Over the past decade, the hospitality industry has evolved, and so has the way that private equity invests in it.
In terms of hotel private equity, what was once a niche opportunity has become a market where real estate, guest experience, and sustainable growth meet.
Even with economic challenges and rising costs, hotel private equity continues to attract long-term investors looking for both solid financial returns and experience-driven value.
EHL alum Min Su Sung, Head of Product Strategy for Asia-Pacific and the Middle East at BlackRock Private Equity Partners, offers an insider’s view: “Every crisis creates inefficiency, and inefficiency creates opportunity.”
In this article, we share his perspectives on why hospitality, powered by private equity, is now a strong, flexible part of a balanced investment portfolio.
Private Capital is Reshaping the Hospitality Asset Class
Before the global pandemic, hotel investments hit a record high of US$66 billion in 2019. When travel restrictions kicked in, the number of transactions dropped sharply. However, smart investors didn’t back down; they changed their strategies.
Today, the opportunities in hospitality investment are more varied than ever, featuring not just traditional hotels, but also serviced apartments, co-living spaces, and travel tech companies.
The Shifting Landscape of Hotel Ownership
Min Su Sung studied hospitality management at EHL and began his career at Shilla Hotels & Resorts in Korea before moving into finance.
His experience shows the growing need for professionals who can combine knowledge of hotel operations with financial skills. This mix of abilities is especially important today as hotel ownership shifts from individual owners to large investors and private firms.
In Europe alone, hotel transactions reached about EUR 17.4 billion in 2024, with US-based investment firms like Blackstone, Starwood, and KKR making up nearly a quarter of the total deals. This trend is also seen in Asia and the Middle East, where investors are looking for profits in major city markets.
[INFOGRAPHIC DIRECTION NOTES: Average room revenue in euros across 5 European hotel markets London, Paris, Amsterdam, Warsaw and Vienna. https://realestate.union-investment.com/en_GB/magazine/research-view/european-hotel-markets-2024
The New Hospitality Asset Class
The hospitality industry has changed; it’s no longer just seen as a niche, luxury option. Investors now consider it a solid mix of real estate and business, providing steady cash flow and growth opportunities through branding and unique experiences.
This approach is typical of modern private equity in hospitality. Instead of going after high-profile properties, focused funds look for struggling or poorly managed hotels, often family-owned, with the goal of improving and expanding them.
Today, private investment in hospitality includes:
- Platform investments: Creating companies to buy groups of properties
- Secondary transactions: Buying partial stakes in funds at discounts.
- Co-investments: Partnering with other investors to share in potential profits without full exposure
- Sustainable redevelopment projects: Upgrading old properties to be energy-efficient and more appealing to customers.
This broader strategy reflects a growing preference for long-term investments, where quality properties are held for longer than the typical ten-year fund life to increase value over time.
[IMAGE DIRECTION NOTES: Front of luxury hotel building with multiple flags flying, eg EU, UK, USA, etc ]
Trends Shaping Hospitality Investment
Resilient demand and constrained supply
After the pandemic recovery, hotel investment trends indicate that the demand for travel and hospitality assets significantly exceeds the available supply. In the UK alone, 2024 saw hotels worth £5.75 billion change hands, 20% above the ten-year average.
Families, sovereign wealth funds, and private investors are actively seeking attractive properties, but limited supply is driving up valuations.
Strong occupancy rates, rising average daily rates, and the emotional appeal of ownership continue to support the sector, even in the face of inflationary pressures.
Operational transformation and technology
The digital evolution in hospitality has attracted private investment into the technology sector, encompassing areas such as property management systems, booking platforms, and guest experience analytics.
There is a growing demand for investors with operational backgrounds to assess these non-real-asset opportunities. The capacity to integrate data insights with service design is becoming a significant competitive advantage.
Sustainability and ESG integration
Sustainability has become an important issue that we can’t ignore. As Sung points out, ESG (Environmental, Social, and Governance) standards are now part of how BlackRock makes investment decisions.
However, the actual use of these standards varies widely. Experts acknowledge that even though there is more pressure from regulations, many guests still pick hotels mainly based on location and service, rather than on certifications.
