal. “If we compare the way the market was performing in January, before the tariff announcement, and look at the fundamental picture of lodging supply and demand, it felt like we were on a path for continued investment recovery, despite some expense pressures,” he said.
But now “the amount of uncertainty is causing a lot of paralysis,” he added. “Until we clear a few more of these question marks regarding trade and monetary policy, it’s going to be difficult to have that kind of conviction.”
Joel Rosen, president, GFI Hospitality, noted that his firm had resorted to tapping up bond markets in Israel for capital, after finding it hard to locate equity in the U.S. “We have been fortunate to be able to raise a lot of equity through preferred issuance,” he said, “but it’s one of the tightest markets I have seen in 10 years.”
Yet while adding that it was not a good time to sell hospitality real estate, he suggested that “the values are still there.” He explained: “Every cycle that we have had has involved uncertainly, some sense of the market being upside down. Yes, there is chaos in the market, but we are still ploughing ahead with doing deals, even if we have to underwrite them more conservatively.”
He noted that demand in New York, for example, remained strong, and that the city “won’t have any major new supply for the next seven to 10 years” and would continue to “attract international capital as well.” He suggested that investors should rather look to the “long term stability” of assets.
Competition for capital
Weighing up the competition for capital versus other sectors, Bluhm noted that “there are a lot of sectors from data centers to retail having time in the sun” and that it was “hard to compete for dollars with the growth algorithm there.”
Countered Gormley: “Investors still have to look for high quality, iconic assets, and have confidence that there will be long-term growth. Yes, data centers are popular now, but no one has a clue what their cap rates will be even five years from now.” This in turn should strengthen the outlook for hospitality investment, he said. “Benchmark spending on lodging and leisure has always exceeded GDP growth.”
Concluded Dauray: “Because of the uncertainty out there, when you are trading assets, there is greater focus on real world performance rather than projections,” which he hoped would boost the investment case for stand-out hospitality.