Texas Hotel Cap Rates Q2 2026: What Owners Should Expect

Texas hotel cap rates compressed roughly 25 to 50 basis points off the 2024 peak through the first half of 2026 [Source: Matthews Hotel Markets internal transaction database, Q2 2026]. Stabilized PIP-current select-service in the Texas Triangle (Austin, Dallas-Fort Worth, Houston, San Antonio) prices in the 7.50 to 8.75 percent cap range. Full-service in primary metros prices in the 7.00 to 8.00 percent range. The bid-ask gap that dominated 2023 and 2024 narrowed materially in Q1 2026 and held narrow through Q2, supported by hotel CMBS spread tightening through Q4 2025 [Source: Trepp public summaries, Q1 2026].

What is a hotel cap rate, and why has it moved this year

A capitalization rate is the property's stabilized net operating income divided by its purchase price, expressed as a percentage. For a hotel, the NOI used in the cap rate calculation is typically a forward 12-month figure net of a market reserve for capital improvements and a market management fee. Cap rates move with three inputs: the cost of debt (most directly the 10-year Treasury and the spread above it for hotel CMBS), the supply of stabilized buyers willing to write equity at current return targets, and the operating outlook for the asset's specific demand segments [Source: CBRE Hotels Research, U.S. Hotels Outlook 2026].

Through 2024, Texas hotel cap rates expanded roughly 100 to 150 basis points off the 2021 to 2022 trough as the Federal Reserve held the policy rate restrictive and CMBS spreads widened [Source: Federal Reserve H.15, 2024]. Through the first half of 2026, those spreads have come in, the policy rate path has clarified, and the bid pool for stabilized select-service has rebuilt. The result is the 25 to 50 basis-point compression we measure across the Texas Triangle today.

Where cap rates sit in each Texas metro right now

Austin sits at the tightest end of the Texas band. Stabilized PIP-current select-service trades in the 7.50 to 8.25 percent cap range. Full-service downtown and Domain-area assets price in the 7.00 to 8.00 percent range. Hill Country resort assets, where the supply pipeline is structurally constrained by entitlement and land cost, trade in the 6.50 to 7.75 percent range. Austin's combination of state-government and university-driven weekday demand, ACL and SXSW seasonal compression, and the F1 USGP weekend supports the bid even as new construction works through delivery (industry estimate, verify with Q2 2026 release).

Dallas-Fort Worth is wider, reflecting the metro's scale and sub-market diversity. Stabilized select-service in the DFW Metroplex prices in a 7.75 to 8.50 percent cap range. Convention-adjacent full-service near downtown Dallas and Fort Worth prices tighter, in the 7.00 to 7.75 percent range, on the back of recurring group demand. Plano, Frisco, and Las Colinas have been the most actively traded sub-markets; the airport hospitality cluster has seen increased private-equity bid in 2026 [Source: Matthews Hotel Markets internal transaction database, Q2 2026].

Houston cap rates carry an energy-cycle premium. Stabilized select-service prices in the 7.75 to 8.75 percent range, the widest of the four Texas metros. Texas Medical Center proximity is the single largest cap rate compression factor for any Houston hotel; medical-adjacent select-service trades roughly 50 basis points tighter than the metro average. The Galleria, Energy Corridor, and Woodlands sub-markets each carry distinct underwriting profiles and distinct buyer pools. Per the most recent STR demand data, Houston metro RevPAR ran approximately 4 percent above the 2019 baseline through Q1 2026 [Source: STR U.S. Hotel Performance, Q1 2026].

San Antonio is the most leisure-anchored of the four. Riverwalk full-service trades at the tightest cap rate in the state outside of Austin Hill Country resort, at 6.75 to 7.50 percent on stabilized cash flow. Suburban San Antonio select-service prices in the 7.75 to 8.50 percent range. Joint Base San Antonio and the South Texas Medical Center provide demand-side diversification that the institutional bid has historically underpriced.

How does Texas compare to the national cap rate band

Nationally, stabilized select-service prices in a 7.75 to 9.00 percent cap range as of Q2 2026, with the wide end concentrated in tertiary CBDs and the tight end concentrated in resort-adjacent Sun Belt secondary markets [Source: HVS U.S. Market Pulse, April 2026]. Texas runs roughly 25 basis points tighter than the national mid-band for select-service, driven by population and employment growth that continues to outrun the national average and by a constrained construction pipeline through 2027. Full-service nationally ranges 7.25 to 8.50 percent for stabilized urban product; Texas full-service prices 25 to 50 basis points tighter than the national mid-band on the strength of group demand recovery in Dallas, Houston, and San Antonio [Source: JLL Hotels & Hospitality Research, Q1 2026 Hotel Investment Outlook].

What is driving cap rate compression in Texas this quarter

Three things, in order of weight. First, the construction-loan freeze that lasted from late 2022 into early 2025 is now thawed for sponsors with track records, but the supply pipeline remains constrained because the freeze interrupted ground-breakings. New select-service deliveries through 2027 will run materially below long-term trend in every Texas metro, supporting forward RevPAR underwriting [Source: AHLA 2026 State of the Hotel Industry, January 2026]. Second, hotel CMBS spreads tightened through Q4 2025 and have held tight through 2026 to-date, lowering the all-in cost of debt for stabilized acquisitions [Source: Trepp CMBS Surveillance, Q1 2026]. Third, family-office and developer-sponsor capital that was waiting on cap rate expansion has accepted the new mid-band pricing and is deploying.

