Denver Hotel Market Pulse
Overview
There were three closed sales in the Denver metro area in September of over 50 rooms, according to COSTAR. This includes two sales of extended stay Hometown in Thornton and Aurora. There is a contract for sale of a Best Western in Brighton, and the adjacent Fairfield Inn has reportedly closed. The transaction market in September 2026 remains slow due to a continuing soft market. Presently there are approximately 17 hotels publicly listed for sale along the Front Range between Colorado Springs and Fort Collins. Prices continue to come down, and it is rumored that more hotels will be coming on the market soon. Owners who purchased properties in 2021 through 2024 are finding themselves upside down, due in large part to the high interest rate environment, coupled with declining net income resulting from political and economic uncertainty. There are signs that the market is stabilizing.
Operational Metrics
The trailing twelve-month occupancy as of August 2026 (one month lag on data) for the Denver metro was 67.5%, which is an approximately 2% increase from the 2025 occupancy. ADR was $151.05, approximately 1.2% higher than 2025. RevPAR is 3.25% higher than last year, at $101.97. The market appears to be stabilizing, as the year to date (8mos.) showed a 3.67% increase in RevPAR, which is expected to continue over the remainder of the year. Hopefully, a more durable upcycle will emerge in 2027. The much-anticipated Sundance Film Festival in Boulder will draw 120,000 attendees next year. The DIA expansion project is also anticipated to finally be complete in 2027, which will boost passenger traffic. The United Airlines pilot training center appears to be moving forward as Zoning was approved for their 113-acre site off Tower Road. The $150 million 16th Street project is finally complete, which will help improve downtown occupancies.
STR data includes 7 submarkets in the Denver/Boulder metro area in COSTAR reports. The positive news is that all 7 submarkets are showing improvement in RevPAR. The CBD submarket had a RevPAR increase of 6.27% to $147.39. ADR is $215.68, with an occupancy of 68.3%, both of which show improvement over the past 12 months. The Airport/East submarket, which includes a large geographical area including Greeley, east to Limon and the State line, is showing a 2.2% increase in RevPAR. The Airport/East submarket still shows the highest trailing twelve-month occupancy at 70.8%, and the second highest ADR and RevPAR, at $139.28 and $98.63 respectively. The Denver Tech Center submarket shows the lowest submarket RevPAR over the past twelve months at $73.56. However, RevPAR in the DTC appears to be finally stabilizing over the past three months, with an increase of 0.33%.
Investment Climate
The September 2026 investment market continues to be challenging. There are approximately 17 publicly listed properties along the Front Range between Colorado Springs and Fort Collins over 50 rooms. Madison Commercial Properties presently has the Sylo Ramada Inn, in the airport submarket, and the Wingate Hotel in Greenwood Village currently listed for sale. We also have a Days Inn available for sale in Alamosa. Madison is also working with sellers on several off-market properties available as well. Long-term Interest rates are increasing and are generally 7% or higher. However, there are still lenders in the market quoting deals in the 6.5%-6.75% range for 5-to-10-year deals. Additional interest rate increases are anticipated, as inflation remains elevated, which creates financing challenges for the hospitality market. Underwriting continues to be conservative. Rates this week (September 28) are up over the last week. Commercial rates for Bank and CMBS are averaging 6.95% to 6.99% for 10-year terms. Conventional Hotel loan rates are currently in the 6.6% to 7.5% range, but loan to value is still conservative, and dependent upon DSCR. SBA 7A rates have increased, as prime is now 7%, resulting in variable rate loans of are currently around 8% to 10.0% adjusted quarterly, up to 80% LTV. SBA 504 blended rates are currently 7.0-8.0%. Seller financing requests are on the upswing to help fill the gap in loan to value. Typical seller finance terms are interest only for 2 to 5 years at rates of 5 to 6%.
According to COSTAR, the average cap rate in Colorado in August 2026 was 9.29% up from 9.23% last year. In contrast, the average Denver cap rate as of August 2026 is 8.8%, slightly lower than 8.83% from a year ago. Cap rates in Colorado Springs are like Denver at 8.8%. There are several Denver metro area listings on the market currently, priced at 8.6%-8.8%, based on year 1 pro formas. The sale of the Hometown Studios in Thornton had a higher cap rate of 9.75%
Pricing is indicative of a reset in the market. Current gross income multipliers are in the range of 3.0 to 3.5. Recent sales are showing a lowering trend. The La Quinta in Louisville sold at a GRM of 2.77. The Fairfield Inn in Brighton sold for an estimated GRM is 2.96. The adjacent Best Western in Brighton is also under contract at an estimated GRM of 3.1. A Hyatt portfolio in the Denver metro area recently came on to the market with pricing at around 3.5 GRM. The portfolio is under contract, but I do not know the final price. The Hyatt hotels are owned by a REIT, and are generally in good shape, and so this is probably a good indicator of market trends.
