Hospitality Horizons 2025: Midyear Reflections and the Road Ahead

As we cross the threshold into the second half of 2025, the hospitality industry stands at a moment of reckoning, not of retreat, but of recalibration. Hotels and restaurants across the United States have shown remarkable resilience, adapting to changing tastes, tightening capital markets, and macroeconomic headwinds. The result? A year that, while not without friction, carries forward with momentum and measured optimism.

Year-to-Date Performance: Signs of Strength

Hotels: U.S. hotels continue to recover, with national occupancy hovering around 63.1% and RevPAR showing modest yet consistent gains. Group travel and urban markets are quietly rebounding, while conversions are on the rise a signal that investors are seeking value through repositioning rather than new builds alone.

Restaurants: With projected industry revenues hitting $1.5 trillion and over 200,000 jobs added, the restaurant sector remains a cornerstone of American consumer life. Innovation in tech, automation, and menu engineering is helping operators respond to inflation and shifting diner behaviors. However, not everything is running smoothly, Fitch Ratings recently downgraded the sector to “Deteriorating,” a reminder that agility is not optional, it’s essential.

The Supply Pipeline: Conversions and Select Builds Drive Growth

The U.S. hotel development pipeline grew by 5% YOY, with over 6,300 projects and nearly 750,000 rooms underway. Conversions now account for a record 1,110 projects, suggesting a strategic pivot away from capital-heavy ground-up construction toward efficiency and brand leverage. Major growth markets include Dallas, Atlanta, Phoenix, and Nashville, where investor confidence and business travel intersect.

Restaurants, particularly QSRs and fast casual brands, are leaning into suburban and drive-thru formats, even as urban concepts look to reinvent the dine-in experience with technology and differentiated service models.

The Financing Landscape: Complex, Yet Navigable

Traditional senior debt remains elusive for many, especially for speculative ground-up developments. Regional banks are lending cautiously, often capping leverage at 55–60% LTV. But opportunities remain:

·         Mezzanine debt and preferred equity are gaining popularity in deals with strong

fundamentals.

·         C-PACE financing offers sustainability-driven funding for hotel retrofits.

·         SBA-backed programs are a lifeline for restaurateurs seeking working capital or

acquisitions.

·         Private capital and real estate funds are re-entering the space, selectively targeting strong operators and asset-backed opportunities.

Looking Ahead: A Future Written in Resilience

As the hospitality industry sails into the second half of the year, it does so beneath skies that are mostly clear, yet not without a few gathering clouds. Adaptability, innovation, and strategic foresight remain the compass points by which we must steer. Though the promise of growth glimmers on the horizon, shifting economic winds, from evolving fiscal policies to the persistent tug of inflation, may alter our course. Still, by listening closely to the rhythms of the market and the whispers of the consumer, hotel and restaurant leaders can chart a steady path forward, balancing bold ambition with thoughtful resilience.

Sage Advice for Owners & Operators

·         Reforecast quarterly and stress-test financial models.

·         Re-evaluate vendor contracts and staffing plans for flexibility.

·         Stay close to your lenders and investors, transparency builds trust.

·         Embrace AI and automation where they enhance the guest or guest experience.

If you're a hotel or restaurant owner, investor, or advisor navigating this moment, I’d love to hear your insights. What trends are you seeing? Where are you placing your bets for growth in 2025?

Let’s connect. Let’s collaborate. The future of hospitality isn’t just coming, it’s already unfolding. www.stanfordGhospitality.com