As we start 2026, here are a few hotel industry predictions for the year ahead.
1. RevPAR will grow, but bifurcation holds
In 2025, U.S. hotel revenue per available room was a bit disappointing. RevPAR fell 0.4%, a 220 basis point decline from CoStar's forecast released in late January. And the 2026 results are expected to be as muted. However, at least we project positive RevPAR growth, albeit at a modest rate of 0.5%. Although macroeconomic growth is expected to be healthy, this positive momentum will not necessarily trickle down to the hotel industry. Companies will continue to manage margins closely, so travel budgets will likely be under scrutiny again.
We expect luxury-class hotels to show their usual room rate growth, which is near the rate of inflation, but we see no real catalyst for lower-end class hotels. As in 2025, we expect these hotels to continue struggling with driving occupancy and rates, and their RevPAR will likely remain under pressure.
The highest-end hotels, dubbed the ultra-luxury segment, will not see any impetus to change their pricing strategy. Why break what works? The expectation is that in major metropolitan areas around the world, the room rate difference between luxury and ultra-luxury hotels will be over $1,000 per night. And many customers will gladly pay the highest rate to purchase unique experiences.
2. World Cup visitors will drive ADR, but demand will be uneven
The expanded 2026 FIFA World Cup field of 48 teams opened the door for teams from Cabo Verde, Curacao and Qatar. These teams will likely not advance past the first round, but more importantly, they will not be a strong source for foreign visitors when they play. We expect that most games will sell out, but when Curacao faces Côte d’Ivoire in Philadelphia on June 25, expect some empty seats.
U.S. hoteliers have high hopes for healthy room rates during match days, and this will likely happen. I just hope that revenue managers do not get ahead of themselves and then need to adjust rates as match days approach.
At the same time, meeting planners will avoid the 11 cities in the U.S. that host games between June 11 and July 19. Besides higher room rates, they will not want their attendees to compete with happy fans for restaurants or event space. Anecdotally, I have heard that sponsoring companies have requested no internal meetings during the games, as their executives must attend events alongside the matches. For some companies, this may mean that their meeting planners are looking to compress a year’s worth of meetings into 10 months.
3. Group demand will hold, but security around events will be tighter
Despite the ongoing uncertainty in the broader economy, companies still need to get their teams together. Associations and trade groups still want their members to come and meet in person. We expect group demand to increase slightly in select markets, with room rate increases above the transient rate increase. Convention centers in some major markets, such as Dallas, Austin, and Houston, are undergoing renovations, which will likely cause groups to look elsewhere. Add to that the FIFA World Cup traffic that will deter meeting planners from certain markets, and some secondary meeting destinations may be the beneficiaries.
If you lived through the rowdy, but peaceful, demonstration at last year’s IHIF Hotel Investment Forum in New York City, you remember that demonstrators tried to enter the main ballroom. Ultimately, they were thwarted. However, I am sure that this year’s event will have tighter security. In an increasingly polarized environment, meeting planners may feel compelled to enlist the assistance of third-party security to safeguard their speakers and guests against external disruptions. Hotel teams need to collaborate with meeting organizers to ensure that this enhanced security does not detract from the conference experience.
4. Pipeline will still be muted, but renovations will pick up
The U.S. Federal Reserve continues to cut interest rates, which should encourage more development as hotel construction loans become cheaper. But with national RevPAR growth projected to hover around 0% — or decline in some instances — developer conviction around new development will continue to be hard to find. Of course, builders always feel that they have a better location, product or combination of amenities, but overall, we do not expect a sharp increase in the hotel development pipeline. As I wrote here, we expect many new luxury hotels to have a residential component as the demand for branded real estate continues to be strong.
With limited new competition on the horizon, many hotel owners will feel that now is the time to reinvest and revamp their property. After all, in many markets, a newly renovated property will not face new competitors for a while, allowing operators to maintain a competitive edge against their competition. One further impulse for hotel renovations is the property improvement plans, or PIPs, which are brand-mandated. As brand standards change, so do PIPs, and after a post-COVID lull in renovations, brand managers are now more forceful in their demands for improvements from owners.
5. Deal volume will increase, but distress remains elusive
Every year in January, my friends in the broker community look bright-eyed into the future and declare the coming year to be the year that hotel deal flow will accelerate. And in 2026, they may finally be correct. Later this spring, when we close the book on recording all deals for 2025, the total volume is likely to be at best equal to the 2024 total volume of $29.2 billion. So, 2025 was not the year of the hoped acceleration. But with continued downward pressure on interest and bid-ask spread compression, more hotel deals are likely in the offing. The end of 2025 saw two noteworthy deals in San Francisco. Blackstone acquired the Four Seasons hotel, and the 3,000-room, two-pack Hilton San Francisco/Parc 55 was finally sold out of receivership. Deals of this magnitude will likely prompt other buyers to act, ensuring they do not miss out.
Just as brokers predict better deal volume each year, expected distress has been in the news since the year 2020. Outside of some noteworthy exceptions, such as the Hilton San Francisco deal mentioned above, the “wall of distress” has remained elusive. And a lower interest rate environment means that owners have even more opportunities to refinance their properties. This could lead to more hotel lifelines for owners and fewer forced sales.
So, these are my five expectations for 2026. What are yours?
Jan Freitag is the national director for hospitality market analytics at CoStar.
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