For private equity, the challenge and opportunity lie in finding a balance between making money in the short term and following environmental guidelines in the long term. Efforts like energy-efficient upgrades, using renewable energy, and reducing waste are becoming more popular, especially among institutional owners who need to disclose their practices.
Labor Costs and Profit Pressure
In Europe and Asia, rising wages have affected profit margins. In some areas, the average cost of employees has gone up by 30% since 2021, which has cut hotel profits by about 2%. Because of this, investors are paying more attention to staffing models and looking into automation options during their research process.
Liquidity and Secondary Market Opportunities
Current market disruptions are creating chances in the secondary market, where funds buy shares in existing portfolios at lower prices. This helps sellers get cash quickly and gives buyers a way to diversify their investments. It's a good entry point for investors who are cautious about overall economic uncertainty.
Building an Investment Edge in Hospitality
The key to success in hotel private equity is managing risk carefully. As Sung points out, "We first look at what could cause a business to fail." It’s more important to understand the risks, like cash flow issues, high debt, or weak operations, than just focusing on positive outcomes.
Key diligence areas now include:
- How well cash flow can hold up under pressure
- Costs for improvements, especially in older or regulated buildings
- The quality and commitment of management
- The economics of the brand and distribution.
Flexibility in exiting investments, which includes options like franchises or management contracts Investors are also rethinking how they invest in this area. Some prefer to own properties directly with operators who don’t have their own brand, while others like fund structures that provide professional management.
In a sense, there’s no single way to do it. The hotel sector is appealing because it offers a variety of options, from active ownership to more hands-off investments.
How to Succeed in hotel private equity
Success in hotel private equity requires more than just knowing finance; it also needs strategic thinking, patience, and a good grasp of how hotels operate. Successful investors in this field know how to weigh risks and opportunities, blend data with human judgment, and think long-term.
Here are some key principles that set apart effective hospitality investors: choosing the right management teams, focusing on sustainability, and knowing the right time to enter the market.
Understand the Hybrid Nature of Hotels: Hotels are both real estate properties and businesses. It’s important to look closely at their location and brand value, just like you would with financial statements.
Focus on Management Skills: If you choose the right people, you can fix almost anything. Spend time getting to know the management teams before you invest your money.
Be Proactive with Capital Expenses: Every deal comes with some hidden costs for repairs and improvements. Plan ahead for upgrades and sustainability projects from the start.
Diversify Your Investments: Combine different types of properties, like luxury hotels in cities and mid-range hotels in smaller areas, or explore alternative lodging options. This strategy helps reduce risk.
Take Sustainability Seriously: Think of sustainability as a way to boost efficiency, not just a marketing gimmick. Saving energy and being ready for regulations can help maintain the value of your investments.
Use Technology to Improve Operations: Invest in technology and data tools that help with pricing, staffing, and enhancing guest experiences.
Build Relationships for Better Insights: Private equity is all about relationships. As Sung says, "Nothing beats personal referrals." Connect with your peers, lenders, and advisors to gain valuable insights.
Time Your Fundraising Well: Launch your funds when the market is down, not when it's at its peak. A strong history of performance and a unique approach can help you raise funds more quickly, sometimes in as little as six months.
Look for Hidden Opportunities: Trust your gut and consider investing in properties that others might overlook. Often, under-managed assets have the greatest potential for growth.
Be Patient and Think Long-Term: Funds that continue indefinitely allow investors to weather market ups and downs and earn returns over the long haul.
Hospitality’s Future is Built on Connection
At its core, hotel private equity is more than just capital allocation; it revolves around creating spaces where people can connect.
This emotional aspect explains why, despite market volatility, this asset class continues to attract both institutional and family investors. For EHL graduates and industry professionals, the intersection of finance and human experience represents a promising opportunity.
The next generation of investors must combine analytical rigor with empathy for guests, employees, and communities. As Min Su Sung emphasizes, “There is a significant opportunity in travel and hospitality businesses for those with a service mindset to truly excel.”
His perspective highlights that human understanding is a crucial differentiator, even in high finance. “We spend a lot of time on calls with managers and partners,” he notes. “Nothing is more valuable than person-to-person references.”
This people-first approach, rooted in trust and a shared sense of purpose, is what distinguishes resilient investors from those who operate purely on a transactional basis.
