What ever happened to “certainty”? - by James O’Connell
It started on April 2nd, 2025, “Liberation Day”. That was the day that the import tariffs were going to kick in for countries all around the world. The stock market dropped 1,500 points the day before and 3,000 points on that day. And then it was the weekend and that gave everyone time to ask questions before work on Monday.
How much will pass through? What does this do to the cost of my Chinese furniture that is coming over on a ship next week? When do these tariffs take effect? With these new costs added to my already expensive renovations, can I afford to move forward?
And then there was DOGE. Will I still have a job? “I don’t need to travel as much as I planned.” What effect will the lack of government travel have on the overall hotel market?
And then there were those nice Canadians. Can you insult an entire country and expect them to continue traveling to your country for vacations? How will that impact hotels on the coast of Maine, Boston, or even Florida? What is the percentage of Canadians traveling to our national parks this summer?
And then there were the interest rate cuts! Are we getting a cut? How many cuts will the Fed cut? Will it be two cuts before the end of the quarter? What’s it going to take for one cut? Is the Fed president getting fired? How many Fed governors will be replaced? If we get a Fed funds cut, what will that do to real interest rates? Why don’t interest rates go down after a Fed funds cut?
And then the government shut down. How long can the shutdown last? I have an SBA loan in process, how long will it take to get my deal closed? Who collects and presents the data? If the Labor Departmemt is out of work, how will we know if the economy is stronger or weaker? Should I? Shouldn’t I?
As we sit and wait for the answers to these and a million other questions, two words sum up the hotel transactions market…. ‘pencils down’. Underwriting risk when you have no answers to all of these questions and “Uncertainty” rules the day is an impossible task. Beginning in April, large private equity firms and public REIT’s stayed on the sidelines, waiting to see what is going to happen. Waiting for answers and the smoke to clear.
While they watch, the race car that is the Boston hotel market has sputtered and appears flat when compared to 2024. According to the Pinnacle Advisors “Pinnacle Perspective” for Boston, Occupancy was 79.2 for 2025; and 2024, Average Daily Rate was $311.64 in 2025 compared to $310.96 for 2024 with a Revenue Per Available Room of $246.91 for 2025 vs. $246.28 for 2024. Those numbers remain some of the best in the U.S. But if revenue is flat, costs certainly are not. Labor, cost of goods sold, utilities, taxes and insurance, are all up over 2024.
As we sit and wonder if that Christmas bonus check will arrive in the mail, when can we expect this uncertainty to settle out of the system? Investors need to get back to making well calculated predictions. Maybe it’s a good sign that the DOGE contract was canceled four months early. The longer terms effects of tariffs should begin to move through the economy and worldwide trade should be able to predict pricing. The government is back open and flailing away as usual.
Searching for “certainty”… real estate investors cannot and will not remain at a standstill for very long. Transactions will increase and we will all get used to underwriting during these “uncertain times”. It will soon be 2026! Investors, please, pick up those pencils!
James O’Connell is a principal of HREC Investment Advisors, a national hospitality and real estate company specializing in hotel brokerage and capital markets transactions. He is charged with managing the New England region and works with over 50 HREC hotel brokers in 15 offices around the country.
In June of 2000, Jim founded O’Connell Hospitality Group, LLC a regional hotel brokerage company which exclusively represented hotel REIT’s, institutional investors, private equity firms and high net worth individuals. He and his team are responsible for over $1 billion in hotel transactions.
OHG merged with HREC Investment Advisors in September, 2016. Jim remained a principal within the newly expanded firm. He has spent his entire career selling hotels and credits his initial experience of managing hotel dispositions for the former Bank of New England and RECOLL Management Corp.
He is a 1982 graduate of Massachusetts Maritime Academy and holds a Master’s License for Unlimited Tonnage Vessels. He is a devoted husband celebrating 30 years of marriage and is the proud father of two very successful, fine young men.