Conviction, Creativity, and the Next Chapter of Hospitality Capital Transaction
A Letter from our CEO, Chris Garratt
As we embark on 2026, the hospitality investment landscape is beginning to shift; quietly, deliberately, and with greater intention than we have seen in recent years.
After a prolonged period defined by elevated interest rates, constrained capital, and wide gaps between buyer and seller expectations, the market is entering a new phase. Financing conditions are improving. Capital that had remained sidelined is slowly re-engaging. And owners across both hotels and restaurants are once again evaluating strategic options that were deferred amid uncertainty. But there are still cautionary headwinds to navigate in the capital markets, and hospitality owners and investors should embark not with exuberance, but with discipline.
Across the hospitality industry, investors are approaching opportunities with sharper selectivity, underwriting with greater care, and placing renewed emphasis on durability over momentum. At the same time, many owners are reassessing long-held assumptions about value, growth, and timing. The result is not a rush of transactions, but a gradual alignment, one that creates the conditions for thoughtful, well-structured deals to move forward.
A Market Defined by Selectivity, Not Scale
In both the hotel and restaurant sectors, we see a clear bifurcation emerging. Best-in-class assets—those with strong positioning, operational clarity, and long-term relevance, continue to attract interest. Differentiated hotels in compelling locations and restaurant brands with proven unit economics and pricing power stand out in a crowded field. At the same time, the market is less forgiving of complexity without clarity. Assets that lack scale, differentiation, or a clear path forward face more scrutiny, more conservative underwriting, and often a narrower buyer universe. This is not a rejection of growth or ambition, but a reassertion of fundamentals and a focus on how an acquisition can strategically align with broader long-term sustainability.
Importantly, operating performance does not need to accelerate meaningfully for transactions to occur. In fact, modest fundamentals, paired with improving access to capital, often help reset expectations and narrow the bid-ask spread. In that sense, 2026 may resemble periods in the past when capital markets improved before operating metrics fully caught up, creating opportunity for those prepared to act.
Creativity as a Competitive Advantage
If the past year offered a defining lesson, it was this: capital alone does not close deals, creativity does. Across our firm’s work in 2025, the transactions that succeeded were not the simplest or even the largest. Rather, they were the ones where buyers and sellers were willing to rethink structure, timing, and outcomes. Earn-outs, recapitalizations, minority investments, seller rollovers, membership interest redemptions over time, and joint ventures became tools not of compromise, but of alignment.
This willingness to explore alternative paths to liquidity or growth will remain essential in 2026. Flexibility becomes the difference between a stalled process and a successful outcome. But creativity and flexibility for their own sake are not enough or even necessary. It takes a keen eye, and industry knowledge to identify what areas of creativity are worth introducing into a deal structure to consummate a transaction that will effectuate long-term growth. I am proud that our firm can bring all of this to the proverbial bargaining table to help our clients succeed.
What This Means for Owners and Operators
For hotel owners, 2026 presents an opportunity to revisit capital strategies with a clearer view of both pricing and positioning. Repositioning plays, targeted sales, and partnership structures are increasingly viable as capital returns with discipline. Dry-powder capital will be more available in 2026 to those proven concepts looking to scale in deliberate ways. Yet conversely, without a playbook for future growth, or a highly differentiated asset, hotels in secondary and tertiary markets will find a limited investor pool, perhaps more sparse than 2025.
In 2026, restaurant operators exploring capital solutions are likely to encounter a market that rewards substance over style. While creative concepts will always matter, investors are increasingly focused on businesses that demonstrate operational discipline, consistency, and a clear understanding of their economic drivers. Strategic buyers and sponsors remain open to growth capital and partial liquidity opportunities, particularly through structured investments, but only where fundamentals are well established. Restaurants with proven performance and focused operating models will be well received, while those still building that foundation, or those too enamored with their establishment’s persona, may find greater success by continuing to strengthen the business before engaging the market.
Across both sectors, preparation matters. Clear financial reporting, unit-level insight, and a well-articulated strategic narrative are no longer optional; they are prerequisites...table stakes for exploring the transaction marketplace and attracting growth capital. There is one statement we often repeat to new clients: “I wish you would have contacted us sooner.”
Looking Ahead
At Birch Creek Advisors, we believe the most compelling transactions are rarely driven by timing alone. They are the result of conviction—about the asset, the business, and the path forward—paired with creativity in how that value is realized.
As hospitality enters this next chapter, the opportunity is not in chasing momentum, but in shaping outcomes thoughtfully. We look forward to partnering with owners, operators, and investors who share that perspective and are prepared to engage the market with clarity, flexibility, and purpose.
Wishing you each a successful year filled with great service,
