Noble's Dustin Fisher in Hospitality Investor: Navigating Hotel Capital Markets with Discipline
Navigating hospitality market cycles requires discipline - not just patience.
As loans originated in a lower-rate environment mature, many hotel owners are confronting a capital stack that no longer aligns with today’s cost of capital. The result is a transitional period across hospitality capital markets.
In Hospitality Investor, Noble’s Principal and Head of Acquisitions, Dustin Fisher, shares perspective on how fundamentally sound assets continue to perform in this environment. Lenders are often working constructively with credible sponsors - through extensions, modifications, and other solutions - allowing time for recovery and repositioning rather than forcing premature outcomes.
The differentiator today is capital discipline: maintaining prudent leverage, reinvesting in the asset, and executing with operational rigor.
At Noble, these principles have guided our approach across cycles as we focus on delivering durable, risk-adjusted returns for our institutional partners.
Read the full article below.
Patience or pretending? Financial stress tests hotel owners’ ability to hold
By: Nellie Day
Kenny Rogers never sang about debt yields or PIPs, yet he still managed to offer some of the best investment advice in the industry:
You've got to know when to hold 'em
Know when to fold 'em
Know when to walk away
And know when to run
For many hotel owners navigating today’s capital markets, that decision is now front and center. To be sure, this isn’t 2008 – but it’s also not 2021. At that time, many assets were underwritten with the expectation that capital would remain both accessible and inexpensive.
Instead, owners now face a market where interest rates are higher, valuation growth has slowed and refinancing proceeds often fall short of outstanding loan balances. Unlike 2008, when distress was driven by collapsing credit availability and operating performance, many of today’s hotels remain fundamentally sound. Yet, pressure is emerging…
“The stress is capital-structure driven, not demand-driven,” explains Ryan Bosch, principal at Arriba Capital. “Hotels are largely performing. The pressure is coming from the liability side of the balance sheet.”
Much of that exposure traces back to CMBS loans originated in 2021 and 2022, when borrowers were able to accept tighter margins and higher leverage. Nearly 80 percent of that conduit maturity pool was already showing signs of stress as of last year, Bosch notes, with loans underwritten at debt yields below 9 percent now maturing into an environment where refinancing proceeds no longer support the original capital stack.
“This isn't a recession story,” he continues. “It's a mismatch between where the capital stack was built and where the cost environment landed.”
That mismatch is forcing owners, lenders and investors to confront a question the industry has largely been able to avoid. Here’s a hint: it’s not whether stress exists. It’s how long can that stress be managed before holding is no longer the smart play.
Under pressure
Travis Burns, executive vice president of business development at Remington Hospitality, admits the caution lights are starting to flash.
“We’re seeing cracks first in older full‑service assets with big boxes, big banquet space and even bigger capex hangovers, especially those financed at floating rates,” he says. “Pre-COVID acquisitions that deferred PIPs for too long are feeling the squeeze as NOI can’t keep pace with debt service coverage ratios. Secondary and tertiary markets with softened mid-week demand are where stress shows up fastest.”
For Dustin Fisher, principal and head of acquisitions at Noble Investment Group, the earliest signs of stress are showing in assets that have been capital starved for an extended period and are struggling to remain competitive within their markets.
“In many cases, these hotels sit within ownership structures that lack either the ability or the economic justification to reinvest meaningfully in the property,” he adds. “Without capital to address deferred maintenance or brand standards, competitive positioning erodes quickly.”
Fisher believes this dynamic is often compounded in markets with outsized fixed-cost structures, particularly elevated labor and operating expenses, which leave little margin for underperformance.
Take Northern California, for example. Not only are coastal markets facing insurance repricing that’s permanently changed the operating cost profile, but the pandemic also permanently changed business culture.
“The earliest signs of financial pressure in California are being seen in San Francisco, Oakland and San Jose/Silicon Valley,” says Alan X. Reay, president of Atlas Hospitality Group. “This is being led by larger full-service hotels, such as the Parc 55 and Hilton at Union Square in San Francisco and the ex-Fairmont in downtown San Jose. These hotels relied heavily on commercial meetings and convention business and have been negatively impacted by the huge vacancies in office buildings and remote work.”
Yet even as financial pressure builds, many owners remain reluctant to sell. Peter Brogan, vice president of hospitality asset management at Stockdale Capital Partners, thinks he knows why.
