The transformation of hotels into multifamily apartment buildings is a significant trend reshaping the U.S. real estate market. Driven by evolving multifamily demand, shifts in consumer travel behavior, and the rise of alternative hospitality options, this innovative approach revitalizes underutilized properties to meet the growing need for urban housing.

Economic Shifts Fueling Hotel-to-Apartment Conversions

The trend of converting hotels into apartments is born from both necessity and opportunity.

As consumer preferences veer towards unique travel experiences, many traditional hotels face declining occupancy, making them prime candidates for conversion into residential spaces. This shift not only addresses the underuse of hotel properties but also responds to the critical shortage of affordable urban housing.

‍

‍Furthermore, with volatile financing rates and construction pricing, developers are strategically repurposing centrally located hotels into residential units to offer affordable and conveniently located urban living. By leveraging existing infrastructure and assessing the condition of an existing building, developers can better estimate renovation costs and potential risks. 

Advantages of Converting Hotels into Apartments 

Meeting Market Demand

• Transforming hotels into apartments directly addresses the urban housing shortage, offering a practical solution to meet the rising demand for rental apartments in urban areas.

• By utilizing buildings and structures that already exist, developers can bring a new offering to the market more quickly than if they were to construct a new structure from the ground up.

Cost Efficiencies, Savings, and Higher Returns

• ‍Leveraging the existing infrastructure of hotels allows for substantial cost savings in construction and development.

• This approach reduces the capital expenditure per unit and accelerates the timeline for generating rental income, enhancing the project's internal rate of return (IRR) and overall financial viability.

‍Convenience of Existing Amenities

• Hotels often have the rough outline of amenities that renters tend to expect in today’s market; such as fitness centers, pools, and communal lounges.

• These amenities likely need to be spruced up, but their existence as-is means more cost-savings for development teams when assembling their construction budget – especially relative to a new property.

Location, Location, Location 

• The strategic locations of many hotels—often in city centers or near key community activation spaces—offer nearly unparalleled opportunities to residential developers.

• These sites which previously only filled up on conference days, or during “the big game”, now provide residents with convenient access to work, entertainment, public transportation, and everything else around those areas that would be utilized daily if it were for affordable housing options. 

Tax Incentives and Renter Demand

• Adaptive reuse of hotel properties can qualify for historic preservation tax credits and other incentives, making these projects financially attractive while promoting sustainable development practices.

• As reusability grows deeper into the everyday consumer’s preference set, these efforts appeal to environmentally conscious renters and can lead to higher occupancy rates and NOI as a result.

Innovative Solutions: Ori Expandable Studios

Addressing the architectural challenges inherent in hotel conversions – where unit sizes are fixed, and often small – Ori Expandable Studios offer an innovative solution to maximize space efficiency and appeal in residential units. Expandable Spaces, unlike static studios, create flexible living spaces that adapt to the needs of residents, transforming compact hotel rooms into functional and stylish apartments.

By leaning on Expandable spaces, the conversion process becomes simplified. The rigid and small floor plans from the hotel layout don’t need any alteration to become fantastic units. No walls need to be demolished or moved, resulting in a much quicker and less expensive construction timeline — making the project more likely to pencil. 

The conversion of distressed hotels into multifamily apartments represents a visionary approach to urban development, addressing critical housing shortages while revitalizing underused properties. This trend not only offers a sustainable path forward for the real estate industry but also creates dynamic, adaptable living spaces for urban communities.

At Ori, we are committed to supporting developers in navigating these transformations, ensuring that even the smallest spaces are both functional and desirable for tenants. Through creative solutions and strategic partnerships, we are redefining urban living for the modern era.

For developers looking to explore the potential of hotel-to-apartment conversions, Ori offers the expertise and innovation needed to turn vision into reality. Discover how our solutions can enhance your next project by reaching out for a collaboration today.