There are several Denver hotels on the market at asking prices ranging from 3.1 to 3.5 times gross. Low net incomes are challenging for many of the hotels on the market, but several are priced from 8.75% to 10% cap rates, indicating a potential narrowing of seller and buyer expectations. I have seen a surge in buyer interest in Denver area hotels over the past two weeks. Whether these buyers transact remains to be seen. Increased buyer interest is an encouraging sign, nonetheless.
Most 2025 P & L statements that I have reviewed showed a declining NOI in comparison to 2024. However, revenues appear to be stabilizing for many hotels during the first three quarters of 2026. The effect of tariffs, high gas prices, ICE raids on construction and housekeeping employees, lack of international travelers, and a decline in leisure business are major factors. The past ski season in Colorado was perhaps the worst in terms of snowfall since the early 1980’s. Hopefully, the anticipated record “super El Nino” projected for this winter will result in a better snow season this year. Group and convention business appear to be stabilizing forces in the face of decreased leisure demand. Occupancies are relatively stable, but the downward pressure on average daily rates across Colorado is a cause for concern. The increasing cost of fuel and tariffs are squeezing consumers. Hotel operating expenses remain high, particularly from real estate taxes, increasing insurance, and high labor expenses.
Bank lending continues to be available, but expensive. Most lenders require a 1.40 DSCR, which reduces the loan value significantly. Value add property deals are difficult to finance, because lenders are reluctant to lend on pro forma, given the current market uncertainty. SBA loans are often times the default way to finance these deals, as they can roll in renovation costs in to their loans. However, SBA 7a lending rates are expensive in the current interest rate environment.
The major franchises are aggressively trying to convert hotels in the Denver metro, but slow transactions and market saturation have affected them as well. Several of the franchises are providing key money to offset some of the increased cost of renovation, including Choice, Best Western, Hyatt and Wyndham. Marriott, Hilton and IHG are generally not offering key money. Key money is generally limited to $5,000 to $6,000 per room but is negotiable as competition for the flags heats up. For example, the Baymont hotel at DIA has a signed offer from Choice to re flag as a Country Inn and Suites. Choice has offered $1.5 million in key money to reflag this airport hotel. Other franchises, such as IHG, are following suit with key money for ground up construction projects. The franchises generally want owners to complete their PIPs within one to two years. Typical PIP costs continue to escalate into the $20,000-$35,000 per key range. Market saturation is also apparent, as new brands are continuously introduced, with limited market awareness. New names, like Spark and City Express, have yet to catch on with the public. Garner by IHG, is receiving some positive reviews from hotel owners, as of this writing.
This and That
There have been a few notable sales in September 2026. Three sales transactions were finalized, all around the $7.5 to $8 million price point. The La Quinta in Louisville sold for $7.5 million, or $62,500 per room. The indicated GRM was 2.77, and the cap rate was high, at 12.6%. This property had little to no PIP.
The 133-unit Home Towne Studios by Red Roof, located at 8750 Grant Street in Thornton, sold on September2 for $8 million, or $60,150 per unit. This is an older extended stay property having been built in 1979. The purchase was financed by a 70% loan to Fortis Bank in Denver for $5.67 million. The indicated cap rate was 9.75%.
The Home Towne Studios in Aurora sold for $6 million on September 16. This hotel had 133 rooms and sold for $45,113 per unit. It was built in 1998. The purchase was financed with a $4.23 million loan (70% LTV) from US Metro Bank in Garden Grove CA.
Pricing remains soft, as average daily rates are very competitive, and many properties require PIP expenditures which continue to increase in 2026. Many of the currently listed properties have limited or negative net incomes, despite reasonable gross revenue numbers.
Denver’s hotel construction pipeline remains elevated, with approximately 1,600 rooms across 13 projects underway. Many developers are focusing on renovating existing hotels this year versus new construction, because of the high-interest rate environment. Nevertheless, there are numerous proposed hotels, particularly in the airport, downtown, and RINO submarkets. The major franchises are still encouraging new construction of hotels in the metro area, despite the low ADR and high construction cost market.
Contact Alex Kovacs at Madison Commercial Properties for more information on the local hotel market. Alex is a 30-year Denver commercial real estate practitioner, and offers not only brokerage but a variety of consulting services, including feasibility studies, market analysis, “soft valuation”, site acquisition, tax appeal and other services relating to the commercial real estate industry. You might have already targeted a property for purchase but you need representation and assistance with due diligence or writing a Purchase and Sales Agreement. I can provide these services for a fixed fee versus a traditional commission agreement, saving you time and money while avoiding pitfalls.
Alex Kovacs
Sr. Commercial Real Estate Advisor
303-514-7076
akovacs@madisoncommercial.com
