U.S. hotel performance is improving, restaurant spending remains resilient, and investors continue to pursue differentiated hospitality assets. Yet higher financing costs, uneven regional performance, and changing buyer expectations are creating a more complicated environment for hospitality transactions.
For hotel owners, restaurant operators, resort developers, and hospitality investors, the distinction between a successful operating business and an attractive investment has become increasingly important. This week's hospitality market update examines the latest operating trends, notable hotel transactions, capital market conditions, and emerging opportunities across the Pacific Northwest, Mountain West, and broader United States.
U.S. Hotel Performance: RevPAR Growth Signals Continued Demand
The U.S. hotel industry reported positive year-over-year performance for the week ending October 17, 2026, according to CoStar.
National hotel operating metrics included:
Occupancy: 70.7%, up 3.1% year over year
Average Daily Rate (ADR): $177.65, up 2.3%
Revenue Per Available Room (RevPAR): $125.53, up 5.5%
These results suggest continued resilience in hotel demand, with both occupancy and room rates contributing to revenue growth.
However, performance varied significantly across markets. Detroit reported a 20% increase in RevPAR, supported by convention activity, while San Diego experienced an 18.5% increase. San Francisco, meanwhile, reported a 21.2% decline, largely reflecting the timing of major events in the prior year.
What this means for hotel owners and investors
Strong national hotel performance does not necessarily translate into comparable results at the property level. Local demand generators, competitive supply, market positioning, and the ability to command premium room rates remain central to hotel valuations. For hotel development projects, particularly those targeting luxury and upper-upscale travelers, demonstrating sustainable pricing power can be more important than relying on broader industry growth projections.
Source: CoStar, U.S. Hotel Results, October 22, 2026
Portland Hotel Transaction Highlights Valuation Challenges and Opportunities
One of the more notable recent hospitality transactions in the Pacific Northwest was the sale of The Hotel Zags in downtown Portland. On October 8, 2026, Pebblebrook Hotel Trust completed the sale of the 174-room boutique hotel for $10 million, representing approximately $57,500 per guest room.
The property reported a trailing twelve-month hotel EBITDA loss of approximately $600,000 and an estimated net operating loss of $800,000 after capital reserves. The purchaser, NewcrestImage, adds the property to its national hotel portfolio.
What this means for hospitality M&A
The transaction illustrates the valuation challenges facing underperforming hospitality assets, particularly in urban markets that continue to experience uneven recoveries. While the purchase price represents a significant discount to the replacement cost of many full-service hotels, the property's negative operating earnings make traditional income-based valuation metrics difficult to apply. Importantly, this transaction should not be viewed as representative of all Portland hotel values. Rather, it demonstrates the growing importance of asset-specific underwriting, operational repositioning opportunities, and disciplined transaction structuring.
For buyers with the appropriate operational capabilities and investment horizon, challenged hospitality assets can present attractive acquisition opportunities. For sellers, realistic pricing and a well-supported investment thesis are essential.
Sources: Pebblebrook Hotel Trust, October 9, 2026; NewcrestImage Acquisition Announcement
Hospitality Financing: Capital Availability Remains a Critical Consideration
Despite improving hotel operating performance, financing continues to present challenges for hospitality owners and developers. Elevated interest rates affect nearly every aspect of a hospitality investment, including acquisition financing, construction feasibility, refinancing proceeds, debt-service coverage, and ultimately the equity returns available to investors. Even relatively modest changes in borrowing costs can materially influence project economics. For example, a $40 million loan amortized over 25 years would require approximately $300,000 more in annual debt service at a 7% interest rate than at 6%. For hotel development projects, this difference can affect the amount of equity required, the feasibility of the capital structure, and the returns available to investors.
