TL;DR: Hospitality Fund Returns — IRR, TVPI, and DPI Benchmarks

This is the reference guide for understanding what hospitality private equity fund returns actually look like across IRR, TVPI, and DPI, and why the numbers that circulate in fundraising materials often tell only half the story. The honest answer is that granular hotel-specific PE fund return data sits behind institutional subscription paywalls at Preqin, Cambridge Associates, and MSCI Real Assets. What is publicly available points to a clear directional picture: value-add hotel PE should target 12-16% net IRR, opportunistic strategies should target 18-22% gross, and the 2021-vintage median real estate PE fund tracked at 7.4% net IRR and 1.07x TVPI as of Q2 2024. But vintage, geography, and strategy tier determine far more than any aggregate benchmark. For context on how LP return expectations drive fund manager selection, see our guide on how LPs evaluate hospitality private equity funds.

• Private real estate fund returns turned negative at –3.5% net through Q3 2023 per McKinsey, the worst performance since the GFC, with hotel PE disproportionately affected by operating leverage
• LP distributions exceeded capital contributions in 2024, the third-highest level on record, as exit activity finally accelerated after two years of market dislocation
• 77 continuation funds raised $39 billion in 2024 and 54 raised $25 billion in H1 2025, the dominant GP tool for managing liquidity in a market where traditional exits remain constrained
• Performance persistence in PE has deteriorated significantly post-2000: only 50.8% of top-quartile funds beat the median in the following fund, versus much higher persistence pre-2000
• PE investors became the most active hotel acquirers in Europe in 2024, deploying EUR 8.6 billion at a 300% increase versus 2023, as the strategy tier that generates the highest hotel PE returns concentrated in value-add repositioning

The Benchmark Problem: Why Hotel PE Returns Cannot Be Averaged

Before any return benchmark is cited, the limitation that produces the most misleading fundraising narratives needs to be stated directly: there is no publicly available, granular IRR benchmark for hospitality private equity. Preqin, Cambridge Associates, and MSCI Real Assets all publish private real estate fund performance data, but none disaggregate hotel and lodging from the broader real estate PE universe at a level accessible without institutional subscription. The free-tier benchmarks blend industrial, multifamily, office, retail, and lodging performance in ways that systematically understate industrial returns and overstate hotel fund comparability to the aggregate.

The practical consequence is that every hotel PE fund citing "top-quartile real estate PE returns" is making a comparison to a benchmark that is not its peer group. The industrial-dominated real estate PE universe of 2020-2023 outperformed hotel-heavy funds by a structurally different margin during COVID disruption. A hotel PE fund in the 75th percentile of real estate PE returns may still have delivered disappointing absolute hotel investing results, and vice versa. The only benchmarks that matter for hotel PE are the GP's own prior fund performance across comparable vintage periods, and the track records of the handful of dedicated hospitality PE managers tracked by placement agents with proprietary databases.

At Bay Street Hospitality, we believe the right benchmark for a Singapore VCC-domiciled APAC hospitality fund is not the Preqin real estate PE universe. It is the specific universe of APAC-focused hospitality strategies, adjusted for the operating environment of each vintage year and the DTA and tax incentive advantages that Singapore domicile provides relative to Cayman alternatives.

What Returns Look Like by Strategy Tier

The four strategy tiers in private real estate carry materially different return profiles, and hospitality PE's operating business dimension creates a systematic premium at each tier relative to comparable passive real estate strategies.

Vintage Year Is the Most Important Variable

The 2017-vintage finding deserves specific attention. Academic research on COVID's impact on PE vintages found that 2018-2019 vintage funds may have paradoxically benefited in some cases by acquiring at the beginning of a pricing cycle rather than at its peak. Capital call timing, which concentrated in 2020 for many 2019-vintage funds, reduced deployment volume by 38% on average across PE, meaning some hotel PE funds avoided deploying at the worst possible moment. The 2016-2017 vintage funds that had already deployed into a pricing peak, however, faced the most severe performance impairment because they paid the highest prices and then experienced COVID demand collapse at the beginning of their expected exit windows.

DPI: The Metric That Has Replaced IRR as the LP Priority

The most significant shift in LP evaluation criteria since 2022 is the movement from IRR as the primary return metric to DPI as the gating question. McKinsey's Global Private Markets Report 2025 confirmed that 2.5 times more LPs now rank DPI as "most critical" compared to three years ago. The shift reflects a rational response to an era of extended holds, fund extensions, and continuation funds that have allowed GPs to maintain attractive IRR calculations while holding LP capital for longer than underwritten.

For hotel PE funds specifically, the DPI situation as of 2024-2025 is problematic for 2018-2022 vintages. The average PE holding period has stretched past five years, and over $1 trillion of NAV is now trapped in older vintages globally. Hotel-heavy funds face the additional constraint of a transaction market that only began to normalize in 2024, with US hotel investment reaching $24 billion in 2025 at +17.5% year-over-year but still below the exit volume needed to work through the backlog of deferred realizations.

