Where to Invest: A Pragmatic View of Hospitality in 2026

Why improving existing assets, not chasing forecasts, may offer the most durable path forward

By Andrew Carey

It’s that time of year again. Crystal balls are out and pundits are busy predicting whether hospitality transactions will rise or fall. No one knows for certain, though everyone seems to have an opinion.

I’m not a forecaster. I’m an operator with a bad habit of investing when I see a good situation. For the past several years, those situations have been scarce.

At a fundamental level, hospitality economics have been out of alignment: interest rates remained elevated, cap rates stubbornly low, and RevPAR growth anemic. Those conditions made it difficult to justify new investment, let alone generate attractive risk-adjusted returns.

That said, I believe 2026 may mark an inflection point.

Over the past 18 months, rates have moved meaningfully off their peaks. Debt constants remain high often in the 7% to 9% range depending on structure, but the door to positive leverage is beginning to reopen. The remaining challenge lies with sellers. Cap rate expectations have yet to adjust meaningfully, reflecting a lingering attachment to the era of ultra-low interest rates. These two realities cannot coexist indefinitely. Transaction volume will remain constrained unless interest rates continue to ease or sellers accept modestly higher cap rates.

In other words, the math is improving but pricing hasn’t. So where does that leave investors?

Given today’s construction costs, which generally require RevPAR north of $150 to pencil, few markets can support new supply. As a result, I see three viable investment paths for private capital:

1. Developing a well-located, soft-branded hotel capable of sustaining RevPAR above $250;
2. Repositioning a neglected or obsolete hotel; or
3. Reinvesting in an existing asset to drive higher ADR and RevPAR.

Each path requires a different kind of skill and a different tolerance for uncertainty.

Development: High Risk, High Reward

High-end, small-scale development is not for the faint of heart. It demands exceptional design, thoughtful branding, and operational precision. When executed well, these projects can command meaningful rate premiums that offset higher development costs.

The challenge lies in finding the right location and calibrating the finish level precisely. Success requires a strong design team, a disciplined operator, and, above all, patient capital.

Repositioning: Compelling, But Rare

Repositioning a “forgotten” hotel may be even more compelling, but it’s akin to hunting unicorns. Most markets have been thoroughly scrubbed for underutilized assets in acceptable locations. Still, when such opportunities do surface, they can generate significant value.

While the physical plant may require extensive reinvestment, you’re starting with two invaluable advantages: an existing structure and a viable location.

The common thread across both strategies is the need for realism. Too often, investors talk themselves into overly optimistic narratives assuming margin expansion where none exists or projecting rate growth unsupported by demand.

While a well-run hotel can achieve RevPAR indices approaching 200, this performance is typically driven more by stronger occupancy than outsized ADR gains.

Reinvestment: The Most Reliable Path

The third path reinvesting in an existing asset offers the highest probability of success and the most attractive risk-adjusted returns. After years of deferred maintenance and operational shortcuts, many hotels are overdue for renewal, both physically and operationally.

In three decades of hotel management, I’ve learned that hotel performance isn’t usually limited by strategy it’s limited by discipline. Too many owners underinvest in guestrooms, constrain payrolls, and defer maintenance slowly eroding both the guest experience and the asset’s long-term value.

Given the broader market constraints, reinvesting in existing assets is often the most compelling strategy. This advantage will only grow over time as demand continues to outpace supply and fewer hotels step forward to improve their product. The result will be a widening gap: fewer well-run hotels serving an increasingly mobile and discerning guest base. Not tomorrow, but the demographic trajectory is clear.

Where should owners begin?

If 2026 is the year operational reinvestment becomes the most reliable strategy, it starts with clarity. Owners should begin by answering three questions:

• What experience are we trying to deliver and what will it cost to sustain it?
• Where has the asset quietly fallen behind the comp set?
• Do we have the discipline, systems, and leadership to execute the plan not just approve it?

A well-run hotel can generate strong returns for decades. A starved hotel, by contrast, has numbered days.

There is no single right investment strategy only the one that aligns with your capabilities and discipline. Development and repositioning can deliver outsized returns, but are constrained by opportunity and execution risk. Reinvestment, while less glamorous, offers broader availability and more reliable outcomes.

The challenge is not finding assets but rather finding teams willing to do the work.

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ABOUT THE AUTHOR:

Andrew Carey is the Chief Executive Officer at Newport Hospitality Group, overseeing the management firm’s new growth opportunities through equity ventures and new acquisitions as well as the general operations of the company. Earning his MBA from the Haas School of Business at the University of California, Berkeley, Andrew started his career 20 years ago by structuring and investing limited partnerships in a variety of real estate environments. Shortly thereafter, he joined Paine Webber where he helped to source and invest $200 million in real estate investments across the United States. Andrew now strives to ensure that every property in Newport Hospitality Group’s portfolio receives the best possible hotel management expertise.

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