Why Blackstone sees hotels as an inflation hedge

With inflation still remaining stubbornly high, hotels have proved to be one of the most valuable asset classes given the flexibility they give owners and operators to raise prices quickly.

It’s unsurprising then, that Blackstone, which describes itself as the largest owner of commercial real estate globally, would see them as something of a safe haven in the current climate.

“Given our concerns around rising interest rates and inflation, we concentrated over 80% of our current real estate portfolio in sectors where strong cash flow growth could help offset these headwinds, including logistics, rental housing, life science office, hotels and data centers,” Jon Gray is president and chief operating officer of Blackstone, said on the company’s fourth quarter earnings call last week.

The impact of those concerns was born out in the company’s latest set of results. Quarterly net income fell 75% to $743 million on the back of a steep decline in its investment income.

“2022 represented the most challenging market environment since the global financial crisis,” CEO Steve Schwarzman said on the same call.

But in a potentially recessionary world, Blackstone spies opportunities. In the next few months it expects start raising its seventh European opportunistic strategy, targeting around €9.5 billion of third-party capital.

“With almost $187 billion of dry powder, we have more capital than almost any other financial investor in the world to buy assets opportunistically when values are low and liquidity is scarce. We have lived through many cycles and have always emerged stronger, growing the firm to greater heights,” Schwarzman said.