If 2025 taught the boutique lodging industry anything, it is that certainty is a luxury few can afford. PwC’s senior hospitality leadership aptly characterized the year as one of “predictable unpredictability” — a phrase born in the world of institutional real estate that resonates with uncommon clarity in the smaller hospitality segment. 

Our team has supported over 300 Inn transactions in the last decade and holds proprietary financial data from thousands of sales, feasibility studies, and operational consulting projects.  Our perspective outlined below draws on both our industry data of Inn transfers spanning 40 + years and holds this up against updates and general metrics provided by consulting firms who make it their business to collect, analyze, and present data for use as a tool for hospitality owners and developers. 

What follows is our honest assessment of where our market stands — and what it demands of those who wish to participate successfully.

A Macro Climate That Reached Main Street

The post-pandemic tailwind that sent ADR, Occupancy, RevPAR and related income to historic highs through 2022 and 2023 (in most markets) has stabilized across the country. PwC’s Hospitality Directions reported year-to-date RevPAR growth of just 0.2% through mid-2025 — a modest rate increase more than offset by occupancy decline. Across the broader hospitality industry, PwC cited “high borrowing costs, valuation mismatches and policy uncertainty” as the defining forces of the year.

The World Travel & Tourism Council estimated a $12.5 billion decline in inbound international visitor spending in the U.S. in 2025. Softer consumer confidence, persistent cost inflation, and elevated interest rates have degraded property performance at nearly every scale — and smaller, owner-operated properties, with their thinner margin structures, have felt it acutely.

Those concepts translate with near-perfect precision to our market where our active and income Seller Clients have reported record declines in international travelers, and, at the very best, marginal performance in 2025. A green shoot in this period of ongoing uncertainty is the significant growth well marketed and positioned Inns are experiencing in their booking pace in 2026 over 2025.

It’s important to remember that even in periods of recession or general market tumult, consumers may stop traveling but they rarely cease taking vacations. The upscale Inn market has long benefited from a guest profile defined by double income professionals who, based on our own post-great recession research, made a point of visiting their favorite regional destinations and, within those markets, their favored small scale hospitality properties.

The luxury travel segment was the only market that saw improvements, however, slight, in 2025 noting the strength of financially sound consumers and their desire to travel and spend for unique, quality experiences.

Margin Compression: The Defining Pressure

Margins in our segment are being squeezed from both ends. On the cost side: property liability insurance has risen sharply across most U.S. markets; property tax reassessments have outpaced income growth in many destination areas; utility costs remain well above pre-2021 baselines; and the cost of goods reflects two years of inflationary pressure that has moderated only slightly.

On the revenue side, the capacity to absorb these increases through ADR growth has reached a ceiling in many markets. Guests who embraced premium experiences post-pandemic have grown more value-conscious. The division between ultra luxury and economy experiences that is driving growth in ultra-luxury properties has not translated as clearly to the average 8 room Inn in a New England village setting (your property description here…). The result is a profit environment that is genuinely challenged — and for Buyers considering traditional financing, this creates a significant barrier to moving forward at terms that support ongoing structural and cosmetic improvements to the asset to improve rates and continually building reserves.

We have found that properties that lodging driven businesses that have maintained profit margins in the historic 40 – 45% range, and F&B operations in the 20 – 30% range, are making up for market pressures by reducing staffing support (putting greater pressure on owners to carry out operational tasks). While this may improve the cash flow in the short term, it has long term impacts on an owner’s/operator’s well being.

The Financing Gap: When DSCR Meets Reality

Most commercial and hospitality lenders now require a Debt Service Coverage Ratio of 1.25 to 1.3x minimum for boutique lodging properties — with lenders on the conservative end requiring 1.35x or higher for seasonal or independent Inns. Given compressed Net Operating Income (NOI) and commercial borrowing costs in the 6.5%–8.5% range through 2025, many otherwise sound Inn acquisitions simply do not pencil at current asking prices.

The number of transactions in our segment peaked in 2022 and 2023, when capital was more accessible and Inn income and cash flow was near historic highs. That pace has moderated on a national scale — and the moderation reflects the basics of financing, not a lack of genuine and growing Buyer interest. While an abundance of time and/or egos have a tendency to drive deals off the tracks, making a concerted effort to improve financial performance and, most critically, stabilize cash flow that supports your desired (or required) price is well worth the effort. Inn owners: a commitment to establishing a well balanced asset and business , is best done 3 – 5 years prior to a sale.  Ideally offering some opportunity for future growth (not a fully matured business) to an incoming owner helps to motivate a Buyer to purchase and plan to put their spin on the asset and business model.

The Valuation Paradox: Real Estate vs. Business Value

The most intellectually honest challenge we can put to Sellers: the real estate value of your property and the investable business value or “value as a going concern” are not always the same number — and in today’s market, the gap matters enormously.

Across our 300+ completed transactions over the last decade, Cap Rates on Inns and B&B sales have consistently fallen around the national average of 10%. The real estate often commands a premium relative to the income it generates, particularly in destination markets where property values have appreciated significantly. For Sellers, this is validating. For Buyers underwriting on tax return income — especially investor buyers requiring 15%+ cap rates to justify the operational demands of Inn ownership — it creates real friction in discussions of price and value, and longer timelines to effect a sale.

