USRC survey finds hotel cap rates split by sector

US Realty Consultants’ Mid-Year 2026 Hotel Investor Survey shows limited-service and full-service hotels moving in different directions on required returns. The report also flags expense growth outpacing ADR growth over the next 12 months, a sign that operating pressure remains uneven across the sector.

Why it matters: - Hotel investors are still pricing limited-service and full-service assets differently. - The gap matters because capitalization rates, discount rates and residual values help determine pricing, financing terms and expected returns. - The survey also points to a near-term operating squeeze, with expenses expected to rise faster than room revenue growth.

What happened: - US Realty Consultants released its Mid-Year 2026 Hotel Investor Survey on October 1, 2026. - The survey found a modest divergence in overall capitalization rates between hotel categories. - The average cap rate for limited-service hotels fell 20 basis points to 8.7%. - The average cap rate for full-service hotels stayed flat at 8.0%.

The details: - Discount rates for limited-service hotels declined 30 basis points to 11.3%. - Discount rates for full-service hotels increased 20 basis points to 10.4%. - Residual capitalization rates for limited-service hotels fell 20 basis points to 9.1%. - Residual capitalization rates for full-service hotels rose 10 basis points to 8.3%. - The survey suggests investors continue to separate hotel categories as broader investment liquidity improves. - Financing and operating conditions remain uneven across the sector. - Over the next 12 months, expense growth is expected to outpace ADR growth for both hotel categories. - ADR growth expectations for limited-service and full-service hotels increased slightly from the previous survey. - Those ADR expectations still trail projected expense growth. - Expense growth expectations also rose slightly. - Average expense growth now stands at 3.3% for both categories. - The complete survey includes data on capitalization rates, discount rates, ADR and expense growth expectations, marketing time and other metrics for full-service and limited-service hotels. - The report can be ordered through USRC’s publications page by clicking “Publications.”

Between the lines: - The split between hotel categories suggests investors are not treating the lodging market as one uniform asset class. - Limited-service hotels appear to be seeing somewhat more favorable return assumptions than full-service hotels. - The forecast gap between ADR growth and expense growth hints that margins could stay under pressure even if revenue improves.

What’s next: - Investors will likely watch whether cap rates and return requirements keep diverging in future USRC surveys. - Operating trends over the next year will show whether higher expenses continue to outpace room-rate growth. - Market participants can use the full survey to compare return assumptions across hotel segments.