What this means for hotel development and recapitalizations
Hospitality projects must increasingly demonstrate not only strong operating potential but also a credible financing strategy. Developers and owners should evaluate financing alternatives early, including conventional bank financing, institutional debt, preferred equity, joint venture structures, and appropriately structured private capital. Existing hotel owners facing loan maturities may also benefit from evaluating recapitalization alternatives before pursuing a sale. The availability of financing should not be confused with the availability of financing on terms that support an attractive investment return.
Restaurant Industry Sales Continue to Grow, but Profitability Remains the Focus
The National Restaurant Association reported that eating and drinking place sales reached $92.9 billion in September 2026, an increase of approximately $1 billion from August. September represented the eighth consecutive month of sales growth, with nominal industry sales increasing 7% compared with the prior year. The results are encouraging for restaurant operators, particularly given ongoing consumer concerns about inflation and discretionary spending. However, revenue growth alone does not necessarily translate into improving profitability. Labor costs, food costs, occupancy expenses, and changing consumer behavior continue to influence restaurant operating margins.
What this means for restaurant valuations and transactions
For independent restaurant owners considering a sale, sustainable profitability remains the most important consideration.
Prospective buyers are increasingly focused on normalized EBITDA, management depth, lease economics, customer retention, and the capital investment required after an acquisition. A restaurant with a strong reputation and consistent revenue may still face valuation challenges if its operating margins are insufficient to support acquisition financing or an appropriate return on invested capital.
Conversely, restaurants with durable customer relationships, disciplined operating costs, and favorable long-term occupancy arrangements may be better positioned to attract qualified buyers.
Source: National Restaurant Association, Restaurant Sales Report, October 15, 2026
Destination Hospitality: Differentiated Experiences Remain an Important Investment Theme
Across the Pacific Northwest and Mountain West, destination-driven hospitality businesses offer an investment proposition that extends beyond traditional hotel operating metrics. Properties such as fishing lodges, boutique resorts, wine-country hotels, waterfront destinations, and experiential hospitality venues often derive competitive advantages from their location, guest experiences, and limited comparable supply. These characteristics can create opportunities for premium pricing and differentiated market positioning. However, destination hospitality investments also introduce underwriting considerations that differ from those of traditional urban hotels. Seasonality, accessibility, labor availability, guest acquisition costs, and the ability to generate repeat visitation can significantly influence financial performance.
What this means for destination hospitality investors
The most compelling investment opportunities often combine an irreplaceable location with a defensible operating model and a clear understanding of the target guest. For owners contemplating expansion, redevelopment, or a sale, the investment analysis should consider both the existing business and the potential value of complementary revenue streams. These may include food and beverage, outdoor recreation, special events, wellness amenities, and other guest experiences. The objective is not simply to increase revenue, but to determine which investments can create sustainable operating income and long-term asset value.
Birch Creek Advisors' Perspective: Strong Operations Are Only Part of the Investment Equation
The central theme in today's hospitality market is the growing distinction between operating performance and investment performance. Hotels may be achieving higher room rates and stronger revenue, but higher financing costs and capital expenditure requirements can offset those improvements. Restaurants may be generating greater sales, yet buyers remain focused on sustainable cash flow and lease economics. Destination hospitality businesses may benefit from strong consumer interest in unique experiences, but investors still require disciplined underwriting and a credible path to attractive returns.
For hospitality owners considering a sale, recapitalization, or development project, understanding these dynamics is increasingly important. Successful transactions require more than an attractive property or a compelling concept. They require a thoughtful assessment of operating fundamentals, market demand, valuation, capital structure, and investor expectations.
At Birch Creek Advisors, we believe that understanding hospitality from both an operational and investment perspective is essential to helping owners and investors navigate these decisions. Our work focuses on mergers and acquisitions, capital advisory, valuations, recapitalizations, and strategic transactions involving hotels, resorts, restaurants, and destination-driven businesses. As the hospitality investment landscape continues to evolve, we see meaningful opportunities for owners and investors who combine strong operating fundamentals with disciplined financial strategy.
