Every hotel investor eventually faces a build-or-buy decision, and the instinct still favors building. New supply carries prestige, and a clean project reads well to capital. The current market, however, presents a strong case for the opposite move.
A well-located resort can be acquired at a discount to replacement cost and repositioned into materially stronger income within two years, making the standing asset a potentially faster route to value creation. The opportunity in this cycle is an existing property, correctly chosen and properly run.
Acquisition starts ahead
Ground-up development has become increasingly expensive. According to HVS Global Hospitality Services' “2025 U.S. Hotel Development Cost Survey,” the median cost to develop a U.S. hotel was approximately $219,000 per room. For full-service hotels, the median rose to about $409,000 per room, while luxury hotel development exceeded $1.057 million per room. These figures illustrate the capital intensity of creating new hotel supply, particularly at the upper end of the market.
The pressure is not limited to construction costs. HVS has also noted that elevated development costs and financing conditions continue to constrain new hotel supply, with projected supply growth remaining well below pre-pandemic levels. A ground-up project also carries the additional burden of environmental review, permitting, utilities, construction and pre-opening, keeping capital committed while income remains several years away.
An existing resort starts from a different position. The buyer inherits the land, buildings, utilities, operating infrastructure and market presence that a new developer still has to create. The opportunity is therefore not simply to buy an operating hotel, but to acquire an established platform and redirect it toward a more valuable use.
What tenure builds
Cost and speed are the visible advantages. The decisive advantage runs deeper.
A resort that has stood in its region for decades carries relationships earned only with time, the farms that anchor its kitchens, the practitioners who lend its wellness programming credibility, the cultural institutions that fill its calendar, and the standing to serve as an economic anchor for the area around it. A competitor with capital can rebuild the spa in eighteen months. Thirty years of regional trust takes 30 years.
This is one of the more durable advantages in leisure hospitality, and it belongs to assets that already stand, accruing to an owner patient enough to inherit and deepen it.
The return is in the repositioning
Acquisition sets the basis. The return follows from changing how the asset earns.
Many older resorts reaching the market were built around a room-led model in which room rates carry the property and everything else plays a supporting role. The leisure guest has become more focused on the experience surrounding the stay. In the drive-to leisure market, where a short break can be taken within a few hours of a major city, the value of the property increasingly depends on how the guest spends that time.
The scale of the opportunity is visible in the growth of wellness and experience-led travel. According to the Global Wellness Institute, global wellness tourism expenditures reached nearly $894 billion in 2024. The broader global wellness economy reached $6.8 trillion in 2024 and is projected by the institute to reach $9.8 trillion by 2029, representing projected annual growth of 7.6 percent.
For resorts, the implication is straightforward. Wellness, programming, entertainment, recreation and dining can become revenue-generating components of the product rather than amenities that simply support the room sale.
A repositioned resort can therefore be measured on total revenue per guest rather than room revenue alone. The objective is to broaden the revenue base, increase guest spend and create reasons for guests to return across more of the calendar.
Sequencing carries the discipline. Programming, entertainment and activity infrastructure can activate first, producing early revenue gains on relatively modest capital. The food and beverage ecosystem follows, lifting the ancillary mix as it matures. Physical renovation can then follow, informed and partly supported by the operating improvement already underway. The objective is to put capital behind the elements that demonstrate demand first, rather than spending heavily before the operating model has been tested.
Each phase can help fund the next, allowing the repositioning to compound from the first operating improvement forward.
The price of the flag
Repositioning also reopens a question most owners answer by reflex: whether to operate under a brand.
In gateway cities with transient, search-driven demand, a flag can provide meaningful value through distribution, reservations, loyalty and customer recognition. In resort and leisure markets, where the guest relationship can be more direct, repeat-driven and experience-led, the economics can be different.
According to HVS, typical hotel royalty fees generally range from 3 percent to 5 percent of room revenue. Depending on the brand and agreement, additional marketing, loyalty, reservation and other system fees can add to the overall cost, while some upscale and luxury brands may also charge fees on non-room revenue.
The question for an independent resort is therefore not whether brands have value. They clearly can. The question is whether the incremental demand and distribution generated by the flag justify the recurring fees and the economics of giving up part of the direct guest relationship.
An asset repositioned around a strong, high-value guest relationship is potentially better placed to own more of its distribution. Independence demands real distribution capability and disciplined asset management, but it also gives the owner greater control over the guest experience and the economics attached to it.
Where the return is built
The valuation opportunity completes the case.
Existing hotels with suppressed earnings can enter the market at higher going-in yields, creating an opportunity for investors who can restore earnings through repositioning. The value creation does not depend solely on buying at a low cap rate and selling at a lower one. It comes from increasing NOI, broadening the revenue mix, improving the physical product and strengthening the quality and durability of the cash flow.
That distinction matters.
If a resort enters the portfolio with underutilized amenities, weak food and beverage performance, limited programming and an outdated guest proposition, the investor has multiple levers for improvement. If those improvements translate into stronger NOI, the asset can become more attractive to a wider pool of buyers at exit.
The valuation upside therefore comes not simply from a change in the yield applied to the asset, but from the combination of stronger NOI, a broader revenue base and improved asset quality.
The market still prices many older assets as though the room were the whole business, while new construction continues to carry the perception of being the natural route to a landmark property. Both assumptions deserve closer scrutiny.
The stronger opportunity in this cycle may be a well-located resort that already stands, acquired at the right basis, carrying only the costs that earn their place, and repositioned for the guest who actually arrives.
The gap between today's price and repositioned value is where the opportunity lies.
