TL;DR: Hotel EBITDA Multiples by Tier and Market

Hotel EBITDA multiples range from 4x for economy assets in regional US markets to 20x for trophy luxury properties in gateway cities, and the spread has widened meaningfully since 2022 as luxury demand bifurcated from midscale and economy. Understanding where a specific asset sits in this range, and whether the multiple is justified by the operating fundamentals and exit liquidity of that segment and market, is one of the most consequential underwriting decisions in hotel PE. The public-private multiple gap is also real: asset-light hotel operators like Marriott and Hilton trade at 18-24x EV/EBITDA, while hotel real estate transactions price at 4-14x, a 30-50% discount that reflects the difference between brand royalty income and real estate operating income. For context on how these multiples feed into LP return expectations, see our guide on hospitality fund IRR benchmarks.

• Luxury and trophy hotel transactions: 14-20x EBITDA; economy and midscale: 4-7x EBITDA; select-service and extended-stay: 7-10x EBITDA
• US hotel cap rates stabilized at 7.3-8.1% by mid-2025; hotel cap rate spread to 10-year Treasury compressed to 2.44% in Q1 2024, signaling end of COVID risk premium
• Tokyo prime hotel cap rates hit record lows in Q3 2025, falling 13 basis points cumulatively through 2025 driven by foreign buyer yen discount and inbound tourism surge
• European hotel transactions reached EUR 22.6 billion in 2025, up 30% YoY, the third-highest level ever recorded; average price per room EUR 210,000
• Luxury RevPAR grew +7.8% YoY in Q1 2026 while economy fell -2.1%, validating the 2-5x multiple premium luxury commands over select-service on equivalent NOI

EBITDA Multiples by Segment: The Full Range

Hotel transaction EBITDA multiples vary more widely than in any other major real estate sector, because the multiple reflects not just the real estate value but the operating business embedded in the asset: brand strength, management contract structure, RevPAR growth potential, and the depth of the buyer pool willing to pay for that specific combination.

The 4x-8x rule of thumb cited for general hotel acquisitions covers the broadest range of transaction activity by volume. But this range masks the most important dynamic in the current market: luxury is trading at a 2-5x multiple premium over select-service on equivalent NOI, and that gap has widened since 2022. JLL's Q1 2026 data shows five single US hotel assets trading above $100 million in a single quarter, all luxury or upper-upscale, and luxury RevPAR growing at +7.8% year-over-year while economy RevPAR fell 2.1%. Capital is concentrating at the top of the quality spectrum, and the multiple premium for luxury versus economy has not been this wide since before the 2008 financial crisis.

Cap Rates by Market: The Geographic Picture

Price Per Key: The Transaction Currency of Hotel Investment

The Public-Private Multiple Gap

Marriott International trades at approximately 20-24x EV/EBITDA with an $87.56 billion market capitalization. Hilton Worldwide trades at 18-22x EV/EBITDA with a $70.84 billion market cap. Both companies earn the majority of their income from management and franchise fees on hotels they do not own, making their income stream capital-light, recurring, and growing with global hotel supply regardless of any specific asset's performance. Private hotel real estate transactions price at 4-14x EBITDA for owned-and-operated hotels, a 30-50% discount to the operator multiples.

The discount is appropriate, not anomalous. An owned hotel EBITDA is capital-intensive, subject to operating leverage, and sensitive to the specific asset's demand drivers. A franchise fee stream is a percentage of revenue, grows automatically with inflation and market RevPAR, and requires no incremental capital deployment. Buying a hotel building for 10x EBITDA and a franchise fee stream for 20x EBITDA are not comparable investments, even if both are “in hospitality.” The PE fund that confuses the two benchmarks in its LP presentation is either poorly advised or hoping its audience does not understand the distinction.

What the Rate Cycle Did to Hotel Transaction Multiples

In Q3 2023, US hotel CMBS rates peaked at 8.4%, while average hotel cap rates were approximately 8.0%. This created negative leverage for the first time in the post-GFC era: a buyer financing at the prevailing CMBS rate would earn a lower unlevered return than the financing cost, making leveraged acquisitions value-destructive at any typical LTV. Transaction volume contracted 35-40% in 2022-2023 as buyers and sellers could not bridge the pricing gap implied by this math.

By Q1 2024, hotel cap rate spreads to 10-year Treasuries compressed to 2.44%, near a historic low, and positive leverage was restored. By late 2025, the spread between hospitality interest rates at approximately 7.11% and hotel cap rates at approximately 8.17% created 106 basis points of positive leverage, restoring the basic arithmetic of levered hotel acquisitions. This is why US hotel transaction volume reached $24 billion in 2025, up 17.5% year-over-year: the mechanism of leveraged acquisition became viable again for the first time since 2021. GPs who held through the rate cycle rather than selling at distressed 2023 pricing are now seeing that patience rewarded in exit pricing.

