With CMBS debt delivering quasi-equity returns and interest rates unchanged, Jan Freitag’s point rings true: “If you don’t have to sell, you won’t.” For hospitality allocators, the bigger question is not when deal flow will return — it’s how to extract alpha in a market where most owners are waiting it out.

‍

Quantamental Breakdown: A Hold Regime, Not a Crash

Bay Street’s Phase 13 Regime Detection confirms a “Hold Regime” in U.S. hospitality, driven by three macro factors:

1. Debt Yield Advantage: Existing owners can hold assets profitably with structured debt that mimics equity-like returns.
2. PE Trophy Bias: Private equity’s “biggest checkbook” is still active, but only for iconic or redevelopment plays, as seen with Terra Group’s $205M Silver Sands Beach Resort acquisition — effectively a land bank for future condos.
3. Sub-$10M Deal Velocity: Nearly 500 of the 600 Q2 deals were in the sub-$10M range, emphasizing that opportunistic select-service trades are the only active tier.

Bay Street’s Bay Score volatility band for U.S. assets has widened by +60 basis points YoY, reflecting pricing uncertainty rather than operational weakness.

‍

‍

Quantamental Tilt: Where to Play in a Frozen Market

Bay Street’s AHA (Alpha Harvest Adjusted) scoring for the U.S. in 2025 recommends three strategic tilts:

1. Redevelopment as Cultural IP

Assets like Silver Sands Beach Resort (being razed for luxury condos) show that the highest IRR scenarios aren’t from running existing operations — they’re from repositioning. Cultural licensing, including art partnerships, enhances exit multiples, particularly in urban boutique markets.

2. Sub-$10M Select-Service Trades

This space remains the only liquid tier. Bay Street’s models show 7–8% IRRs with limited downside if paired with low-debt structures and ESG or wellness upgrades.

3. Trophy Properties with Long-Term Cultural Plays

Historic hotels with narrative equity (think Boulder, Charleston, Aspen) offer LSD scores 20–30% higher when coupled with art licensing. As Management of Art Galleries reminds us:

“Sustainability of cultural venues lies in the story they keep alive, not the one they start.”

‍

‍

Final Takeaway: Waiting Is Not a Strategy — Positioning Is

The muted U.S. deal flow shouldn’t push allocators to sit idle. The market is bifurcated: patient capital is buying trophies; nimble capital is trading sub-$10M select-service assets.

For Bay Street, the best plays are where cultural programming intersects with long-duration holds — creating experiential IP that compounds loyalty and valuation even in a frozen macro environment.

As we often remind LPs:

In a hold regime, the question isn’t “Who’s selling?” — it’s “Who’s quietly compounding?”

‍