Investing in Hotels: Stability, Growth, and High Returns in the US & Canada
Investing in hotel properties has long been considered a niche strategy, but today it’s entering the spotlight as a compelling opportunity for both new and seasoned investors. At TNB Hotels (based in Idaho), we’ve witnessed firsthand how branded franchise hotels – the Marriotts, Hiltons, IHGs of the world – can deliver stable performance and attractive returns even through economic cycles. In the wake of the pandemic, the hospitality sector has rebounded strongly: in 2023, hotel revenues in many markets not only recovered but surpassed pre-2020 peaks (1). This blog post will explore the benefits of investing in hotels across the U.S. and Canada, backed by current industry data, trends, and success stories. Our aim is to provide a friendly, educational look at why hotels (especially branded franchises) are emerging as a strong real estate investment class.
Strong and Steady: Hotels Offer Stability & High ROI
Despite their reputation for cyclicality, hotels have proven to be surprisingly resilient and rewarding over the long term. Unlike apartments or offices that rely on fixed monthly rents, hotels can adjust room rates daily and tap multiple revenue streams (rooms, conferences, restaurants, etc.), giving investors a more stable and robust cash flow. (geonet.properties) Over the past decade, hotel revenues have grown impressively – for example, in downtown Toronto they achieved a 6.5% average annual growth rate, outpacing other property types. Across North America, the post-2020 recovery has underscored hotels’ stability: U.S. hotel occupancy, which hit a low of ~43% in 2020, climbed back into the 60+% range by 2023 (pwc.com), and Revenue Per Available Room (RevPAR) is now above 2019 levels in nominal terms (about 116% of pre-pandemic RevPAR) In Canada, 2023 was a banner year – occupancy averaged 65.7% (up nearly 8% year-on-year), ADR reached C$200 (up 9.7%), and RevPAR hit a record C$131 (18.3% growth year-on-year) (hoteliermagazine.com)
Notably, Canadian hotel room rates outpaced inflation in 2023, reinforcing hotels as a hedge against inflation. These trends translate into real returns for investors: cap rates for U.S. hotels averaged around 8.0% in late 2023, higher yields than many other real estate classes(cbre.com.) In short, a well-selected hotel can offer steady income (from daily guests) and significant upside as travel demand grows.
The Power of Branded Franchise Hotels
One key way to mitigate risk and boost success in hotel investing is to focus on branded franchise hotels – the specialty of TNB Hotels. Franchise-branded properties (think Marriott, Holiday Inn Express, Hilton Garden Inn, etc.) come with built-in advantages that independent hotels often lack. Brand loyalty and global marketing drive consistent guest demand; millions of rewards members prefer staying within familiar brands, helping branded hotels achieve significantly higher occupancies than independents across all economic cycles (sciencedirect.com.) Franchisors also provide proven operational standards, reservation systems, and support with design and training, which can streamline management and control costs for owners. Essentially, when you invest in a Marriott or IHG franchise hotel, you’re leveraging a trusted name and an established customer base – an enormous advantage for stability. TNB Hotels has leveraged these benefits in our own portfolio; we’ve successfully operated Marriott and IHG properties on the West Coast and beyond, delivering quality service that keeps guests (and returns) coming back. In practical terms, a branded hotel in a good location may enjoy higher occupancy, stronger pricing power, and easier financing than a non-branded counterpart – all factors that contribute to a more reliable ROI.
By the Numbers: Hotel Industry Trends in 2024
To appreciate the current opportunity, let’s look at some industry metrics and trends for hotels in the U.S. and Canada. Even amid economic headwinds, hospitality fundamentals are solid and improving:
Occupancy & RevPAR: After the sharp dip in 2020, occupancy rates have rebounded to around 60-65% on average, and industry forecasts see further improvement. U.S. hotel occupancy is expected to reach about 63.6% in 2024, just a few points shy of the 66% pre-pandemic record(pwc.com.) Rising occupancy combined with higher room rates pushed U.S. RevPAR to $97.84 in 2023 (a 4.8% YoY increase)(ahla.com.) In Canada, as noted, 2023 RevPAR hit an all-time high (over C$131) (hoteliermagazine.com)
. Revenue per available room growth has been robust – e.g. +5.8% in the U.S. for 2023 (cbre.com)– and while it may moderate slightly in 2024, it remains on an upward trajectory in both countries.