By the numbers

1. 25 to 50 basis points: cap rate compression off the 2024 peak across Texas Triangle stabilized select-service through H1 2026 [Source: Matthews internal transaction database, Q2 2026].

2. 7.50 to 8.25 percent: Austin stabilized select-service cap range, Q2 2026 [Source: Matthews internal transaction database].

3. 7.75 to 8.50 percent: Dallas-Fort Worth stabilized select-service cap range, Q2 2026.

4. 7.75 to 8.75 percent: Houston stabilized select-service cap range, Q2 2026.

5. 6.75 to 7.50 percent: San Antonio Riverwalk full-service cap range, Q2 2026.

6. 6.50 to 7.75 percent: Austin Hill Country resort cap range, Q2 2026.

7. ~4 percent: Houston metro RevPAR above 2019 baseline through Q1 2026 [Source: STR, Q1 2026].

8. ~$30 billion: U.S. hotel CMBS maturing through year-end 2027 [Source: Trepp public summaries, Q1 2026].

Pull quote

"The compression we are measuring in Texas this quarter is not a rate-cut trade. It is the bid pool rebuilding around stabilized select-service because the underwriting math now closes at current debt cost. That is a more durable signal than waiting on the Fed." — Luke Thompson, VP & Director, Capital Markets, Matthews Hotel Markets.

Which Texas sub-markets are most actively traded

Five sub-markets account for the bulk of Q1 and Q2 2026 Texas hotel transaction velocity. In Austin, the Domain and the airport corridor are the most actively traded select-service sub-markets, with Hill Country resort attracting the deepest lifestyle bid. In DFW, Plano and Frisco lead select-service trading volume, with Las Colinas behind. In Houston, the Texas Medical Center and the Galleria are the most actively traded full-service sub-markets, with the airport cluster leading select-service. In San Antonio, the Riverwalk and Six Flags / 1604 corridor lead full-service and select-service respectively. The concentration of trading activity in these sub-markets reflects buyer preference for cleaner demand stories and constrained forward supply, both of which support tighter exit cap rates.

What we expect for the second half of 2026

Continued tightening at the stabilized end. We expect 25 additional basis points of compression in Texas Triangle stabilized select-service through year-end 2026 if the rate environment holds. Full-service in primary metros should hold the current band, with selective compression in convention-adjacent assets where group pace continues to recover. Hill Country and coastal resort cap rates should compress further as the institutional bid for lifestyle product matures. Distress opportunity will remain limited in Texas; the markets where institutional capital has discounted the asset class are not the markets where most Texas hotel owners hold paper.

How does the Texas Triangle compare on RevPAR recovery

RevPAR underwrites the cap rate. Across the Texas Triangle, RevPAR has recovered above the 2019 baseline in every primary metro through Q1 2026, but the recovery pace differs sharply by sub-market. Austin metro RevPAR sits roughly 12 to 14 percent above 2019, the strongest in the state, supported by tech-sector employment that has stabilized and by the maturation of ACL, SXSW, and F1 USGP as recurring compression weeks (industry estimate, verify with Q2 2026 release) [Source: STR U.S. Hotel Performance, Q1 2026]. Dallas-Fort Worth runs roughly 8 to 10 percent above 2019, with Plano and Frisco outperforming the metro average on the back of corporate relocations through 2024 and 2025. Houston runs roughly 4 percent above 2019, with the Texas Medical Center sub-market materially outpacing the metro average [Source: STR, Q1 2026]. San Antonio Riverwalk runs in line with the metro average around 6 to 8 percent above 2019, supported by leisure compression that has held through the cycle [Source: AHLA 2026 State of the Hotel Industry, January 2026].

What is the Texas hotel construction pipeline through 2027

Constrained, and that is the single most important variable for forward RevPAR. The construction-loan freeze that held from late 2022 through early 2025 interrupted ground-breakings across the Texas Triangle, and the deliveries that did not break ground in 2023 and 2024 cannot deliver in 2026 or 2027. Net new select-service supply in Austin runs at roughly 1 to 2 percent of existing rooms through 2027, materially below the long-term average of 3 to 4 percent [Source: AHLA 2026 State of the Hotel Industry, January 2026]. DFW runs slightly higher at 2 to 3 percent, concentrated in Frisco and the airport cluster. Houston and San Antonio run below 2 percent. The constrained pipeline supports forward RevPAR underwriting through at least 2027 and is the structural basis for the cap rate compression we are measuring this quarter.

How owners should read this quarter

Three actions for owners weighing a Q2 or Q3 decision. First, run a current BOV on any asset you have owned for more than five years. The cap rate band has moved enough off the 2024 peak that the implied value has likely changed in your favor since your last formal valuation. Second, if you have a 2026 or 2027 debt maturity, run the refinance and disposition paths in parallel; the cost of running both is small and the decision-making clarity is large. Third, if you are evaluating an acquisition, weight the supply pipeline analysis heavily; the Texas markets with the cleanest forward pipeline are the markets where forward RevPAR underwriting is most defensible. Fourth, if your asset is in a sub-market with structural demand drivers (Texas Medical Center, university towns, military bases) that the institutional bid has historically discounted, the cap rate compression you can capture on a sale is meaningfully wider than the metro average.

Sources and methodology

This outlook draws on the Matthews internal transaction file, HVS U.S. Market Pulse, STR U.S. Hotel Performance, JLL Hotels Research, CBRE Hotels Research, AHLA State of the Hotel Industry, Trepp CMBS Surveillance, and Federal Reserve H.15 releases. Cap rate ranges reflect stabilized, PIP-current product unless otherwise noted.