Hoteliers convened in New York City this week for the annual NYU International Hotel Investment Forum to take stock of the first half of the year.
The mood at the conference was constructive as the first four-and-a-half months of U.S. hotel performance data showed increases in demand and room rate. At cocktail receptions and on panels, participants' sentiment mirrored the rosy data.
The optimism was also reflected in CoStar's new hotel RevPAR growth outlook. Based on a combination of demand increases and ADR growth, we revised our forecast up to 2.8% for the year. We expect that all hotel chain scales will increase demand. But room rate growth over 2% remains elusive, confined to luxury and upper-upscale chain-affiliated hotels. One owner in the luxury space described her current outlook as “happy, but not satisfied.” Part of that dissatisfaction comes from the relentless pressure on margins as expenses continue to increase, be they labor, insurance or energy costs.
As inflation continues to grow at a much faster clip than revenues, hotel ADR growth in real terms for the lower chain scales remains negative. We expect that the total revenue growth will offset some of the expense growth and that gross operating profit per available room, or GOPPAR, will grow, albeit anemically.
Adam Sacks from Tourism Economics set the tone by listing a plethora of healthy macro indicators, from higher-income households driving travel demand, to a middle class with more income, to a positive outlook of international inbound demand. What continues to defy our commonly held belief is his chart showing the “how low can you go?” consumer sentiment data, which has not affected how Americans travel on their own time. Expected higher airfares might actually be a positive tailwind for U.S. hotel demand as some Americans may forgo a pricey trip abroad and stay home to participate in the Great American Road Trip.
In addition, now that the World Cup is upon us, there is more visibility into hotel occupancy and rates on the books in June. And we expect July data to become more robust as the tournament's knockout stage matches get seeded.
In the past, the NYU IHIF conference was characterized by splashy news releases about deals and brand launches. As far as I can tell, only Hilton’s Undergraduate brand was announced, and despite broker optimism in the hallways, no billion-dollar deals were announced. The U.S. interest rate environment, with a later-than-expected rate cut, or maybe even a rate hike, certainly did not help.
Looking ahead, the positive operating environment, coupled with some positive calendar shifts in the coming quarters, sets up robust hotel performance in the second half of 2026. A lot of us will convene at the Hotel Data Conference in early August in Nashville to compare vibes and data to get ready for the 2027 budget conversation. See you there.
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