Driftwood Capital Observes Hotel Credit Outgrowing the Private Credit Label

• New white paper by the Miami-based hospitality investment and credit platform contends that real estate credit that is backed by an income-producing asset is being mistakenly swept into the same bucket as ‘private credit’

As public alternative-asset managers absorb a reported $265 billion selloff and private credit funds from BCRED to Apollo Debt Solutions have restricted or gated redemptions, Driftwood Capital (“Driftwood”) argues in a new market analysis that current market conditions may reflect investor categorization rather than underlying real estate credit fundamentals.

In "The New Shape of Risk: Private Credit, Real Estate, and the Case for Hotel Credit," the Miami-based hospitality investment and credit platform contends the current stress is specific to corporate direct lending.

Real estate credit, backed by a deeded, physical, income-producing asset, has characteristics that differ materially from corporate direct lending that has been often evaluated within the broader private credit category by allocation committees treating "private credit" as a single bucket.

Citing a decade of Brookfield return data, the firm notes real estate credit carries just a 0.18 correlation to corporate direct lending, while Federal Reserve data shows commercial real estate charge-off rates running roughly a fifth those of commercial and industrial loans.

"Real estate credit and corporate direct lending get grouped together because they share a label, not because they behave the same way," said David Steiner, Partner and Chief Investment Officer at Driftwood. "Our analysis suggests they are meant for different investors with different goals. This is made even clearer when comparing hotel credit to the rest of the industry."

Within real estate credit, Driftwood believes hotels remain an under appreciated segment on the table:

• Hotels defy their reputation as CRE's volatility asset.

  • According to Trepp, despite RevPAR falling 47.5% in 2020, 76% of maturing lodging CMBS loans were repaid on time between 2020 and 2025. This outperformed office (60%) and mixed-use (54%).

  • Citing Trepp, lodging delinquency now sits at 6.5%, below office (11.7%, a record) and multifamily (7.7%).

• New supply is structurally constrained. Top-50 market hotel supply growth has fallen from 2.0-2.5% pre-pandemic to roughly 1.0-1.3% today, according to LARC Market Intelligence and Green Street.

• Hotels may benefit from certain structural characteristics other commercial real estate doesn't have. Major brand families like Marriott, Hilton, Hyatt and IHG have an ongoing financial stake in every flagged property staying open and current, giving them incentive to support a borrower through a workout, something office and industrial lenders don't have with their tenants.

Hotels are one of the few real estate types where the asset, the demand and the operating business are all in the same place. That’s what may provide lenders with additional recovery options if a deal goes wrong. Driftwood believes the distinction is more appropriately viewed as an allocation issue. It’s like comparing an oil tanker and a luxury cruise ship. One is bulk, while the other is a high-touch, consumer-facing operating business. They are both ships but do different things. Pranav R

Bhakta, SVP of Corporate Business Development at Driftwood

Driftwood has run a dedicated hospitality credit platform since 2020.  Since its inception, the platform has evaluated approximately $35.7 billion in hospitality credit opportunities, ultimately executing  on approximately 11% of total evaluated opportunities (representing 63% of opportunities  formally pursued following initial underwriting).  As of March 30, 2026, Driftwood currently owns and/or manages roughly 83 hotels totaling approximately 16,400 keys and manages approximately $3.5 billion in hospitality assets.

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