The U.S. Federal Reserve raised its benchmark rate by a quarter point Wednesday. For hotel developers, that's a familiar movie, as higher rates impact their decisions.
Take Field & Stream Lodge Co., a brand Starwood Capital Group and AJ Capital Partners launched in January 2023. The developers forecast opening about 30 hotels by 2030.
They changed their tune after Fed hikes at the time affected the economy. Higher rates raise borrowing costs. Lenders want more equity or more cash flow before they sign.
So the developers slowed down. The first hotel opened in 2025. The second and third will open in 2028, Skift exclusively reported this week. Thirty by 2030 now looks like a long shot.
Starwood Capital and AJ Capital Partners also leaned into conversions instead of construction. Ground-up new-builds, funded with floating-rate debt and taking years to deliver steady profits, took the biggest hit.
If rates stay high, expect the rest of the industry to follow a similar script: slower growth, fewer cranes, more conversions.
Hotel supply growth this year is already a mere 0.5%, CoStar said. That's well below the 1.4% annual average before 2020.
"It has been a historically slow investment-volume couple of years across the industry," said Scott Ebbott, a principal at AJ Capital. "We're brand builders, but we're also investors first."
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