Brookfield has identified luxury hospitality as one of the real estate subsectors it is watching closely, highlighting the supply and demand tailwinds that continue to attract institutional capital.
Speaking at Brookfield's recent investor day, Lowell Baron, CEO of the firm's real estate group, said there remained significant white space for new investment strategies:
"We're going where we have the highest conviction in the opportunity set and what's happening. Right now, we're doing things like housing and logistics. We've raised our first regional fund in Europe and a regional fund in Asia Pacific.
"But there's a lot of opportunity to grow that beyond. We're looking at things like luxury hospitality, which has good tailwinds, triple net lease, which we think is interesting. So it's evolving and it's early, but we'll be able to pick our spot."
Brookfield's interest comes at a time when luxury assets in key gateway and resort locations continue to attract significant capital.
Luxury owner and developer Aman has attracted sizeable outside investment in recent years. In 2022, the company raised $900m in a funding round led by Saudi Arabia's Public Investment Fund and Cain International. A year later, it secured a further $360m from investors including Mubadala Capital and Alpha Wave Ventures. Earlier this year, Aman owner OKO Group and South Korea's Shinsegae announced a $500m joint venture to develop Aman and Janu hotels, branded residences and mixed-use projects globally.
Others are also looking to increase their exposure to the sector. In March, Cedar Capital Partners and L Catterton Real Estate launched a strategic joint venture focused on building a luxury hospitality platform across Europe and North America. The partnership is pursuing a value-add strategy centred on the acquisition, repositioning and transformation of iconic luxury hotels in major urban and resort destinations.
Taken together, the moves suggest luxury hospitality is increasingly being viewed as a dedicated institutional allocation rather than simply a niche corner of the hotel market.
Brookfield's real estate thesis
Another comment from Baron helps explain why the company may be taking a closer look at hospitality.
"In real estate, there are three things we focus on in every deal. It's the high-quality nature of the assets we're buying, finding a way to buy them at a very attractive value and then creating growth in the underlying profitability of the asset. And in today's market, I would say that third one may be the most important.
"What we're avoiding today in a market with sticky inflation and high interest rates is even if we can find a great asset and buy it incredibly cheap, if it's fully locked in and there's no ability to grow your cash flows, that's something we're not going to spend time on.
"Some people would call that core real estate and low risk. We would actually say that's got more risk attached to it because if you end up in a place with higher interest rates and higher exit cap rates, you have no ability to grow your way through that."
What this tells us is that, in Brookfield's mind, buying and holding an asset with limited operational flexibility is no longer enough in today's market. Brookfield is effectively arguing that investors need assets with growth potential embedded in the operating model, rather than relying on cap rate compression or passive income streams to generate returns.
Hotels fit that thesis particularly well. Unlike office buildings or other long-income real estate assets, hotel rates can be repriced daily and revenues can grow alongside demand. Owners also have a wide range of operational levers available to improve profitability, from brand repositioning and F&B strategy to technology, distribution and revenue management. They can also deploy capital into renovations, repositioning programmes and operational improvements to unlock further value.
In that sense, Brookfield's interest reflects a broader shift in institutional real estate towards operationally intensive asset classes where active management can drive performance.