Some say the hospitality market is recovering.
I believe we are standing on the edge of a massive correction.
And for the prepared investor?
It is the single greatest opportunity of the next decade.
Here is the reality that most people are ignoring.
Hotel owners just survived 2025.
But "surviving" isn't thriving.
Look at the numbers.
We are projecting RevPAR (revenue per available room) growth of less than 1% this year.
That is below inflation.
Which means in real terms?
Revenue is shrinking.
Occupancy is flatlining around 62%.
Demand isn't coming back to save the B & C class economy hotels and motels.
Meanwhile, expenses are eating everything.
Labor is up. Insurance has doubled in some markets. Utilities are climbing.
Hotel owners are tired.
And the Brands?
They are demanding new Property Improvement Plans (PIPs) that owners simply cannot afford or see no value for them...it's one sided in favor of the franchisor.
So you have a choice as a hotel owner:
You can bleed cash trying to keep up with rising expenses and flat revenue.
Or...you can sell. (I recommend NewGen Advisory if selling is your goal.)
This is where the magic happens.
This is where the "Arbitrage" exists.
Because while the hospitality sector is getting squeezed?
The housing market is starving.
We have a massive structural shortage of housing in this country.
People need places to live.
But have you looked at the cost to build new apartments lately?
You are talking $350 per square foot for garden-style multifamily.
The timeline?
Three to five years for entitlements, permits, and construction.
That is a lifetime in this economy.
Now look at a hotel conversion.
We can acquire these distressed assets for a fraction of replacement cost.
Often around $100,000 per door or less.
We are buying well-located, concrete assets that already exist.
The zoning is often easier to navigate if you know what you are doing (if you don't...don't bother).
The speed to market is months, not years.
We aren't speculating on what the world will look like in 2030.
We are solving a problem today.
This is why I love Adaptive Reuse.
It is the ultimate form of value creation.
You take something that is broken, underutilized, and bleeding money.
And you transform it into something beautiful that families actually need.
My late father, Bill LeBaron, taught me a lot about resilience before he passed away in 2024.
He taught me that you don't run from the fire.
You look for what can be saved from it.
[side note: in December of 2001 our house burned down and we were lucky to get out in time...the smoke inhalation almost kept us asleep.]
Right now, the hotel market is smoking.
But the bones are good.
The location is often irreplaceable...WHICH IS THE KEY TO THIS WHOLE PUZZLE.
And the demand for attainable housing is infinite.
In 2026 we are going to see a wave of these assets hit the market.
Class B and C hotels that just don't make sense as hotels anymore.
The question is not if they will sell.
The question is, "who will have the vision to convert them?"
What brand or hotel to multifamily operator will actually create a win-win deal with the existing hotel owner?
We shall see.
I am betting on operators with a vision that sees past the poor Medallia report.
I am betting on operators who select innovative extended-stay brands with flexibility.
I am betting on all conversion pros such as Sage Investment Group and others who are offering municipalities a housing breakthrough.
And I am betting that regret only comes from watching the opportunity pass you by.
If you are a hotel owner looking for an exit?
Or an investor looking for yield that actually makes sense?
You'll have a large list of options here soon.
The market isn't waiting, and the legacy brands can't move fast enough.
Sources & Market Data:
RevPAR Growth: Projected at ~0.9% for 2026, lagging inflation (Source: STR & Tourism Economics Forecast, Nov 2025).
Occupancy Rates: Projected to remain flat at approx. 62.0% - 62.2% (Source: PwC Hospitality Directions US, Jan 2026).
Replacement Cost: It is estimated to be 71% more expensive to build new urban assets than to acquire existing ones (Source: JLL's Hotels & Hospitality Group JLL Hotel Investment Trends).
Supply Constraints: New hotel supply growth is constrained at ~1.5% due to high construction costs, creating a floor for existing asset values.
Transaction Trends: Market focus has shifted toward smaller assets (under $50M) and distressed opportunities.
General information only - not legal, tax, or investment advice. Verify local codes and programs before deploying capital.
#HotelConversion #AdaptiveReuse #ExtendedStay #Multifamily #RealEstateInvesting #Entitlements #Underwriting #CPACE #Homekey #HotelToHousing
