Wall Street analysts who cover publicly traded hotel companies are entering the new year with some sense of optimism, but that outlook is largely in relation to the tough year hotels faced in 2025.
"Our outlook is things are less bad; the backdrop should be better," said Michael Bellisario, senior research analyst at Baird Capital. "That makes for a relatively good setup, especially in the first half."
He noted some of his optimism is founded on getting past difficult year-over-year comparisons. That was a similar takeaway for Truist managing director of lodging and leisure equity research C. Patrick Scholes, who also pointed to the timing of holidays this year as a major positive for the industry.
He noted the positive outlook is also based on the assumption of avoiding the major disruptions of 2025.
"This all is predicated on no further government shutdowns," he said. "Who knows what's going to come from Pennsylvania Avenue. That's the big risk here. But what's on the books now is pretty strong. It's actually really strong, right now."
Factors built into Wall Street assumptions include travel demand lift from the largest FIFA World Cup ever and a stronger outlook for consumer confidence and spending.
President Donald Trump "is tweeting things because it's a midterm election year, and I think he's throwing things on a wall and seeing what's sticking," Bellisario said. "But a lot of them are very good for consumers. A tariff dividend probably won't happen. [But] lower credit card fees, $200 billion of mortgage backed securities purchases [would be]. Mortgage rates already came in 22 basis points. There's lots of things that should add up to make the consumer have more dollars in their pocket, including these tax refunds that are coming here. So the setup is just better."
Scholes also pointed to "bigger tax refunds" as a travel stimulus. He said America 250 celebrations will also be a tailwind for travel, particularly in urban markets.
Overall, hotel C-corps, which are the brands, have been better poised for growth in the stock market in recent years, but there is at least some hope that hotel real estate investment trusts can show some promise in the new year.
Bellisario said "the broader health of capital markets" could help buoy REITs in 2026, but any turnaround will have to be looked at relative to recent years.
"We're still talking about, for the most part, expense growth exceeding revenue growth and margins down to flat," he said.
He called cycle dynamics "relatively unfavorable" for REITs with the one thing that could truly shake up the landscape would be mergers and acquisitions.
"Do we start to see some bigger transactions occur?" he asked.
Scholes said hotel REITs will remain challenged in terms of perception from larger real estate investment.
"You can see from years and years of underperforming stocks that these — especially from your traditional, long-holding real estate investors — are not even hated. It's sort of beyond hate. It's just ignored at this point. They don't even look" at hotel REITs, he said.
In terms of the brands, Scholes said 2026 could be the year where the gap between the haves and have-nots closes somewhat. That would mean better performance for companies like Choice Hotels International and Wyndham Hotels & Resorts, which have a lot of rooms in the economy chain scale.
He said Choice in particular was "given up for dead" by some investors. He recently upgraded the company to a buy though, due to stronger consumers and "all-time low valuation multiples."
"I think low-single-digit growth is pretty reasonable" for Choice in 2026, Scholes said.
The outlook for 2027 is still murky though, he said.
"The uncomfortable truth is, there's not a World Cup next year, nor is there going to be a 251st anniversary celebration," he said. "So let's enjoy the moment, right now. And you know, maybe come 2027 we start to get some government business coming back. Maybe you start to get international inbound, but we're not seeing it yet."