tekmak

How to Target Hotel Markets

Tue, 27 Jan 2026 19:47:08 GMT

Product-Market fit starts with the market

What makes a target market worth targeting for a hotel?

First, the obvious - Product-Market fit applies here the same in any business environment. A market that is ready for a TownePlace Suites is rarely ready for a full-service Marriott with 30,000 sq ft of meeting space.

TEKMAK Development specializes in developing custom upper-midscale select service and extended stay hotels (e.g. SpringHill Suites, TownePlace Suites, Home2Suites, etc) for suburban, secondary and tertiary markets.

So how does TEKMAK identify target markets?

It begins with data.

What is the current and historical performance of the existing hotels and how does that translate to a future hotel. There are several powerhouse data providers, such as CoStar out there, but these national providers do not yet provide granular enough submarkets to prove useful for our target markets.

About half of U.S. States impose a lodging tax, making hotel revenue publicly available data.

Texas is one of these states, and there are a couple of good Texas based data sources for this information. TexasRevPar & Source Strategies being our preferred data sources.

Typical of most asset classes - what is the strength and trajectory of the local and surrounding economy: job growth, unemployment rate, household income, etc.

Performance of hotels is rarely sustained by only a handful of major drivers (e.g. convention centers, professional sports, etc). Instead, there are 1,000 different drivers that sustain performance.

�� Large businesses
��‍��Small businesses
��‍�� Colleges
�� Youth sports
��️ New retail openings
�� New construction

Identifying market tailwinds isn't just about data though, especially in the suburban markets. Having an intimate understanding of a community and county is critical.

This is one reason why TEKMAK focuses on markets within a certain radius from our home base - no one knows our markets better than we do outside of the local community themselves.

Also of critical importance, are there any hotels in the pipeline for this market. This filter is one of the quickest ways to eliminate a market.

It is worth noting in the current environment, there is a big difference between hotels that are "planned" or in the "planning phase", and hotels that are actually coming to market soon.

Once a market appears to indeed be a worthwhile target market, the next questions to ask are:

-Is there a viable site for the hotel?
-What flag is the right one for this market and site?

Hotel Exit Cap Rates & Risk

Wed, 07 Jan 2026 16:59:54 GMT

Why cap rates for Hotels are higher than other asset classes

Why are cap rates for Hotels higher than the other primary asset classes ?

The most common answer I receive is simply "risk". On the surface, it appears to make logical sense. People always need a place to live, and a place to work, and to buy stuff but do they really need to travel ?

As we enter 2026, riding the wave of a turbulent 5-year stretch, is our understanding of CRE asset risk still accurate?

Remote work has upended office; A glut of new supply, declining birth rates and cost of living backlash suggests a coming reckoning for multi-family, and the Amazon effect of shopping continues to impact the world of retail - this is also reflected in the continued strength of Industrial as an asset class, which is directly tied to these super power online retailers.

As of 2025, hotel CMBS Loan Delinquency is now below all but the industrial asset class.

So, is it really "risk" that leads the market to apply a higher cap rate, or perceived risk?

If the latter, what drives that perception?

COMPLEXITY

It is the complexity of the unique nature of a hotel, where you not only must execute on a real estate deal - identify a market, acquire the site, construct the building - but must also operate a living breathing profit and loss, cash producing business.

Building the hotel is just the first step.

Every day requires dedication to detail and an 'always be closing' mentality to win business. Pricing can change hourly, and every single day is a battle vs the competition to win.

Not only do you have to maintain the quality of the asset, but also the quality of the guest experience.

Anyone that suggests that hotels are not complex is either lying to you or doesn't know hotels.

But is complexity a problem to be discounted, or an opportunity to seize on?

Over the next few months and with the help of the many exceptional individuals I am fortunate to work with, I am going to spend time exploring the unique faucets of hotels that give them their layers of complexity.

This will include, but not be limited to:

-How we identify good markets and sites for hotel
-Product selection
-Construction
-Pre-opening
-Sales & marketing
-Expense management
-Exits

If you have any other topics and areas you think would be interesting to cover, please reach out on our Contact Page .

2025 Reflections on the Hotel Industry

Fri, 02 Jan 2026 20:06:35 GMT

Time Favors Texas

As 2026 begins, below is a brief reflection on 2025 for the hotel commercial real estate (CRE) industry.

BLUF : TEKMAK Development is focused on driving strong top-line performance at our operating hotels, improving flow-through to the bottom line, and executing efficiently on our hotels under construction, which are currently running on-time and on-budget.

Industry Performance :

2025 started with optimism but experienced a gradual monthly decline in year-over-year (YoY) Revenue per Available Room (RevPAR) resulting in an overall YoY decline for 2025.
The cause of lower RevPAR is occupancy, which remains below pre-COVID 2019 numbers.
Average Daily Rate (ADR) hit a record high in 2025.
Industry sentiment projects a flat or slightly improved 2026.

Operations :

Rising cost of operational labor, equipment and supplies continued to squeeze margins in 2025.
There was some easing of these pressures in Q4 and the trend appears to be flat or marginally favorable heading into 2026.
Hotels that are disciplined in operations and maintain strong guest satisfaction will outperform their market competitors.