“The real estate value of your property and the investable business value are not always the same number — and in today’s market, the gap matters enormously.”

Seller Financing: From Exception to Expectation

One of the most significant structural shifts of the past 18–24 months is the very recent normalization of seller financing — not as a concession of last resort, but as a legitimate transaction tool that can, when reasonably structured, benefit both parties.

For Sellers content with a 10%+ cap rate and the lifestyle rewards of innkeeping, carrying a note can be an attractive alternative to waiting indefinitely for an all-cash buyer who represent a fractional percentage of Buyers who enter the Inn and B&B market. The monthly income stream from a seller-carried note, secured by a property they know intimately, often compares favorably to alternative fixed-income options. For investor Buyers targeting 15%+ cap rates, seller financing is frequently the mechanism that makes the deal viable — bridging the gap between what the property earns today and what the buyer needs it to earn to service conventional debt.

This convergence of interests is healthy for the market and, unless there is a significant shift in the direction of real estate valuation and financial expectations of buyers and sellers, seller financing will become an increasingly necessary tool to carry deals to a successful conclusion. While a Seller’s position is subordinate to the primary lender, protection comes in the form of guarantees from both the individuals purchaser(s) and their ownership company.

A Growing, Qualified Buyer Pool

Amidst the headwinds, a meaningful silver lining: the Buyer side of our market is active, growing, and increasingly engaged. We’ve observed a 20% increase in visitation to our website in recent months. Deals are actively in process across the United States with historical high demand markets where Cap Rates hover below the national average (Maine) outpacing other destination locations.

This Buyer pool spans personally motivated individuals seeking a lifestyle and investment combination, family groups pursuing generational asset ownership, and investor-operators who bring commercial real estate discipline and tech focused improvements to drive rates and create efficiencies in small scale hospitality operations. Their expectations are highly personal, however, nearly all buyers are driven by the same financial and lending requirements. While the ability to guide a transaction is based upon standard procedures it is increasingly difficult with the rise of .ai as an analytical tool for consumers, our strength remains anchored in our ability to connect qualified Buyers and Sellers with with one another before putting them in the hands of experienced professionals (real estate attorneys, accountants, marketing professionals, and beyond) to ensure a smooth transition of the real estate and business assets.

The Seller’s Imperative: Time, Investment, and Positioning

Here is the single insight that distills our team’s collective and long term knowledge: even a well-operated Inn, defensibly priced and professionally represented, may require two to three years to find the buyer willing and able to pay the price reflecting its highest and best use. This is not meant to cause undue despair. It is a call to buyers and, to a greater degree, sellers to recognize that work is required to remove barriers to reaching a Closing that supports your specific and developing needs.

The highest-return short-term investments for an Inn targeting a sale in two to three years follow a consistent pattern:

• Guest room refreshes deliver outsized ADR and review impact relative to cost. Quality linens, guest centered décor, and improved in-room technology shift positioning without significant renovation budgets.
• Curb appeal and exterior presentation are the first impression for both guests and buyers. Landscaping, paint, signage, and entry experience signal ongoing care and reflect the quality of the asset and business.
• Digital presence and review history are a great part of the business being sold. A documented upward trend in review scores (and related occupancy and income?) and a coherent direct booking channel is measurably more attractive to a qualified buyer. At the same time, a property using no online booking engine points to a clear opportunity to drive the business to soaring new heights!
• Revenue management discipline — dynamic pricing, yield management, channel optimization — improves NOI without capital investment. The 24 months prior to listing are the most important financial months of your tenure, so work to improve income and cash flow by controlling expenses or, at the very least, creating clear silos between actual business expenses and owner/one-time expenses that have historically been buried in the operating P&L.

Our data supports the positive effect of thoughtful pre-sale investment: properties undertaking targeted improvements to guest rooms and common areas 12–18 months before a sale have documented NOI improvements of 10–15% in the stabilization period — a direct multiplier on asking price in an income-based valuation. A helpful statistic: Using the national average 10% Capitalization Rate of Income, a $10,000 increase in NOI adds $100,000.00 to the value (price?) of your property.

The Market Is Recalibrating— Not Broken

The Inn and B&B transfer market of 2026 is not a broken market by an means. It is a recalibrated one — more demanding of preparation, more dependent on honest pricing (or sellers waiting to hold their asset for the foreseeable future), more reliant on creative transaction structures, and more rewarding of those who approach a sale with discipline and a framework for reaching a purchase/sale on their terms.

For Sellers: start earlier, invest strategically, price honestly, and engage well informed representation.

For Buyers: the deals that work in this market require financial discipline, operational readiness (internships, innkeeping bootcamps?), and creative thinking on structure when the fundamentals are sound. As a critical aside, we recently resuscitated a circa 1984 spreadsheet of active and former Inns that is proving to be a useful tool to our Buyer Clients in seeking off market opportunities, a strategy required to test available inventory in the current climate.

The B&B Team has supported Buyers, Sellers, and lifetime operators in the hospitality industry since 1984. We remain fully committed to this special segment of the hospitality industry. We welcome you to contact us at any point in the future to start a conversation around your plans for the future.

Until Next Time,

Eben Viens & David Hiler

Ready to understand what your Inn is worth, or to find properties that meet your criteria? Contact The B&B Team or explore current listings at bbteam.com.