TL;DR: Hospitality Fund IRR Benchmarks — What “Good” Looks Like
There is no single published benchmark for hospitality private equity IRR, and any GP or placement agent who presents one as fact is overstating the data. What does exist is a clear directional picture: institutional LPs expect 12-16% net IRR for value-add hotel PE and 18-22% gross for opportunistic strategies, with realized 2021-vintage real estate PE median net IRR running at 7.4% as of Q2 2024, a number distorted significantly by the COVID demand shock on 2018-2020 vintage hotel funds. Understanding what “good” actually means in this context requires disaggregating the benchmark from the vintage, the strategy, and the geography, because the dispersion in hotel PE performance is materially wider than in almost any other real estate sector. For context on how institutional LPs use these benchmarks in fund evaluation, see our guide on how LPs evaluate hospitality private equity funds.
The absence of a published hospitality-specific PE IRR benchmark is not a data gap. It is a structural feature of the private markets information landscape that allocators and GPs need to understand before using any benchmark figure with confidence.
Preqin, Cambridge Associates, and MSCI Real Assets all publish private real estate fund return benchmarks, but none disaggregate the hotel or hospitality sub-sector from the broader real estate PE universe at the free tier. The granular hotel-specific IRR tables sit behind institutional subscription paywalls. What is publicly available are the aggregate real estate PE figures, which lump lodging with industrial, office, retail, and multifamily in a way that dilutes the hospitality signal significantly. For the 2018-2022 vintages most relevant to current fundraising, the aggregate real estate PE numbers are dominated by industrial and logistics performance, which tells an entirely different story from hotel performance during the same period.
The practical implication for allocators evaluating a hotel PE fund: the GP's claim that their IRR is “top-quartile relative to real estate PE benchmarks” may be technically true while being economically irrelevant, because those benchmarks are not hospitality benchmarks. The more useful comparison is the GP's IRR against their own prior funds across equivalent vintage periods, and against comparable hospitality-focused GPs tracked by placement agents who maintain proprietary hospitality PE performance databases.
| Strategy | LP Net IRR Expectation | Target MOIC | Premium vs Comparable RE Strategies |
|---|---|---|---|
| Core-plus hospitality | 8-10% net | 1.4-1.6x | Roughly in line with listed hotel REIT long-term returns |
| Value-add hotel PE | 12-16% net | 1.6-2.0x | 150-200 bps premium over value-add office/industrial |
| Opportunistic hotel PE | 18-22% gross (15-18% net) | 1.8-2.5x | Significant distress or complexity premium |
| APAC hotel PE (value-add) | 13-17% net | 1.7-2.2x | Additional premium for currency risk and APAC operating complexity |
The 150-200 basis point premium that value-add hotel PE commands over comparable office and industrial strategies reflects the operating business dimension of hotel investing. A repositioned office building requires capital expenditure and leasing execution; a repositioned hotel requires capital expenditure, brand negotiation, operator replacement, revenue management system implementation, and labor restructuring. That additional complexity layer justifies a return premium when the GP has the operational capability to execute it. When the GP does not, the complexity becomes pure downside.
The most important variable in interpreting any hotel PE IRR benchmark is not the strategy label but the vintage year, because the COVID demand shock created a before-and-after discontinuity in hotel PE performance that makes pre-2020 and post-2020 benchmarks almost incomparable.
| Vintage | Approx Median Net IRR | Hospitality Context |
|---|---|---|
| 2015-2016 | 10-12% | Fully deployed and mostly realized; pre-COVID performance intact for early exits |
| 2017-2018 | 5-10% | COVID disruption hit funds entering deployment phase in 2020; wide dispersion by exit timing |
| 2019 | 3-6% | Worst-impacted vintage; first capital calls landed directly in 2020 demand collapse |
| 2020 | 4-7% | Recovery vintage; early J-curve; opportunistic distress thesis partially playing out |
| 2021 | 7.4% (Preqin median, Q2 2024) | Confirmed Preqin figure; 1.07x TVPI; rate headwinds compressing early marks |
| 2022-2023 | 2-5% (early stage) | Rate headwinds dominant; early J-curve; limited realized data available |
For 2018-2019 vintage hotel PE funds, the IRR math is permanently impaired even if the underlying assets ultimately recover to full value. A fund targeting 15% net IRR that endured 18 months of near-zero NOI from March 2020 cannot recover that IRR simply by eventually achieving the original exit price. The time value of money embeds that loss permanently into the IRR calculation. This is why many 2018-2019 vintage hotel PE funds are reporting DPI of 0.3-0.5x at the 5-6 year mark while still projecting eventual total return multiples above 1.5x. The returns will be realized; the IRRs will not match original underwriting.
Distributions paid in (DPI) is the most direct measure of a hotel PE fund's liquidity performance, and for 2018-2022 vintage hotel PE funds, the DPI picture as of 2024-2025 is materially below historical real estate PE norms.
A representative median private real estate fund historically earns a DPI of approximately 1.5x after 10 years, which implies roughly 0.7-0.8x DPI by year 5-6. For hospitality-heavy 2018-2020 vintage funds, the 5-6 year mark DPI is running significantly below this norm, with many hotel-heavy funds showing DPI below 0.3-0.5x. The cause is the combination of the COVID demand shock extending hold periods and the 2022-2024 rate environment making exit pricing unattractive relative to GP-estimated values.
The unlock is starting. US hotel investment reached $24 billion in 2025, up 17.5% year-over-year per JLL, reflecting improving bid-ask alignment as buyers and sellers adjust to the post-COVID and post-rate-rise equilibrium. APAC hotel transaction volume reached $12.2 billion in 2024 and $4.7 billion in H1 2025, providing additional exit venues for APAC-focused funds. The expectation among industry participants is that DPI acceleration for 2018-2022 vintages will materialize through 2026-2028 as transaction volumes sustain and buyers gain confidence in operating fundamentals.