Transactions :

The expected increase in 2025 transactions driven by the debt maturity wall and decline in rates did not materialize in the first 3 quarters.
Activity began to pick up in Q4 and early indicators are that declining rates and increasing liquidity will continue this trend in 2026 with a higher level of transactions.
Increased activity in 2026 will help with price discovery, which has been very limited the past few years, and potentially compress hotel cap rates over the coming 18-24 months.
Many of the major brokerage firms such as JLL, HVS and more are all suggesting that their books are fuller in Q1 2026 than previous quarters. Below is a quote from one of our primary brokers supporting this sentiment as well:

"I generally agree. Just looking at our pipeline, we have $500MM under contract to close in Q1 - all with non-refundable deposits. We are also scheduled to launch approximately $450MM in the next 30 days. To further support next year’s activity, we have seen a material increase in BOV requests from our institutional clients who are out of options and need to sell."

Market cycle :

US hotel construction pipeline indicates that new supply is slowing.
Current market cycle suggests now is the time to build and buy.
One added perk of new hotel construction is the meaningful bonus depreciation hotels can take advantage of to investors' benefit following the passing of the One Big Beautiful Bill.
Our current outlook is that the cycle will begin to turn in about 2.5+/- years, starting a multi-year window where sale fundamentals become more favorable.

Texas :

We are big believers that time favors Texas, with Texas continuing an upward economic trajectory that will benefit most asset classes.
Texas continues to have explosive demographic growth , and is one of the top states in the nation for commercial real estate , corporate relocations , startups , banking/finance (e.g. y'all street ) and more.

2025 was a year of mixed signals, with early optimism met with mid-year uncertainty. The hotel industry maintains measured optimism that performance is more likely to be flat or marginally improved, with the difference between success and stagnation dependent on the commitment and abilities of the asset managers and operators.

Cost Segregation & Investment Performance

Fri, 10 Oct 2025 14:37:50 GMT

Why post-tax performance deserves more attention in CRE investments

How important are post-tax earnings when making an investment decision? Unless an investment centers around a 1031 Exchange or Opportunity Zone, few investment decks seem to factor them in. Yet post-tax earnings are of great importance to investors, and commercial real estate (CRE) offers investors unique and powerful strategic tax advantages. While the 1031 Exchange and Qualified Opportunity Zones are two powerful strategies their use is limited to select CRE investments. By contrast, cost segregation provides both a powerful and widely applicably benefit.

A cost segregation study is a tax strategy that identifies and reclassifies a commercial or residential rental property's components into different categories for depreciation purposes. The goal is to accelerate depreciation deductions, which provides significant tax savings and increases cash flow for the property owner. This tool became even more valuable with the recent passing of the One Big Beautiful Bill, which enshrined a permanent 100% bonus depreciation for qualifying assets placed into service after January 19th, 2025.

This valuable tax tool is simple to execute (we work with Wipfli ) and can have a wide range of impacts depending on the asset class within CRE.

Car washes present a uniquely high benefit of accelerated depreciation due to the proliferation of short-term assets. Restaurants/QSR, Healthcare and Assisted Living facilities also present a higher range. Some of the most common asset classes, such as multifamily, office (less popular these days), retail, and industrial (warehouse) present less meaningful tax depreciation benefits.

The full dollar implication of course depends on the actual dollars invested. Data Centers provide some of the highest accelerated depreciation in total dollars due to the significant investment requirements to develop them. On the other hand, car washes and self-storage can often carry relatively small total dollar amounts due to lower cost of construction.

Ultimately, the decision making of whether to invest or not depends on the sponsor and the investment, but when comparing opportunities, it is worthwhile considering the post-tax performance as well.

Where Are the Greener Pastures?

Tue, 30 Sep 2025 14:37:44 GMT

Anticipating the Coming Turns in Capital Flow

Where will the herd move next? I was catching up with a peer of mine in the commercial real estate (CRE) field, and our conversation centered around this critical question. Where is the herd (or the money) going now, and more importantly, where will it turn next? As we dove deeper into the discussion, we each found ourselves arguing (perhaps quite selfishly) that commercial real estate, and specifically in Texas markets, presents a lot of green grass.

Institutional and private capital has been stampeding toward a consistent set of primary strategies. Private Equity remains a popular vehicle, especially private credit as it has been growing 14.5% annually and is now a multi-trillion-dollar market. Fixed Income has provided appealing risk-adjusted returns as interest rates increased, with monthly bond fund net inflows in the tens of billions. Public equities, and specifically technology/AI focused ETFs have seen ongoing headline driven surges . Infrastructure, multi-family, industrial and data-center CRE investments have experienced steady inflows through multiple waves of investor interest.

Yet many of these strategies are showing weaknesses. Private equity distributions have slowed dramatically , leading to historic surges in sales on the secondary markets. Private Credit is awash with competitive capital still waiting for the wave of distressed assets to materialize, while drawing increasing regulatory attention . Declining interest rates will reduce the appeal of Fixed Income for many investors. The question of whether Public Equities are overvalued is a constant talking point, and Corporate America is facing their own debt maturity wall that they will have to grapple with. Even popular niches like AI demand-driven data centers are facing mounting challenges as a speculative asset class.

While the herd crowds into private credit and data centers, or sits on the fixed income sidelines, CRE in Texas Submarkets present greener grass for opportunistic capital. TEKMAK Development’s near-term focus remains on suburban hospitality investments, but the economic and demographic tailwinds in Texas present an equally appealing opportunity in multifamily, retail and even offices in suburban markets. As the herds turn over the coming years, also looking for more open pastures, these opportunistic investors will find themselves in prime position. Especially as the distant thundering hooves of retirement capital begin their march into alternative assets, including commercial real estate.

Interest Rate Cuts, Hotel CRE, and Opportunities

Mon, 22 Sep 2025 12:29:09 GMT

"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 ( Hotel development stalls amid growing financial pressure: report ).

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 ( Mueller CRE Cycle Q2 2025 ) 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.