Average Daily Rates (ADR): Hotels have shown remarkable pricing power. U.S. ADR reached about $155 in 2023 (hvs.com) (up ~4% YoY) and is projected to keep rising modestly
(pwc.com.) Canadian ADR hit C$200 in 2023, the highest on record
. Importantly, hoteliers have been agile in adjusting rates to balance demand and inflation. As a result, room revenues have kept ahead of inflation in many markets, supporting healthy profit margins.
Occupancy Mix: Leisure travel led the initial recovery, and now business and group travel is returning, filling more rooms on weekdays. Upscale and luxury segments in Canada saw double-digit occupancy jumps in 2023 (hoteliermagazine.com,) and group travel in the U.S. is accelerating as conferences resume. This diversified demand base bodes well for stability – hotels serve multiple travel needs, so they can pivot between leisure, corporate, and group markets as needed.
Supply & Demand Dynamics: New hotel construction slowed during the pandemic and remains modest, especially in Canada (hotel supply grew only ~1% in 2023) (cbre.com). Meanwhile, travel demand is growing faster – for instance, U.S. room-night demand is forecast to rise ~2.7% in 2023 vs only 1.2% supply growth
. This favorable supply-demand gap gives existing hotels a chance to capture more business and push rates higher. In other words, the hotels you invest in today face less new competition and can capitalize on pent-up travel demand.
These numbers tell a clear story: the hospitality sector is on firm footing, with positive growth trends that support strong performance. For investors, this translates to confidence that a hotel property can generate steady cash flow (from solid occupancy and ADR) and appreciate in value as the market continues its upward momentum.
Success Stories: High-Performing Hotel Investments
Nothing illustrates the potential of hotel investments better than real-world success stories. Recent transactions and case studies show how lucrative this space can be when fundamentals align:
Figure: The Diplomat Beach Resort in Hollywood, Florida – a 1,000-room beachfront hotel that sold for a record $835 million in 2023. Such high-profile sales underscore the strong investor demand and rising values for well-positioned hotel assets.
Record-Breaking Sales: In early 2023, the iconic Diplomat Beach Resort (Hollywood, FL) was acquired for $835 million, marking one of the largest single-hotel sales in U.S. historyen.wikipedia.org. Around the same time, an AC Hotel in Phoenix sold for a record price-per-key for its market globest.com. These headline-making deals show top-tier hotel assets commanding premium prices – and rewarding their owners/investors with substantial capital gains. Even more modest projects can yield impressive returns when managed well and located in growth markets.
Operational Turnarounds: Many investors have found success by purchasing underperforming hotels and improving their operations (or rebranding to a strong franchise). For example, savvy hotel owners during the pandemic acquired properties at discounts and benefited as travel rebounded. By late 2022 and 2023, those hotels saw 36%+ increases in RevPAR (for lodging REITs, per industry reports) as demand roared back reit.com. Investors who had confidence in the sector’s resilience realized outsized gains in just a couple of years.
Consistent Cash Flows: Hotels don’t only pay off when sold; they can deliver excellent ongoing returns. A well-run select-service franchise hotel often achieves gross operating profit margins of 35-40%, converting a good portion of revenues into income for owners hotelinvestmenttoday.com. We at TNB Hotels have properties (e.g. Holiday Inn Express in smaller markets) that produce steady cash flow year after year, thanks to stable occupancy and efficient management. These consistent profits can be distributed to investors or reinvested to expand one’s portfolio further.