The RevPAR recovery narrative is more complex than the headline numbers suggest, and understanding the composition of the recovery is essential for evaluating whether hotel PE fund portfolios are tracking toward their original underwriting.
US RevPAR reached $99.94 in 2024, approximately 14-15% above 2019 nominal levels, which sounds like a strong recovery. But the composition diverged materially from how most hotel PE funds underwrite their investments. The recovery was almost entirely ADR-driven, with ADR growing significantly faster than expected due to inflation pass-through and strong luxury and resort demand. Occupancy, however, remained below 2019 levels at 63.0% in 2024 versus approximately 66.5% in 2019. Business transient and group segments, which are the primary demand drivers for the urban full-service hotels favored by most PE funds, lagged the leisure recovery that dominated the headline RevPAR numbers.
For 2025, CBRE revised full-year RevPAR growth to just +0.1%, a near-stall after years of recovery. JLL's 2025 data shows luxury RevPAR growing +3% year-over-year while midscale fell 2.8% and economy fell 4.4%. Hotel PE funds with luxury positioning are tracking close to or ahead of their original ADR assumptions; funds with limited-service or economy exposure are facing the worst operating conditions since 2020. At Bay Street Hospitality, our APAC focus provides a distinct RevPAR dynamic from the US pattern, and our underwriting assumptions for APAC markets reflect local supply-demand fundamentals rather than US RevPAR benchmarks.
Granular APAC hospitality PE return benchmarks that are publicly available are limited, and allocators should be skeptical of any source claiming APAC-specific hotel PE IRR data without a clear institutional subscription backing it.
What does exist: APAC hotel transaction volume data from JLL, CBRE, and HVS that provides a proxy for market activity and exit liquidity. Full-year 2024 APAC hotel transaction volume reached $12.2 billion, up 15% year-over-year, the most active year since 2019. H1 2025 volume was $4.7 billion, with full-year 2025 projected at approximately $12.8 billion. The top five APAC markets by H1 2025 volume were Japan at $1.5 billion, Greater China at $744 million, Australia at $664 million, Singapore at $546 million, and South Korea at $504 million. For Tokyo specifically, cap rates reached record lows in Q3 2025, having fallen 13 basis points cumulatively through 2025, reflecting the structural demand from foreign buyers receiving an effective yen discount on JPY-denominated assets. For the full transaction pricing context, see our guide to hotel EBITDA multiples by tier and market.
What is the minimum IRR a hospitality GP should show to raise a second fund?
There is no universal floor, but the practical threshold based on LP re-up behavior is a realized net IRR at or above the preferred return on any fully distributed investments, combined with a TVPI demonstrably above 1.5x on fully deployed capital. GPs who cannot show at least one fully realized hotel exit are in a materially harder position regardless of their unrealized NAV. The 2020 demand shock has given most LPs a direct stress test to evaluate: GPs who communicated transparently, made decisive operating decisions, and are tracking close to revised underwriting after extensions are being funded; those who were slow to communicate and whose assets required dilutive recapitalization are facing headwinds regardless of current unrealized marks.
How should an LP interpret a hotel PE fund's DPI of 0.4x at year 6?
For 2018-2020 vintage hotel PE funds, a DPI of 0.4x at year 6 is below historical real estate PE norms but not necessarily a signal of permanent impairment. The question is whether the unrealized value in the remaining portfolio justifies the expected eventual TVPI, and whether the GP has a credible exit timeline rather than extending indefinitely to avoid realizing marks. The most important follow-up questions are: what percentage of the remaining portfolio is in assets that have recovered to or above original underwritten exit pricing; what is the current cap rate environment in target exit markets; and has the GP exercised extension options responsibly with clear triggers for distribution.
Are APAC hospitality fund returns higher or lower than US hotel PE returns on average?
The available data does not support a definitive directional claim, but the structural factors suggest APAC returns are more dispersed rather than systematically higher or lower. APAC hotel PE benefits from yen weakness providing foreign buyer discount in Japan, strong inbound tourism demand recovery in Japan and Southeast Asia, supply constraint in gateway APAC markets, and growing institutional capital base. APAC hotel PE faces currency risk management complexity, operating model differences across markets, and thinner exit liquidity in secondary markets. The GP selection variable is at least as important as the geographic variable in explaining APAC hotel PE returns.
What RevPAR growth should a hotel PE fund underwrite for new investments in 2025-2026?
CBRE's revised 2025 RevPAR growth forecast of +0.1% is a useful anchor for near-term underwriting in US markets. For value-add strategies where RevPAR growth is not the primary return driver, the occupancy ramp and ADR recovery assumptions specific to the asset matter more than market-level RevPAR. Conservative underwriting in the current environment anchors RevPAR growth to market supply-demand data rather than recent trend, models operating cost inflation explicitly, and does not assume exit cap rate compression beyond current market levels.
About Bay Street Hospitality. Bay Street Hospitality is a Singapore Variable Capital Company (VCC) and a diversified hotel fund platform for institutional and family-office allocators. We invest across hospitality tiers and geographies, concentrating in APAC, the Middle East, Europe, and the Americas, and have publicly stated a 2032 SGX listing target. Our quantamental approach combines quantitative underwriting with on-the-ground operator relationships. To request our investor materials, contact our team directly.
This article is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security. Past performance is not indicative of future results. Bay Street Hospitality is a Singapore VCC managed by a MAS-licensed fund manager; offerings are made only to qualified investors via private placement memorandum.
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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.
