NASHVILLE, Tennessee — While a good chunk of 2026 remains, hoteliers can start to shift their mindset toward what to expect in 2027. And, according to the data, they can expect next year to be a stable one.
What people might not have entirely understood is that last year, the hospitality industry only nearly avoided a downturn, said Kelsey Fenerty, manager of analytics at STR, CoStar's hospitality data analytics firm. In her presentation at the 18th annual Hotel Data Conference, she explained that this makes 2026 a recovery year, and stability is on the horizon for 2027.
"If we had a little bitty, mini downturn last year, we recover in 2026, and we're a little bit more stable in 2027," she said.
Fenerty added that the U.S. hotel industry can expect a "low, slow growth environment," something that was originally predicted six years ago, so it's not a new concept. However, she added, while the data show 2027 should be a stable year, there's a lot to consider that could derail expectations — namely volatile economic or geopolitical swings.
"A forecast is really only as good as the external world around it is stable. Our world remains very uncertain these days," she said. "Right now, 'normal' is living in a world where really big changes happen semi-frequently with basically no lead-up or notice, and our long-term trends just change very abruptly as a result."
Supply and demand
While the K-shaped U.S. economy continues, Fenerty said it's flattened slightly, but the luxury hotel segment continues to lead.
Zooming into where the U.S. hospitality industry is with supply, there's not much growth to speak of, she said. Right now, there's around 50 or 51 hotel rooms per person in the United States. That number is expected to be closer to 49 per person by 2030, which isn't going to be an issue either.
"Our population growth is slowing, and as our population growth slows, we don't necessarily need a ton more rooms added," she said.
Much like supply, hotel demand is also slowly growing.
"Demand is still technically growing, and our adult population is growing, too, to support that. Our disposable income is growing. All signs point in the direction that travel demand is not going anywhere," Fenerty said.
While the interest in travel continues to be a promising indicator for the U.S. hospitality sector, demand is consistent. Domestically, travelers are going to the same places at the same times of year, she said, making a percent change year over year harder to accomplish and pushing things like calendar shifts and event-driven demand to the forefront when it comes to growth opportunities.
And growth opportunities are stemming from one segment: transient, specifically leisure travelers. While hoteliers continue to target group business, "it has been roughly unchanged for the last 21 years."
"At best, [group demand] reached 3% above 2005 levels," she said. "Right now, it's about 3% below 2005 levels, and you can compare that to transient demand that's running about 59% ahead. Transient is doing all the work here."
The U.S. hospitality industry has responded accordingly, and hoteliers have decreased their reliance on group demand. That segment has shrunk, from 40% to 30% over the past 20 years.
This evolution of hotel demand hasn't happened overnight, and it's not expected to change drastically either. But Fenerty said there's a silver lining to how things have changed.
"On a rolling 12-month basis, annualized, we're not going to hit the demand high-water mark that we hit pre-pandemic, that we reached in February 2020, until this time next year," Fenerty said. "And this might be a kind of shift, and I would just encourage you to think about that. That's not a bad thing — it is sophistication."
The sophisticated shifts
With all these trends in mind, traveler behavior has shifted and so, too, must hoteliers' response. One example Fenerty gave was the booking window length, which is shrinking — a hot topic among hoteliers at the conference.
Additionally, with both hotel supply and demand experiencing slower growth, occupancy has stagnated, which isn't too surprising if you factor in historic data, Fenerty said.
"U.S. hotel occupancy fell below 60% in three separate instances: 2020, 2008, 2001. It grew above 64% in three separate instances: once in the late '80s, a couple years in the mid '90s, and then again in the 2010s. We're forecasting it to hold around 64% for the next five years," she said. "In other words, if you want to get really technical with the term, we're at our optimal occupancy level."
If hotel occupancy isn't to be counted upon for growth, then average daily rate is what hoteliers are going after. Year to date, according to CoStar data, half of the 5 million rooms in the U.S. are growing either occupancy or ADR — not both.
Historically speaking, group demand and ADR growth have been correlated, Fenerty said. She added that hoteliers, confident with their group rate and bookings, feel obliged to raise transient rate accordingly.
But now transient ADR is on its own journey decoupled from group, she said. One reason is the aforementioned booking window shrinking, but another is because of the growth that's happening in the luxury segment.
Luxury hotels make up only 6% of U.S. hotel supply but 20% of ADR growth. And this is affecting hoteliers outside of the luxury space.
"If the most expensive hotel in your market pushes their rates up more and more, they're raising the ceiling for the entire market," Fenerty said.
Amid all the shifts, Fenerty said hoteliers have to seek new ways of doing business, and, more specifically, how they are looking at their own data to do so.
"You have to be creative. You have to look beyond just this idea that this is what the industry does — this is how it's always been. It might not be anymore," she said.