The GP response has been structural. 2024 saw a record 77 continuation funds raise $39 billion, and H1 2025 saw 54 continuation funds raise $25 billion. Continuation funds allow GPs to offer liquidity to LPs who want it while retaining high-quality assets for longer under a new vehicle. For hotel PE, this mechanism has been used extensively for assets that have operationally recovered to or above original underwriting but cannot yet be sold at exit prices that justify the IRR claimed in ongoing LP reporting. LPs evaluating any hotel PE fund should determine what proportion of prior fund NAV has gone through continuation fund structures versus traditional exits.

What Drives Outperformance in Hotel PE

Performance Persistence: Does Top-Quartile Stay Top-Quartile?

The academic evidence on PE performance persistence has deteriorated significantly since 2000, and hotel PE is no exception. Post-2000 data shows that only 50.8% of top-quartile PE funds beat the median in the following fund vintage, a near-coin-flip result. More tellingly, only 35.7% of bottom-quartile funds break above the median in subsequent funds, suggesting that underperformance persists more reliably than outperformance.

For hotel PE specifically, persistence is complicated by the operating environment dependence of returns. A GP who delivered excellent returns in the 2015-2018 period built that track record in a specific rate, supply, and demand environment that does not repeat. The question for any fund manager selection exercise is whether the specific operational capabilities that drove outperformance are reproducible across different market conditions. Track record that is entirely attributable to cap rate compression rather than operational intervention tells LPs very little about what the GP will deliver in a cap rate-stable or expanding environment.

Regional Returns: APAC vs. Europe vs. Americas

CBRE's Full Year 2024 Global Hotel Capital Flows report provides the most comprehensive regional return proxy through transaction volume and pricing data. EMEA delivered the strongest 2024 signal, with total hotel investment up 65% year-over-year and cross-border flows up 112%. Private equity investors became the most active European hotel buyers, deploying EUR 8.6 billion at a 300% increase versus 2023, concentrating on value-add repositioning strategies in markets where RevPAR was growing above inflation.

APAC is the regional outperformer by comparison to pre-pandemic baseline. 2024 APAC hotel transaction volume reached approximately 90% of 2019 levels, ahead of EMEA at 75% and Americas at 60%. Japan represented 50% of cross-border APAC investment, driven by the yen discount structural advantage for foreign buyers. The Americas declined 9.9% in total investment volume year-over-year in 2024, reflecting the slower US market normalization relative to Europe and APAC. For full details on APAC transaction multiples and cap rates by market, see our guide to hotel EBITDA multiples by tier and market.

At Bay Street Hospitality, our APAC and Middle East concentration reflects both the structural return opportunity and the tax efficiency advantage: Singapore's 80+ DTAs provide yield enhancement at the asset level that translates directly into net LP returns that a Cayman-domiciled APAC fund cannot replicate.

Frequently Asked Questions

What should a hospitality GP include in their track record presentation to institutional LPs?
The most credible track record presentation includes deal-level attribution showing the specific GP's role in each investment decision, a clear separation of realized versus unrealized returns, vintage-adjusted benchmarking that compares hotel PE to comparable hotel PE rather than aggregate real estate PE, and a detailed account of at least one investment that went through a demand disruption event. LPs will independently verify the realized returns through reference checks with prior LP contacts. For the full LP evaluation framework, see our guide on how LPs evaluate hospitality private equity funds.

How should DPI be interpreted for a 2019-vintage hotel PE fund in 2025?
A 2019-vintage hotel PE fund at year 6 in 2025 with DPI below 0.4x is underperforming historical real estate PE norms, but this needs to be understood in context. The fund's deployment coincided with the COVID demand collapse, hold periods extended by 2-3 years relative to original underwriting, and the exit market only normalized in 2024. The critical follow-up questions are: what is the current gap between GP-stated NAV and achievable exit pricing in today's market; has the GP been transparent about hold period extensions with clear exit triggers; and what proportion of the remaining portfolio has recovered to or above original underwriting. A DPI of 0.4x with a credible path to 1.6-1.8x TVPI and active exit pipeline is a different situation from 0.4x DPI with general extensions and no visible transaction activity.

Is there a meaningful difference between hotel PE fund returns in Singapore VCC structures versus Cayman structures?
The vehicle structure does not directly change the gross return of the underlying hotel investments, but it does affect net returns to Singapore and APAC LPs in two specific ways. First, the Singapore DTA network reduces withholding tax drag on income from hotel assets in treaty jurisdictions including Japan, India, Australia, and the UAE. Second, the Section 13O or 13U tax exemption at the fund level eliminates Singapore income tax on qualifying investment income. For a full comparison, see our guide to VCC vs Cayman.

How does the J-curve look for a hotel PE fund versus a diversified real estate PE fund?
Hotel PE funds have a more pronounced J-curve than most comparable real estate strategies because the value creation thesis requires operational intervention before the income profile improves. The time to positive IRR in hotel PE is typically 18-36 months from first capital call for value-add strategies, versus 12-18 months for core-plus real estate. The good news is that the operating leverage of hotels means the return profile accelerates more sharply once stabilization occurs, producing the steeper return trajectory that justifies the deeper initial J-curve.

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.