Global Hotel Market Forecast Assumptions – May 2026

STR and Tourism Economics currently produce forecasts for 59 markets across Europe, the Middle East, Africa and Asia Pacific region. The analysis below summarizes the latest forecast revisions. 

Impact from war in Iran:

•    Forecasts assume the Iran conflict will conclude by end of summer 2026, with the ceasefire declared on 8 April remaining broadly in place through a formal resolution, despite periodic violations. 
•    Middle East markets are experiencing the greatest impact from the war. Outside the region, Asia Pacific, particularly Australia, is expected to be most affected, driven by its reliance on Middle Eastern transit routes and source markets.
•    European markets will be affected by a demand decline from Middle Eastern source markets as well as the loss of some long-haul demand that normally transits the region. However, the net impact will be positive as growing regionalization will benefit most markets in Europe.

Europe short-term outlook: 
For STR’s 31 European forecast markets, short- and medium-term RevPAR projections have been modestly rebalanced. We now forecast 1.4% RevPAR growth for 2026, an ADR-driven upgrade from the 1.1% increase forecasted in February 2026. Consequently, ADR and RevPAR growth in 2027 have been downgraded, with rate expected to decline 0.1% and RevPAR forecasted to rise 0.2%. Occupancy projections remain unchanged, with growth forecasted at 0.5% in 2026 and 0.3% in 2027.

Demand expectations remain stable
Occupancy growth expectations have been lifted for 16 of the 31 European forecast markets. However, much of the improvement has already occurred in this first half of the year, as demand in March, April, and in some markets May materialized stronger than initially projected. 

The outlook for H2 2026 remains conservative across all markets. Demand in the first half of the year has been largely unaffected by the conflict in Iran, but direct and indirect impacts are likely to occur beginning summer 2026. 

Most markets have offset the loss of Middle East demand year to date, with increased intra-Europe travel, as well as long-haul demand from the Americas helping lift hotel demand. Milan and Zürich are exceptions to this trend, however. Zürich occupancy is now expected to decline 0.5% relative to 2025. Milan occupancy is still forecasted to rise (+0.7%), but the increase is predominantly driven by Olympics demand already realized in January and February.

Glasgow, Barcelona, and Prague are among the top-growing markets this year, driven primarily by strong leisure demand. Scotland has emerged as an increasingly popular tourist destination, as cooler weather and cultural attractions drive demand both regionally and from the US. Meanwhile, Barcelona stands to benefit from displaced leisure demand caused by the conflict in the Middle East. Prague can also expect some demand resulting from the conflict, as it’s a more affordable destination.

Occupancy expectations for 2027 are likewise anchored. As airlift through the Middle East improves, demand both from and through the region will increase, offsetting losses from European travelers moving out of the region. Zürich and Milan will both outpace 2025 occupancy levels, although Milan occupancy is still expected to decline in 2027 due primarily to the Olympic Games offset. 

Rate growth trends split across markets
Although the 2026 ADR forecast for the aggregated 31 European markets has modestly increased from 0.6% to 0.9% this quarter, an additional seven markets are now forecasted for ADR declines when compared with our February forecast.

While not the only factor, the Iran conflict has influenced ADR declines in Zürich Centre, as well as UK’s Gatwick and Heathrow Airport submarkets as the drop in Middle East travelers (Zürich) and changes in airlift (Gatwick and Heathrow) have limited pricing power in all three markets. 

Supply growth plays another important role in rate growth expectations, with markets like Stuttgart (+4%) and Budapest (+3%) expecting rate declines as new rooms increase market competition. For Stuttgart, as well as Heathrow, Brussels, and Frankfurt, sluggish corporate demand has also limited rate growth.

Corporate prospects, much like rate growth, are increasingly market dependent. Glasgow stands out as hosting six major medical congresses this year, while Dublin will host the EU presidency from July through December. Meanwhile, traditionally business-reliant markets like Manchester Centre and Birmingham Centre have stronger rate growth expectations than in February in part due to sporting events and concerts, including the ICC T20 Women’s World Cup in cricket (both markets), the European Athletic Championships (Birmingham), as well as Dermot Kennedy, Take That, and The Cure concerts (Manchester).

Macroeconomic outlook shifts
The war in Iran has caused significant shift across most economic factors, including slower GDP growth and higher inflation expectations. 

Higher energy costs will flow through to inflation both directly and indirectly, as supply chain disruptions, as well as energy as input, feed through to the cost of other goods. As inflation rises, consumers’ disposable income falls. Inflation is set to peak over the second half of 2026, although it will remain elevated though 2027. From a demand standpoint, increased inflation may limit or divert hotel demand.
At the same time, increased prices lead to growth in hotels’ operating costs, which often pushes hotels to increase ADR. 

