Hospitality Real Estate in Orlando, FL

Cap rates for hospitality properties in Orlando vary by submarket, property class, and occupancy levels. The overall Orlando market average cap rate is approximately 6.1%. Class A properties typically trade at lower cap rates than value-add opportunities.

Hotels are primarily valued using the income approach, with price typically expressed as a multiple of trailing or projected EBITDA (8-12x for stabilized assets) or on a per-key basis. RevPAR, ADR, and occupancy benchmarks from STR reports are essential for evaluating performance relative to the competitive set. The income approach is preferred because hotel revenue fluctuates significantly, making comparable sales less reliable than in other asset classes.

A Property Improvement Plan (PIP) is a capital expenditure requirement imposed by the hotel franchise brand to bring the property up to current brand standards. PIPs are typically triggered during ownership changes and can cost $15,000-50,000+ per key depending on the scope. These costs must be factored into acquisition pricing and can significantly impact returns, particularly for older properties requiring extensive renovation to meet brand standards.

While tourism remains a major economic driver, Orlando has diversified significantly into healthcare, technology, and defense. The pandemic demonstrated both the risk (hospitality collapsed) and the resilience (recovery was swift due to pent-up leisure demand). Investors can mitigate tourism risk by focusing on submarkets and asset classes less dependent on visitors, such as Lake Nona medical office, suburban multifamily, or I-4 corridor industrial.

Orlando industrial has strong fundamentals driven by the metro's central Florida location and growing population. E-commerce fulfillment centers, grocery distribution, and building materials suppliers are active tenants. The market benefits from serving as a distribution hub for the entire Florida peninsula, and available land along the Florida Turnpike and SR-429 corridors supports continued development.