As CoStar’s Jan Freitag and STR’s Isaac Collazo explained in the Tell Me More podcast, despite the gloom surrounding consumer sentiment, U.S. hotel performance metrics remain solid. Revenue per available room (RevPAR) is up 1.6% year-to-date, and average daily rate (ADR) continues to rise — up 1.8% in April, the highest since January. While still below inflation, these numbers speak to resilience and pricing power in a fragmented demand environment.
Bay Street’s internal analytics, powered by our Adjusted Hospitality Alpha (AHA) and Bay Score models, similarly suggest a stabilization narrative is emerging — particularly in urban submarkets supported by group and trade show demand. San Francisco’s 37.4% RevPAR gain in April, driven by large events, is a textbook example of event-based reversion. As we’ve discussed in recent LP meetings, the ability to forecast calendar-sensitive rebounds is a key component of our “Transient-Adjusted Yield” module, and we’re increasingly layering these adjustments into our RevPAR-normalized scoring for public and private assets.
More significant, in our opinion, is the commentary around the U.S. hotel construction pipeline. For over three years, developers maintained a low-but-consistent pace of new groundbreakings, adapting to higher costs and tighter capital. But now, Freitag notes, we’re seeing that number decline. The reasons are clear: while properties are still opening, fewer are being funded or initiated.
From a quantamental lens, this is a classic case of supply-side asymmetry. Fewer new starts combined with healthy demand—even if modestly growing—means existing assets should see a compression in forward yield spreads, increasing the long-term intrinsic value of stabilized properties. It’s also a trigger for Bay Street’s Liquidity Stress Delta (LSD) model to reduce exit volatility scores in certain urban cores, provided macro conditions hold.
This macro-micro mismatch also intersects with another trend Bay Street has been tracking closely: luxury asset owners reassessing their operating narratives. In the past 45 days, we’ve met with three U.S.-based art families seeking to license or co-brand their collections with the right hotel platforms. In each case, the art was not just a design statement — it was a strategic differentiator.
As referenced in Art Collecting Today, “Collectors are increasingly viewing their works not only as financial assets, but as vehicles for legacy and narrative control.” In a low-pipeline environment, where future brand distinction will rely more on experience than expansion, the integration of culturally significant, institutionally-curated art is no longer peripheral — it’s a pricing power tool.
Quoting from Management of Art Galleries, “It is not enough to hang art; one must manage meaning.” The same applies to hospitality: it is not enough to own or operate a hotel; one must manage the meta-narrative of the stay. Our thesis is that experiential capital — art, culture, community — is what will allow certain operators to transcend rate ceilings and generate sustained excess return (AHA).
While national averages provide stability, it’s in the micro-markets that quantamental conviction truly compounds. Cities like Tampa, Miami, Los Angeles, and Chicago all recorded 6%+ RevPAR gains. Bay Street’s Geo Risk Heatmap and Bay Score Delta modules flag these locations as overweight targets, particularly when paired with owner-operator groups willing to embrace new art-collaboration strategies.
Moreover, the current narrative vacuum around consumer confidence—despite flat or improving hotel fundamentals—reminds us of a core lesson from Peter Lynch’s Beating the Street: “The best stock to buy may be the one you already own.” In hospitality, the best asset to underwrite might be the one overlooked due to sentiment, but performing quietly in RevPAR resilience, pipeline scarcity, and asset improvement trajectory.
We view the current U.S. hospitality landscape as defined by performance divergence—where narrative anxiety is out of sync with real data. For allocators willing to embrace a data-rich, behaviorally aware, asset-by-asset underwriting model, this is a prime moment to build position in urban assets with compression potential, operator-art partnerships in play, and supply caps acting as a tailwind.
In our view, this is not a time to retrench. It’s a time to deploy—selectively, smartly, and with the full quantamental toolkit in hand.
Bay Street Quantamental Team
For further insights, please contact your Bay Street LP Relations representative or visit our data portal to view updated AHA, BAS, and RevPAR trajectory forecasts across core and opportunistic markets.
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Bay Street Hospitality is a diversified hotel fund series for allocators seeking quant-driven exposure across top countries, operators, and hotel tiers. The fund targets a diversified portfolio in both high-growth emerging markets and stable developed markets, optimizing risk-adjusted returns. The leadership provides structured equity and pivotal strategic guidance to hotel-related investments. The fund establishes joint ventures with best-in-class partners, focusing on deal flexibility, currency considerations, tax efficiency, and clear exit strategies.
