What's Happening?
Investors in the hotel industry are facing critical decisions on whether to buy existing properties or build new ones, as market conditions evolve. Factors such as sales price, renovation costs, and closing costs influence the decision to purchase, while land costs, construction expenses, and pre-opening requirements impact the choice to build. The scarcity of affordable land, particularly in international gateway cities, and rising construction costs are significant considerations. Analysis of land sales from January 2020 to June 2025 shows Las Vegas leading in hospitality land sales, while Sun Belt markets dominate in acreage. Hotel sales from January 2023 to June 2025 are concentrated in top markets like New York.
Why It's Important?
The decision between buying and building hotels has significant implications for the hospitality industry, affecting supply-demand dynamics and investment strategies. As construction costs rise and land becomes scarce, investors may lean towards purchasing existing properties, impacting the development of new hotels. This trend could influence hotel availability and pricing, particularly in high-demand areas. Understanding these dynamics is crucial for stakeholders aiming to optimize their investments and adapt to changing market conditions.
What's Next?
Investors may increasingly focus on markets with affordable land and diverse demand generators, such as Fort Worth-Arlington and Orlando. The interplay between population growth and hotel demand will continue to shape investment strategies, with cities experiencing significant population increases likely to see more hotel development. Stakeholders will need to monitor economic indicators and demographic trends to make informed decisions.