“Most owners have strong conviction in the basis of their assets, and they will therefore pull whatever levers are available to push off a forced sale while lodging demand recovers and the interest rate environment improves,” he explains.
Brogan is confident in his explanation because Stockdale’s own portfolio is composed of similar high-conviction assets in gateway markets, including Los Angeles and San Francisco.
“We continue to ride out the market recoveries benefitting from our defensive low leverage positions,” he adds.
Buying time
Having low leverage is enviable, but it’s been far from the only option in today’s environment. For many, holding isn’t a matter of conviction alone; it’s a matter of cooperation. Rather than selling into an uncertain pricing environment, many borrowers and lenders are working together.
“Lenders have generally shown a willingness to work constructively with owners where there is clear positive intent and a credible business plan,” Fisher says.
That cooperation has most commonly taken the form of loan extensions or modifications rather than significant restructurings. The result is that many potential forced sales have instead been deferred.
“The flexibility from capital providers has effectively reduced the near-term distress-driven transaction pipeline,” Fisher continues.
Bob Bernard, senior vice president of Northmarq, sees a lot of flexibility in this market. This applies to both banks, which he says have been “reasonable” in extending loan maturities, as well as to the amount of capital solutions out there.
“Several years ago, financing options for hotels were limited, but today CMBS lenders, debt funds, banks and even insurance companies are active in hospitality,” Bernard says, while noting that CMBS lenders tend to be more rigid and often charge significant extension fees.
Matin Roshan, vice president of Dekel Capital, adds that the incentive for lenders to help an owner hold on are obvious.
“Lenders typically don’t want to take back hotels,” he explains. “They’re not set up to operate and sell those types of assets, especially because hotels are fundamentally operating businesses.”
Reay has witnessed a similar pattern.
“The vast majority of the larger full-service hotels were financed through CMBS, which, through their special servicers, historically have moved very slowly to take over assets, instead preferring to ‘extend and pretend,’” he says.
Bosch adds that many of these maturity extensions are actually disguised as modifications since “loan extensions have been the primary relief valve.”
Burns says that dynamic has helped owners avoid locking in losses, as most equity partners know a forced sale today guarantees a “haircut.” But those warning lights are getting brighter…
“We have seen a change in mood from lenders,” he adds. “The overall tone from lenders [at a recent hotel investment conference] was that their patience to extend has run out.”
He sees operators doing their parts by squeezing margins, smoothing cashflows and supporting PIP deferrals where brands allow it. But this activity has also made extensions, restructures and quiet equity top‑offs more common than ever.
“GPs are essentially buying time,” Burns continues.
Naturally, refinancing is the quintessential way to buy time. It’s a viable – albeit expensive – option for well-capitalized owners, but not so much for those who are overleveraged. Or those staring down required renovations.
“We are seeing a lot of hotels owners being pressured into selling at today's discounted prices as they are faced with very costly PIPs mandated by the franchise companies,” Reay says. “Higher interest rates and lower appraised values have taken away the refinancing option and increased pressure on owners to sell.”
Fisher says loan extensions, refinancings, low leverage and other capital solutions have allowed owners to hold rather than sell into a dislocated valuation environment, limiting forced sales and delaying meaningful pricing resets.
He also says the clock’s ticking.
“Over the next one to three years, capital recycling mandates are likely to be a leading catalyst for sales and recapitalizations,” Fisher adds. “There remains a meaningful population of ‘zombie’ assets and ownership groups that have limited flexibility and will ultimately require resolution.”
For now, that long-anticipated resolution has yet to take the form of forced sales.
“We’ve all been waiting for the wave of distress, but the wave hasn’t come yet,” Roshan admits.
Instead, assets are resolving gradually as lenders and borrowers work through maturity pressures on a case-by-case basis.
“The result is a slow bleed, not a crash,” Bosch notes, adding that assets are transferring through negotiated sales, discounted payoffs and note purchases rather than auction-style liquidations.
Still, Burns expects this pace to accelerate as more loans mature and capital obligations come due.
“The big dominoes will be loan maturities, brand-mandated renovations and refi moments that simply don’t pencil at today’s rates,” he says.
Add in partnership buyout deadlines and deferred maintenance catching up, and Burns believes we’ll get that wave, though it’ll come in the form of “motivated but not distressed” sellers over the next 12 to 36 months.
“The pressure isn’t dramatic, but it’s building and, eventually, math always wins,” he says.