Japan: The Standout APAC Market

Tokyo prime hotel cap rates fell 13 basis points cumulatively through 2025, hitting record lows in Q3 2025, in a consistent quarter-by-quarter compression trend that has persisted through multiple consecutive CBRE Japan quarterly surveys. Japan hotel transaction volume reached $3.5 billion in 2024, a 15% year-over-year increase, and remained the leading APAC destination for hotel capital in H1 2025 at $1.5 billion.

The structural driver is currency. The yen has been at multi-decade lows against the USD and major currencies through 2024-2025, providing foreign buyers with an effective 15-30% price discount on yen-denominated assets compared to pre-2022 exchange rates. A foreign buyer purchasing a Tokyo hotel at a 4.0% JPY cap rate is effectively acquiring at a materially different USD-equivalent return than that cap rate implies once currency positioning is factored in. This has compressed JPY cap rates in headline terms while maintaining or improving USD-denominated returns for foreign buyers, creating a dynamic where international capital is structurally motivated to continue pushing Tokyo cap rates lower. For Bay Street Hospitality's APAC investment framework, the Singapore-Japan double tax agreement generates direct economic benefit relative to a Cayman-domiciled alternative in this market. For context on how the VCC structure supports APAC investments, see our VCC vs Cayman guide.

Notable Benchmark Transactions (2024-2025)

The KKR and Baupost acquisition of a 33-hotel Marriott-branded UK portfolio from Abu Dhabi Investment Authority for approximately £900 million in December 2024 was the single largest UK hotel transaction of 2024 and one of the defining benchmark transactions for European full-service hotel pricing. The deal drove UK hotel transactions to EUR 7.8 billion for the year, a 197% year-over-year increase, reclaiming the top European market position.

Covivio's acquisition of 43 AccorInvest hotels across France, Belgium, and Germany for EUR 800 million in a portfolio swap structure illustrated operator-adjacent buyers using portfolio consolidation mechanics to acquire at favorable pricing. European hotel transactions reached EUR 22.6 billion in 2025, up 30% year-over-year, the third-highest level ever recorded. Average deal size was EUR 31.1 million per hotel; average PPK was EUR 210,000, a 7% increase from 2024 reflecting higher average transaction quality rather than broad market appreciation.

Frequently Asked Questions

How do I use EBITDA multiples versus cap rates in hotel underwriting?
EBITDA multiples and cap rates measure different things and should both appear in hotel underwriting. The EBITDA multiple captures the total operating business value including management contract structure, brand premium, and operating leverage. The cap rate captures the NOI yield on the real estate asset, treating the hotel more like a traditional real estate investment. For hotels with strong management contracts and brand premiums, the EBITDA multiple will appear lower relative to cap rate because the management fee is already subtracted from NOI but adds value to the buyer. Sophisticated hotel PE underwriting uses both, with the EBITDA multiple as the primary valuation metric and the cap rate as the exit scenario stress test.

Why do luxury hotel transactions command such a large premium to select-service?
The luxury premium reflects four structural factors that compounded through the 2022-2025 period: demand resilience (luxury RevPAR grew +7.8% in Q1 2026 while economy fell 2.1%), barriers to entry (new luxury hotel construction is economically unviable at current construction costs in most gateway markets), exit liquidity (the buyer pool for luxury assets includes global institutional capital and branded residence developers), and optionality (a luxury hotel site in a gateway city carries embedded development optionality that a select-service asset does not have).

What does the APAC 480 bps secondary market premium mean for investors?
The 480 basis point spread between APAC secondary hotel yields and primary market yields as of Q3 2025 reflects an unusually wide bifurcation between Tokyo and Singapore trophy asset pricing and regional APAC market pricing. For investors, this spread creates a genuine risk-return choice: primary market assets at 3.5-5.0% cap rates offer stability and continuing cap rate compression, but at yields that provide limited spread over financing costs. Secondary market assets at 7.5-9.0% cap rates offer higher yields but require more intensive asset management and carry thinner exit buyer pools. Neither is uniformly correct; the allocation between primary and secondary APAC markets should reflect the GP's operating capability and the LP base's return requirements.

How should a GP think about exit cap rate assumptions in 2025-2026 underwriting?
The safest 2025-2026 underwriting approach is to assume exit cap rates in line with current market survey data rather than projecting compression beyond current levels. For US hotels, this means exit cap rates of 7.5-8.5% depending on segment and market. For Tokyo, exit cap rates should reflect the current record-low trajectory but should not project further compression as a base case. The allocator stress test most commonly applied is whether the investment still generates a positive return at exit cap rates 100-150 basis points above current market levels, which represents the rate scenario experienced in 2022-2023. Any underwriting that fails this test is pricing in cap rate compression as a required component of the return thesis rather than an operational value-creation thesis.

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.