This analysis includes all public hotel, motel, lodging companies in the US, Canada, developed Asian and European countries that are profitable. See old 2023 post here.
In 2024, the hotel industry’s valuation landscape experienced notable shifts, influenced by evolving market dynamics and investor sentiment. As we look ahead to 2025, several key trends are poised to shape the sector’s financial outlook.
Hotel and Lodging Company Valuation Changes in 2024
The global hospitality market expanded from $4.39 trillion to $4.70 trillion in 2023, indicating a 7% compound annual growth rate (CAGR).
Investor interest in hotel properties surged, particularly in Spain, where real estate investment in hotel acquisitions reached record levels.
But it wasn’t good news for all hospitality companies around the world. Certain markets faced hurdles. For example, New York City’s hotel industry, despite new luxury openings, struggled to return to pre-2019 performance metrics, with occupancy rates and revenue per available room lagging behind 2019 levels.
Hotel Revenue Multiples in 2024
In 2024, the hotel industry experienced a significant decline in valuation multiples compared to 2023. Specifically, the revenue multiple decreased from an average of 2.6x to 1.9x.
Following the COVID-19 pandemic, the hotel industry saw a surge in valuations due to pent-up travel demand and investor optimism. As the market stabilized in 2024, growth rates normalized, which recalibrated the valuation multiples.
For instance, InterContinental Hotels Group (IHG) reported a revenue per available room growth of 3.2% in the second quarter of 2024, a significant drop from the 16% growth witnessed in 2023.
Similar revenue multiples can be seen across the US, Canada, developed markets in Europe and Asia.
Hotel EBITDA Multiples in 2024
Hotel industry average EBITDA multiple dropped even more dramatically from 26.9x in 2023 to 11.5x.
The industry faced increased operational expenses, including higher labor and utility costs, which compressed profit margins.
Overall, hotel shares have struggled, with slower growth rates compared to previous years.
Higher operating costs and slower revenue led to the suppressed EBITDA valuation multiples, which reflect investors’ expectation that the post-pandemic travel boom has come to an end.
Hotel Valuation Trends in 2025
- Major US hotels forecast a modest growth in revenue per available room gain of 3.3% in 2025. This suggests a steady recovery and potential appreciation in hotel valuations.
- The adoption of AI and other technologies is anticipated to revolutionize guest experiences and operational efficiencies, potentially enhancing profitability and, consequently, valuations. But this may not be reflected in valuations until after 2025.
- An increased emphasis on sustainability and eco-friendly practices is expected to influence investment decisions and brand valuations, as consumers and investors prioritize environmental responsibility.
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