The Hospitality Investor Sentiment Index saw a 4.1 point decrease in the fourth quarter of 2025, falling back down to 59 from 63.1. The index has given up most of the positive gains it made during 2025, falling back to roughly the same level it was 12 months ago.
The change perhaps reflects a softening in overall confidence with the dealmaking environment still not fully unlocked and global geopolitics continuing to provide an uncertain backdrop.
We’re going to take you through the 5 key takeaways from this quarter’s report.
Before we delve into this quarter’s report, a note on the methodology:
The Investor Sentiment Index values are bounded between 0 (all companies respond lower) and 100 (all companies respond higher), with a theoretical no-change mark at 50 (all companies respond ‘the same’ or equal proportions respond up as do for down).
The resulting index is called a diffusion index, with values above 50.0 signalling expansion and below 50.0 indicating contraction. The distance from the 50 no-change mark signals the implied rate of change in the variable, the further from 50.0 the faster the rate of change indicated.
For example, take a movement from 55.0 in Q3 to 52.5 in Q4. Although the level of the index has fallen, it has nonetheless posted above 50.0 in both quarters. The correct interpretation is that the sentiment was positive in both Q1 and Q2, but that the rate of increase in confidence was slower in Q2 compared to Q1.
4 Takeaways from the Q3 2025
Confidence slows
The story post pandemic has been one of continued growth for the hospitality sector. Owners and operators were able to capitalise on pent-up demand with rates growing steadily. This has also helped mitigate some of the inflationary cost pressures that have been added to businesses, such as those related to food, energy and labour.
However, there are signs that we might be coming to the end of this cycle or at least plateauing on the top line performance.
Overall confidence in long-term total accommodation demand growth (through the cycle) slowed by a 14.1 points to 70.9. This is still firmly in positive territory but reflects something of a pull pack in terms of positivity.
Confidence in leisure and corporate demand growth continued their trend of moving in the opposite direction. A study released at the end of last year by Morgan Stanley Alphawise found that travel managers were “forecasting higher year-over-year hotel bookings, airline passenger volumes and airfares” with “61 per cent of survey respondents saying they are ‘very optimistic’ or ‘somewhat optimistic’ about the outlook”.
Operational worries
This quarter’s survey also reflects the changes we have been seeing in terms of confidence relating to revenue and profit growth. Investors remain positive on top line revenue growth (59.3 -6.4), they are however getting much less confident on profitability (40.7 -7.9).
As CBRE noted in its H2 Global Hotel Outlook:
“Hotel market fundamentals are expected to remain challenged for at least the next three quarters. Year-over-year changes will be more dramatic due to strong demand last year from an active hurricane season and presidential election-related events, as well as flat per diems for travel by government workers, increased tariffs and continued competition from lodging alternatives. These headwinds are compounded by persistent labour challenges and rising operating costs, which are pressuring margins. As alternative lodging options proliferate, hotel margins are expected to decline for the third consecutive year in 2025.”
Urban beats resort
Resorts, which were were previously a marginal subsector for institutional hotel investors, have enjoyed an increase in attention over the last few years, a trend that has been reflected in many of the quarterly surveys we have conducted. This level of attention does seem to be wavering at the moment. This quarter the sentiment index in this area dipped below 50, falling 8.3 points to 48.8.
This might reflect the earlier change in sentiment towards business and leisure travel with the former being much more important to the urban market.
Lack of stock
Perhaps the most worrying datapoint from this quarter’s results is the pessimism of availability of investable hospitality stock. This datapoint has dipped below 50 for the first time falling 11.5 points to 44.2 indicating a contraction in sentiment for the first time wince we started reporting in 2022.