Interest Rate Cuts, Hotel CRE, and Opportuniuties
"Be fearful when others are greedy, and greedy when others are fearful"
The interest rate cuts last week bring some sense of relief—but for hotel CRE, it may be too little, too late in the near term. Development has slowed under the weight of higher construction costs, rising labor expenses, and now, declining RevPAR.
Industry analysts are even warning of a “RevPAR recession” as softness carries into Q1, possibly early Q2. Our expectation aligns with this view: muted performance in the near term, followed by a stronger back half of the year as RevPAR begins to recover.
Where there’s uncertainty, there’s also opportunity. Hotel supply has been lagging demand for years, and the current pullback will only widen that gap. The projects that do move forward will be the ones with strong brands, compelling markets, and the right site—tailwinds that position them as winners when the cycle turns.
The Mueller cycle framework reinforces this outlook: downturns sow the seeds of the next expansion. Five to seven years from now, many hoteliers will look back and say, “I wish I had built more.”
The key is conviction and capability: the right product, in the right market, with the right story and the right team. Those who are able to act now will be the ones reaping the benefits later.