NASHVILLE, Tennessee — U.S. travel demand is benefitting from stronger economic fundamentals but that demand cannot be taken for granted as guests require more and know what they want.
During the a forecast session at the Hotel Data Conference, industry experts addressed hotel performance this year and expectations for 2027.
Despite the U.S. co-hosting the 2026 World Cup, international travel demand has not been kind to the U.S. hotels, said Jan Freitag, national director of hospitality market analytics at CoStar Group.
The factors driving U.S. performance are national economics and corporate transient travel, said Aran Ryan, director of industry studies at Tourism Economics. U.S. households with a combined income of $200,000 or more account for 36% of lodging spending. There are 2.3 times as many households in this category than there were in 2018, making up approximately 11% of all U.S. households currently.
Brian Allen, vice president of operational performance at Atrium Hospitality, said 20% to 30% of his company's owned hotels are in the middle of a renovation, and that is one opportunity for driving value. Atrium has 74 hotels, and 70% are in the upper-upscale segment, he added.
Last year was an outlier, with U.S. hotel revenue per available room down 0.2%, Freitag said.
"But this year, rock n’ roll, group demand’s back, America is fully employed and people do not want to buy stuff, they want to buy experiences,” he said.
RevPAR is expected to grow but at a percentage lower than that of inflation, which adds more pressure to hotel margins.
The three levers driving increased inflation right now are higher energy costs, the impact of tariffs and AI companies driving so much investment that it's increasing the cost of everything else, Ryan said.
"That is the headwind right at this moment: rising inflation, which slowed real growth,” he said.
The economic outlook for 2027 is better, Ryan said. Non-AI investments in the second quarter this year bode well for group travel.
Sonny Kerstiens, vice president of sales at Aspen Hospitality, said some of the U.S. hotel industry must look at itself as being a differentiated jewel.
“Every macro trend has a local expression … and our job is to understand what that looks like in each market,” Kerstiens said. “What is it we can provide as an experience that is not even a question [for the guest]. It is less driven by the comp set, more by the experience and what guests are willing to pay for now. … Tactically, we must always look at our sales deployment. So, are we deployed appropriately for what forecasts are coming, or deployed against yesterday’s reality?”
Allen agreed.
“We know in our markets, which is secondary and tertiary, nobody is building a brand new 300-room Embassy Suites with 40,000 square feet of space, so we feel we have to protect the demand for that,” Allen said. “As we look at overall strategy from an occupancy versus average daily rate side, our strength has been in occupancy … and we see upper-upscale driving that.”
But increasing U.S. inflation is a major concern, he said. This is an area where hoteliers have to manage the levels of the profit-and-loss statement.
"That is in our strategy this year, and yield is difficult," Allen said. "We did … have a much better result than we first thought we would, and that has driven profitability up and helped us with margins."
Labor
If the demand is there, will hoteliers be able to staff their properties appropriately? Current U.S. government policy has seen a reduction in net immigration, but the data does not show a marked hole in labor, Ryan said.
“It is retention and recruitment that becomes vital. We have to be an employer of choice, which is what protect us from the risks in the macro data,” Kerstiens said, noting that his company has been challenged to find employees, and the cost-of-living concern is prominent among the labor pool.
Atrium conducted a study and changed all processes connected with labor following the pandemic, Allen said.
“We want to ensure [employees] have a good experience from the time they walk in the door, that they have appropriate training, and the result is a very low turnover rate, which helps us drive productivity," he said.
It's tough finding employees, and in some markets that leads to leaning into contract labor, he said.
“Everyone wants more to stick around,” Allen said.
International
Referring to the 2026 World Cup, Freitag said the biggest concern is that the U.S. had “the single largest sporting event in the world in this country, and if we can’t get people off the couch … well, why are they going to come in 2027?”
The U.S. “borrowed from 2025 and stole from 2027,” he said.
Hoteliers on the panel said a lack of international guests just leads to more opportunities to push the right levers and attract domestic ones.
“That worked in Canada,” Freitag added.
Another opportunity is to attract guests who might now be avoiding Dubai or have less opportunity to get there due to reduced airline flights.
“We certainly haven’t seen this in stronger overseas arrivals,” Ryan said.
Instead, American travelers have fallen in love again with Europe.
“Global international travel spending is growing 8% to 10% annually, the same [from Europeans], 10% spending growth forecast for next year outbound, so even if we get a decline in share of that, we think that’s set to become a tailwind” for the U.S., he said.
Travel demand remains resilient in most parts of the globe, but in turn, guests have a larger range of purpose and barriers, panelists said.
One bright spot for U.S. domestic travel is that corporate transient demand is shrugging off macroeconomic concerns and getting their employees out into the world.
“That’s a really interesting disconnect from the macro to the micro,” Freitag added.
The increase in corporate demand likely will be aimed at the U.S. midscale hotel segment, panelists said.
“We are seeing more spending and more wealth,” Ryan said. “When you think about travel and go back to your economic textbook, and you look up the definition of a ‘luxury good,’ it is something that grows faster than income.”
Regardless of the hotel segment, the experience still matters to the guest, Kerstiens said.
“You have to go up to and beyond expectations," he said. "There are levels of that at every class of hotel, not just luxury.”
Climate change
Another tailwind for hoteliers is insurance costs are decelerating due to 2025 having a muted hurricane season, Freitag said. Europe, however, is getting warmer, so any reductions in one market might be offset by increases in others.
“We have to be ready with an incredible amount of flexibility, not just with our forecasts but with what we are doing from a programming and activation standpoint,” Kerstiens said, referring to his company's resorts.
Allen said he has seen these tailwinds materialize this year in the U.S.
“We don’t budget for the weather either … but we also take advantage of opportunities when they are presented,” he said.