For family offices considering direct hotel ownership, the decisive underwriting question is not only what the property is worth. It is whether the operating business can produce the return.

The following article comes from Marty McDaniel (pictured below), who is chairman and CEO of The Northstar Companies. The piece is written for family offices evaluating direct hotel ownership and looks at the risk that can get obscured when a hotel is underwritten primarily as real estate. Management depth, labor, franchise obligations, revenue execution and reinvestment can alter the return profile quickly, even when the underlying property and market look sound. The editors are happy to share these insights; the usual editorial disclaimers apply. To comment, email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com
 

Marty McDaniel

A hotel can look reassuringly familiar to a family office. There is land. There is a building. There is often a recognizable flag on the sign. There are comparable sales, replacement costs and a capital plan. On paper, it can read like real estate. In practice, it behaves more like an operating company that happens to own a very expensive piece of real estate.

That distinction matters because family offices are not strangers to private assets. UBS reports that alternative assets account for 42 per cent of family office allocations, including private equity, real estate and private debt. It also reports that 77 per cent of the families surveyed still have an active operating business. (1)

Many of these investors therefore understand operating risk intuitively. The mistake is assuming that a hotel can be managed with the same degree of passivity as a leased building.

Source: UBS Global Family Office Report 2026. Alternatives include private equity, real estate, private debt, hedge funds and other alternative/real assets.

I have spent nearly four decades in hotels, and the easiest way I know how to explain the risk is this: the building sets the stage, but the operation writes the check. A great location can survive mediocre execution for a while. A good brand can cover mistakes for a while. Neither can permanently overcome weak leadership, poor revenue strategy, labor inefficiency, deferred maintenance or a capital plan that exists only in a spreadsheet.

Underwrite the operator, not just the asset
Traditional real-estate diligence asks whether the market supports the asset. Hotel diligence must go one step further and ask whether the operating team can actually convert that market into profitable demand. In Q2 2026, US hotel demand grew 1.7 per cent year-over-year while supply increased only 0.4 per cent; ADR rose 4.4 per cent and RevPAR 5.7 per cent. (2)

Those are constructive market signals, but they do not mean that every hotel participates equally. The gap between market growth and asset-level performance is where operating quality shows up.

Before a family office buys a hotel directly, I would want a clear answer to five operating questions: Who is accountable for revenue strategy? Is labor scheduled to demand or to habit? What is the real condition of the building behind the engineering log? What brand obligations or property-improvement requirements are coming? And can the management team explain, in plain English, how the property will produce the underwritten cash flow?

The answer should not be a 40-page budget. It should be an operating thesis that connects rate, occupancy, channel mix, labor, food and beverage, maintenance, capital and guest experience. A hotel does not have independent departments. It has one economic engine with a lot of moving parts.

The quiet risk is capital that arrives late
Hotels wear out in public. Guests see the tired corridor, the slow elevator, the worn carpet and the room that should have been out of order before they checked in. Deferred capital eventually becomes a pricing problem, a guest-score problem, a labor problem and, in branded hotels, potentially a franchise problem.

That is particularly important now because hotel transactions are accelerating while a large amount of hotel debt approaches maturity. JLL reports $24 billion of US hotel transaction volume in 2025, up 17.5 per cent year-over-year, and about $88 billion of hotel loans scheduled to mature through 2027. (3)

Buyers will see opportunities created by refinancing pressure, capex needs and ownership transitions. Some will be genuine basis opportunities. Others will simply be undercapitalized operating businesses wearing attractive real estate.

A family office with patient capital can have an advantage here. It does not have to force a three-year exit, and it can fund a sensible renovation or repositioning without manufacturing short-term performance. But patient capital still needs impatient operating discipline. The longer the intended hold, the more important it becomes to know whether management is protecting the physical asset, the brand, the team and the cash flow at the same time.

Direct ownership requires direct governance
The best hotel investments I have seen were not micromanaged by ownership. They were governed well. Ownership knew which decisions belonged to the operator, and which decisions could change the investment thesis. They monitored a small set of leading indicators, not just last month's P&L. They made capital decisions before the building forced them to. And they treated management depth as part of the asset, not an HR issue.

That is the real opportunity for family offices considering direct hotel investment. Hotels can offer scarcity, inflation sensitivity, multiple demand segments, daily pricing and tangible real estate. They can also provide something that many passive assets cannot: operational upside. JLL expects constrained supply, stronger debt-market liquidity and active private-equity interest to support a new hotel investment cycle in 2026. (4)

Operational upside, however, is only valuable
if the owner is prepared to govern an operating business.

The conclusion is not that family offices should avoid hotels. It is almost the opposite. A hotel can be a compelling direct investment when the investor underwrites the operation with the same rigor as the real estate. The mistake is buying one and pretending those are the same thing.

About the author
Marty McDaniel, CHA, is a second-generation hotelier with 38 years of senior hospitality leadership across hotel and resort operations, multi-property leadership, development, renovations, revenue strategy, turnarounds and ownership-side advisory. He is chairman and CEO of The Northstar Companies, a Certified Hotel Administrator and an eCornell Revenue Management Expert. His hospitality commentary and industry work have appeared in Hotel Business, Lodging, Hotel Management, Hotel Online and other hospitality publications. More at MartyMcDaniel.com.

Footnotes
1. UBS, Global Family Office Report 2026, May 28, 2026. The report surveyed 307 family offices in more than 30 markets; it reports 42 per cent of allocations in alternatives and notes that 77 per cent of surveyed families had an active operating business.
https://www.ubs.com/global/en/media/display-page-ndp/en-20260528-global-family-office-report-2026.html

2. CBRE, “Hotel ADR & RevPAR Continue to Rise – US Hotel Q2 2026,” July 29, 2026. https://www.cbre.com/insights/figures/q2-2026-us-hotel-figures

3. JLL, “Hotel investment momentum builds as US market posts $24 billion in 2025 transaction volume,” January 30, 2026; and JLL, 2026 Global Hotel Investment Outlook, which reports $88 billion in hotel loans scheduled to mature through 2027. https://www.jll.com/en-us/newsroom/jllreleases-2025-us-hotel-investment-trends-report

4. JLL, 2026 Global Hotel Investment Outlook, February 2026. https://www.jll.com/en-us/insights/market-outlook/global-hotel-investment