Community Growth = Hotel Opportunity: Sometimes the success story is about being the first in a growing market. Take Ontario, Oregon – a smaller city where TNB Hotels is developing a new 115-room Marriott dual-brand property. Local officials welcomed it as a “big asset to the city,” noting that firms like TNB “do the math” to ensure sufficient demand malheurenterprise.com. Indeed, our decision to invest in Ontario was driven by positive trends (highway traffic, business expansion, lack of modern rooms). By getting in early, hotel investors can ride the wave of a region’s growth. Already, our existing hotel in that market (an IHG franchise) has performed strongly, validating the opportunity. It’s a great example of how geographic flexibility – investing in both major metros and emergent secondary markets – can yield high-performing assets in one’s portfolio.
Success in hotel investment comes from marrying smart strategy with supportive market conditions. Whether it’s a big-city high-rise that’s consistently full or a new-build in an underserved area, the common thread is that demand for travel translates into real earnings for owners. And with travel demand on an upswing in both the U.S. and Canada, many hotel investments are hitting their stride.
Geographic Flexibility and Cross-Border Opportunities
Another benefit of hotel investing is the geographic flexibility and diversification it offers. Hotels are needed virtually everywhere – from bustling urban centers and resort areas to highway stops and regional hubs – giving investors a wide canvas to choose from. You can diversify your portfolio across different cities or even countries to balance risk and capture growth wherever it’s happening.
At TNB Hotels, we started in the Pacific Northwest and have since expanded into multiple states and into Canada
. We’ve learned that each region has its own demand drivers. For example, a hotel in Toronto or Vancouver might thrive on year-round corporate and tourist business, while a hotel in a smaller market like Meridian, Idaho or Sudbury, Ontario might benefit from steady highway travel, local industry, or sports tournaments. Diversifying across geographies can stabilize your overall returns – when one market has a slow season, another might be peaking. It also allows you to capitalize on emerging hot spots. (We mentioned Ontario, OR earlier as one such up-and-coming locale of interest.)
Importantly, the U.S. and Canadian hotel markets often complement each other. Canada saw a slightly slower recovery early on, but is now hitting new highs, whereas the U.S. rebounded faster and is entering a normalization phase pwc.com. By considering cross-border investments, an investor can participate in both stories. The franchise model we specialize in makes this easier: major hotel brands operate internationally, so a Holiday Inn Express in Oregon and one in Ontario (Canada) can be part of the same family, with similar standards and reservation systems. This consistency gives investors confidence to branch into new regions knowing a trusted brand and manager (like TNB Hotels) is at the helm.
In short, hotel investments are not one-size-fits-all. You have the freedom to choose geographic markets that align with your goals – whether it’s high-growth Sunbelt cities in the U.S., gateway cities in Canada, or quieter markets with limited competition. That flexibility means you can always seek the best risk-reward scenarios, and adjust your focus as travel trends shift.
Figure: The Marriott Long Wharf Hotel in Boston, MA – an example of a branded hotel in a prime urban location. Hotels can be found in a variety of markets, from downtown city centers to small towns, allowing investors to diversify geographically.
Hotels vs. Other Real Estate: Why Hospitality Stands Out
You might be wondering how hotel investments stack up against more traditional real estate classes like apartments, offices, or retail centers. The comparison is increasingly tilting in favor of hotels for several reasons:
Adaptive Income vs. Fixed Income: Hotels rent “nights” instead of years. This means pricing is highly flexible – rates can be adjusted in real time to match demand. In strong markets or inflationary times, hotels can raise prices quickly (daily if needed), whereas office or residential leases are locked in for years (and can lag behind market inflation). This dynamic revenue model helped hotels not only recover but excel – for instance, Canada’s hotel sector drove ADR to record levels by dynamically managing rates amid rising demand hoteliermagazine.com. Investors benefit from this adaptability with higher top-line growth potential.
