Hotel Living

Hotel-to-apartment conversions were hailed by many as a top-tier opportunity during the pandemic. Let's see where they stand today and meet some GPs executing on them.

Thesis Driven dives deep into emerging themes and real estate operating models by featuring a handful of GPs executing on each theme. The deep dives will give an investor enough context to understand the trend as well as opportunities for personal introductions to relevant GPs actively executing on opportunities. This week’s theme is on hotel-to-apartment conversions.

At the height of the pandemic in 2020, fortunes appeared dire for hotel owners. Occupancy bottomed out well below 30%, and owners of hotels across classes and locations relied upon lender forbearance to retain control of their assets. Without visibility into the recovery that was to come the following year, many owners considered converting their hotels into longer-stay apartments. Some states—including New York—even passed laws to make these conversions easier.

As of January 2023, it’s safe to say that the anticipated nationwide wave of hotel-to-apartment conversions never materialized. However, hotels are still being converted into both affordable and market-rate housing reflecting a variety of business plans and approaches. Today we will dive into a few examples of these conversions and the GPs executing on them. Can hotel conversions emerge into a repeatable real estate strategy at scale?