- Hotel executives at The Lodging Conference said the Fed’s mid-September 25-basis-point hike will not break floating-rate deals but adds cost pressure for owners and operators already running lean.
- Panelists see technology, from AI tools to check-in kiosks and housekeeping robots, as a path to lower costs, though brand standards and franchisor approval slow adoption.
- Vision Hospitality’s Mitch Patel warned that expenses are growing faster than RevPAR and that the owner-operator-brand model breaks down if owner economics do not improve.
The Federal Reserve’s mid-September rate hike is squeezing owners and outside managers of hotels who were already running costs tight, according to CoStar’s coverage of The Lodging Conference in Phoenix.
The numbers are not catastrophic alone, executives said, but the knock-on effects will spread through the industry.
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A Deal Market Interrupted
Rob Leven of Procaccianti Companies said deals were finally happening in 2026, following several years in which buyers and sellers were far apart. Then the Fed raised rates.
Stonebridge CEO Rob Smith said small rate moves do not kill deals since many are financed with floating-rate debt. Still, a 25-basis-point increase has to be absorbed somewhere, and with fundamentals strong, operators are already running tightly and must help owners cover the higher cost of capital.
Operations Over Underwriting
Peregrine Hospitality CEO Greg Kennealey said investors can no longer count on low rates, inflation-driven growth and optimistic demand to carry a deal. Operational skill matters more.
Vision Hospitality’s Mitch Patel added that when acquisitions look less attractive at higher rates, the ability to pull operating levers becomes the way to create value.
Technology as a Cost Lever
Most operators already run lean while fixed costs keep rising, which makes technology appealing. Natson Hotel Group CEO Sam Patel expects it to drive costs down, across AI tools, kiosks for self check-in and housekeeping robots.
The obstacle is execution. Changing a brand standard for housekeeping or check-in needs franchisor buy-in, and Patel noted that many franchisors left ownership. He argued margins will keep shrinking until technology works for operators rather than franchisors.
Leven said housekeeping robots will arrive eventually and could be game-changing for profitability. Kennealey pointed to check-in kiosks, and Smith said his company already uses robotic carpet cleaners overnight. The panel agreed such tools work best alongside people, with staff spending more time on guests.
Service Still Pays
Panelists also argued service culture helps profitability, since cost cuts only go so far. Smith said hotels that skip service investment end up paying for it through higher customer acquisition costs.
Why It Matters
Mitch Patel said costs are rising faster than RevPAR, which he called unsustainable. Brands are seeing slower net unit growth and a thinner development pipeline, he said, because asset-light models need owners willing to carry the assets. That is consistent with a hotel pipeline that has already shrunk in major markets.
Unless owner economics get better, he said, the whole ecosystem breaks down.
What’s Next
Expect operators to lean harder on automation and service-driven revenue, and to press brands for faster approval of cost-saving standards. Deal activity will depend on how owners underwrite against higher debt costs, as seen in recent hotel portfolio bids.
