Private Equity Bidders Intensify Competition for US Hotels

Private Capital Reshapes Hotel Deal Flow

The US hotel transaction market is getting crowded as more private equity and high-net-worth investors join the fray, according to CoStar News. DiamondRock Hospitality Company’s CEO Jeff Donnelly told investors on the REIT’s Q2 2026 earnings call that the bid landscape has shifted, with sharper, more aggressive competition for assets—particularly in high-profile and resort segments. President and COO Justin Leonard noted private equity activity has jumped notably compared to 2024 and 2025, outpacing the usual buyer mix in recent quarters and catching sellers off guard. The influx is widening bid-ask spreads on core assets, especially for properties attracting multiple offers.

This renewed attention from private capital comes as DiamondRock adjusts its acquisition and disposition outlook for the year. In May, the REIT sold its 189-key Courtyard by Marriott New York Manhattan Fifth Avenue for $33M to Knightstone Capital Management. Donnelly said DiamondRock is likely to end 2026 as a net seller but remains nimble amid fast-moving market dynamics.

The Details

During the second quarter, DiamondRock sold the leasehold interest in the 189-key Courtyard by Marriott Manhattan Fifth Avenue to Knightstone Capital for $33M, according to CoStar transaction records. The sale followed a $40.3M CapEx investment in H1 2026 across its 34-hotel, 9,400-key portfolio in 16 states. DiamondRock projects $75M to $85M in total capital spending for the full year, with major renovations scheduled for the Westin San Diego Bayview and Atlanta Marriott Alpharetta in Q3 and Q4 respectively.

The company reported a strong financial quarter: Q2 revenue climbed 4.1% year over year to $318.3M; net income surged to $90.5M from $38.4M a year earlier. EBITDA rose 20.9% to $113.2M. Portfolio metrics improved, led by a 4.6% increase in average daily rate to $308.50, a 2.4% rise in occupancy to 78.1%, and a 7% boost in RevPAR to $240.79. DiamondRock ended Q2 with $1.1B in debt, a weighted average interest rate of 4.9%, and $106M in unrestricted cash.

Bidder Activity Reshapes Pricing Power

The influx of new capital is reshaping the hotel bid environment. CEO Jeff Donnelly explained that in 2026, initial and second-round bids are diverging more dramatically compared to 2024, with spreads of 10–15% separating top contenders—especially on select resort assets. Pricing for trophy resorts has grown “very, very competitive” and often outpaces what strategic buyers like REITs are willing to pay, leading to more failed bids. Nevertheless, urban assets stay in play, with DiamondRock evaluating both urban and resort deals across the US.

This heightened demand is playing out as franchise brands face owner pushback over loyalty economics. The Wall Street Journal reported that 51 hotel owners wrote to Marriott in June seeking more revenue from Bonvoy loyalty programs. DiamondRock, which counts 15 Marriott properties, did not comment on those negotiations.

Why It Matters

The latest round of private equity and high-net-worth bidding further spotlights the shifting power dynamics in the US hotel deals market. For REITs like DiamondRock, deal-making discipline is being tested as capital inflows lift asset values and widen bid-ask spreads across key markets. That discipline also reflects broader caution across commercial real estate, where volatile bond markets continue to complicate pricing and investment decisions. According to STR and CoStar data, US hotel transactions slowed after the record 2021–2022 run-up and subsequent interest rate hikes. Recent private capital is reviving deal flow, but only for a more selective group of assets.

On the operational front, independent hotels in DiamondRock’s portfolio are demonstrating stronger EBITDA per key—50% higher than branded peers according to CEO Donnelly. The REIT’s flexibility to toggle between branded and independent models or redevelop assets delivers additional optionality—as well as defensiveness amid cost pressure from branded franchise relationships. At the same time, CapEx spending remains elevated industrywide as owners push to reposition or hold onto top-tier assets during this competitive phase.

Public market confidence appears restored, at least for DiamondRock. Its share price jumped 47.5% year to date through early August, far outpacing the Nasdaq’s 9% gain for the same period.

What’s Next

The second half of 2026 is set to deliver a clearer picture of how long private capital inflows can keep hotel valuations buoyant. DiamondRock projects up to $45M in CapEx spend in H2 2026 and continues to vet brand exit scenarios as franchise agreements mature or expire. With no major acquisitions imminent, the REIT signals it will remain opportunistic—balancing asset sales and disciplined buys—while navigating heightened competition. Broader industry consolidation and additional owner pushback against brand economics may further shape the next wave of hotel deals through 2027.