Family offices considering direct hotel ownership face a risk that traditional real-estate diligence often obscures: the hotel is an operating business that happens to own property, not a passive asset that can be managed with the same discipline as a leased building. Marty McDaniel, chairman and CEO of The Northstar Companies, argues that underwriting the building without underwriting the operator leaves critical value drivers unexamined.
McDaniel has spent nearly four decades in hotels. He describes the risk plainly: the building sets the stage, but the operation writes the check. A great location can survive mediocre execution for a while, and a good brand can cover mistakes for a while, but neither can permanently overcome weak leadership, poor revenue strategy, labor inefficiency, deferred maintenance or a capital plan that exists only in a spreadsheet.
UBS reports that alternative assets account for 42 per cent of family office allocations, including private equity, real estate and private debt, and that 77 per cent of the families surveyed still have an active operating business. Many of these investors therefore understand operating risk intuitively, McDaniel said. The mistake is assuming that a hotel can be managed with the same degree of passivity as a leased building.
Traditional real-estate diligence asks whether the market supports the asset. Hotel diligence must go one step further and ask whether the operating team can actually convert that market into profitable demand. In the second quarter of 2026, US hotel demand grew 1.7 per cent year-over-year while supply increased only 0.4 per cent. Average daily rate rose 4.4 per cent and revenue per available room rose 5.7 per cent. Those are constructive market signals, McDaniel said, but they do not mean that every hotel participates equally. The gap between market growth and asset-level performance is where operating quality shows up.
Before a family office buys a hotel directly, McDaniel wants a clear answer to five operating questions: Who is accountable for revenue strategy? Is labor scheduled to demand or to habit? What is the real condition of the building behind the engineering log? What brand obligations or property-improvement requirements are coming? And can the management team explain, in plain English, how the property will produce the underwritten cash flow? The answer should not be a 40-page budget, he said. It should be an operating thesis that connects rate, occupancy, channel mix, labor, food and beverage, maintenance, capital and guest experience.
Operating risk that hides inside a real-estate sleeve is far more dangerous than risk that declares itself across the portfolio, family office advisor Jaf Glazer has maintained.
Hotels wear out in public. Guests see the tired corridor, the slow elevator, the worn carpet and the room that should have been out of order before they checked in. Deferred capital eventually becomes a pricing problem, a guest-score problem, a labor problem and, in branded hotels, potentially a franchise problem. That is particularly important now because hotel transactions are accelerating while a large amount of hotel debt approaches maturity. JLL reports $24 billion of US hotel transaction volume in 2025, up 17.5 per cent year-over-year, and about $88 billion of hotel loans scheduled to mature through 2027.
Buyers will see opportunities created by refinancing pressure, capital-expenditure needs and ownership transitions. Some will be genuine basis opportunities, McDaniel said. Others will simply be undercapitalized operating businesses wearing attractive real estate. A family office with patient capital can have an advantage here. It does not have to force a three-year exit, and it can fund a sensible renovation or repositioning without manufacturing short-term performance. But patient capital still needs impatient operating discipline, he said. The longer the intended hold, the more important it becomes to know whether management is protecting the physical asset, the brand, the team and the cash flow at the same time.