Multiple Revenue Streams: A hotel is more than just guest rooms. It can generate income from restaurants, bars, meeting rentals, parking, spas, etc. This diversification of revenue makes hotels more resilient – if one segment (say, international tourism) dips, another (say, local staycations or events) can fill in. Other property types usually have a single rent stream per tenant. As one industry publication put it, unlike properties that rely solely on tenant rent, “hotels generate multiple revenue streams, offering…a more stable and robust return”geonet.properties
Demand Drivers and Recovery: In recent years, we’ve seen how external shifts affect different real estate sectors. Remote work significantly hurt the office sector (many downtown offices are still half-empty), and e-commerce has challenged retail, but travel has an enduring appeal that bounced back strongly once restrictions lifted. People prioritize experiences – evidenced by the surge in leisure travel – and businesses eventually return to face-to-face meetings. This inherent demand for travel makes hotels a reliable long-term bet. In fact, lodging revenues historically tend to grow faster than inflation over a full cycle
hvs.com. And during downturns, certain hotel segments (like midscale franchises) even cushion the impact by capturing budget-conscious travelers, showing smaller revenue declines and quicker recovery than luxury tiers
Investor Interest and Diversification: The institutional real estate community is taking note of hotels’ performance. According to Deloitte’s 2025 outlook, hotels have risen from 12th to 5th place among the most attractive real estate asset classes for investors, now ranking ahead of office, malls, and others hvs.com. Adding hotels to a portfolio brings diversification benefits – hotel returns often have a different cycle and correlation compared to, say, housing. So a hotel can balance out holdings in apartments or commercial buildings. As one expert noted, including hotels helps “spread risk more effectively” across a real estate portfolio hvs.com . And when you partner with experienced operators, the perceived higher risk of hotels (due to daily occupancy variance) is mitigated by professional revenue management and brand support.
Tangible Community Impact: From an investor’s viewpoint, this is a bonus point – hotels often have positive visibility and impact in their communities, which can smooth project development and operations. Local governments appreciate the jobs and taxes hotels generate. (Recall how Ontario’s city leaders enthusiastically supported our new hotel, calling it a “big asset to the city”
malheurenterprise.com.) While this isn’t a direct financial metric, having community support can make the investment process easier and enhance the property’s value in the long run (through goodwill, easier permitting for expansions, etc.). Contrast this with certain other real estate assets that might face community resistance (e.g. apartments can raise NIMBY concerns, industrial warehouses don’t exactly excite the public). Hotels, by and large, are welcomed as contributors to local economic growth – a nice alignment of investor interest and community interest.
Conclusion: Why “There’s Nothing Better” Than Hotels
As a hotel management and development group, we at TNB Hotels are admittedly passionate about this sector – our motto is “There’s Nothing Better.” But the facts and figures back up that enthusiasm. Branded hotels in the USA and Canada offer a blend of stable income, growth potential, and diversification that is hard to match in other real estate classes. They allow you to benefit from powerful global brands, tap into recovering travel demand, and adapt quickly to market changes. Whether you’re eyeing a limited-service hotel off an interstate or a full-service property in a city center, the fundamentals of hospitality investment remain compelling in 2024 and beyond.
For investors weighing their options, consider that hotels have proven their mettle by weathering an unprecedented crisis and coming out stronger – with higher ADRs, improving occupancy, and record investor interest. They’ve shown the ability to innovate and monetize (through dynamic pricing, varied services, etc.) in ways traditional rentals cannot. And with travel an ingrained part of human life, well-located hotels will always have a base level of demand supporting them.
In summary, if you’re looking for an asset that combines real estate’s tangibility with the operational upside of a business, hotels could be the perfect fit. The overall stability and ROI profile of hotels – supported by data on RevPAR growth, occupancy rates, and transaction trends – makes a strong case for a spot in your investment portfolio. And with expert management (like the team at TNB Hotels) and the backing of trusted franchises, you can unlock the full potential of a hotel investment. There’s a reason more investors are turning to hospitality – it’s an exciting space where smart capital can thrive.
Ready to explore hotel investments further? The opportunities are as broad as the map of North America, and the team at TNB Hotels is happy to share insights or discuss how to turn a capital placement into the next great hotel success story. After all, in the world of real estate investing, There’s Nothing Better than a well-run hotel.
Sources: We’ve incorporated data and insights from industry experts and reports, and recent news of notable hotel transactions to ensure this discussion is grounded in current market realities and performance metrics.
cbre.com