The outcome is increased emphasis on budget-friendly accommodation, both from a destination and class standpoint, though Luxury travelers will remain unaffected. 

While some travel may be deterred, decreased disposable income further supports growth in short-haul and intra-regional travel. Europe’s geographic size and connectivity allow travelers a multitude of transportation options that satisfy various price points.

Asia Pacific short-term outlook:
STR’s 16 Asia Pacific forecast markets are forecasted to increase RevPAR 4.4% in 2026 and 2.2% in 2027—a short-term improvement and marginal medium-term downgrade. Occupancy–forecasted to grow 1.3% across the region in 2026–has been upgraded for eight markets, while rate (3.1%) has been lifted in 13 of 16 forecast markets. The 2027 adjustment, caused by a 200-basis-point downgrade in occupancy and 100-basis-point reduction in ADR growth expectations, is a marginal adjustment based on individual market outcomes—not a sign of regional slowdown.

Connectivity challenges change demand trends
The Middle East travel corridor plays an important role in connecting Asia Pacific to the West, with both inbound and outbound demand transiting through the Middle East.

While many airlines are working to shift routes and transit through other hubs—namely Singapore—the temporary reduction in seats, increased uncertainty around jet fuel availability, and rising cost of air travel will depress long-haul inbound and outbound travel to Asia Pacific.

Increased intra-regional, and in some cases domestic, travel should help to offset the decline among many markets. Sanya, one of China’s most popular coastal destinations, now expects 11.8% RevPAR growth in 2026. With routes to the West restricted, the Middle East off limits, and the first-ever Chinese Spring Break for school children, Sanya has and will continue to enjoy strong demand and pricing power.

For other markets, most notably Melbourne, connectivity concerns will have a net negative impact. The decline in long-haul international demand, coupled with a tighter economic environment within Australia, is likely to stymie domestic demand and lead to a RevPAR decline of 0.6% this year—a significant downgrade from the +1.5% forecasted in February.

Corporate travel is expected to remain strong across the region, fueled by domestic demand in Mumbai (+3.5% RevPAR in 2026) and by trade fairs and other events in Auckland (+9.2% RevPAR in 2026). 

Leisure events still pack a punch
Event calendars continue to stack up in markets across the region, highlighting the continued appetite for experiential travel. BTS’s Arirang World Tour will reach six forecast markets between December 2026 and March 2027, leading to 3% ADR growth in December 2026 for both Bangkok and Singapore. Jakarta, which unlike most markets typically finds event impact on demand, expects 3.7% occupancy growth that same month.

Sydney will host two Barclays Premier League teams, Tottenham Hotspur and Chelsea FC, over the winter. Interest in the friendlies is expected to help lift July 2026 ADR 1.4% against a challenging 2025, when rate grew 7.8%.

In September 2026, Melbourne will host the first NFL game in Asia Pacific, as the Los Angeles Rams take on the San Francisco 49ers. NFL games have historically had significant impact across European host markets, and September ADR is expected to climb 11.7%, the highest rate growth all year.

However, next year is arguably the bigger year as Australia plays host to the 2027 Men’s Rugby World Cup. Sydney will host nine matches in October, as well as both semifinals, the bronze final, and final match in November. Rate growth will be strong across both months but will peak in November at more than 10%. Melbourne hosts eight matches and Brisbane 10, all in October. Rate growth for the month is expected to reach almost 10% for both markets.

Middle East short-term outlook: 
Conflict around Iran is forecasted to cause a nine-month tail on travel demand, with safety perception, cost, and airlift the key factors in demand recovery region-wide. However, until the ceasefire is ratified and the war fully concluded, sentiment will remain low and a ceiling on occupancy, particularly in the UAE and Riyadh, will remain in place, with travel advisories and reduced airlift the biggest deterrents to demand growth. Regardless of an official conclusion, already low summer season (due to weather) will remain extremely depressed for Riyadh, Dubai, and Abu Dhabi.

Dubai and Abu Dhabi
International inbound demand is expected to remain extremely depressed through the summer, with Dubai reaching a ceiling at just over 40% occupancy and Abu Dhabi closer to 60%. Occupancy should improve rapidly in Q4 2026 and into Q1 2027, before a modest slowdown over the Ramadan period. Recovery should continue through 2027, with full-year occupancy reaching 2025 levels in 2028.

Strong marketing efforts alongside existing attractions and the markets’ coastal location will lead to a moderately rapid rebound that will accelerate as airlift and safety perceptions improve. The forecast, while conservative, has moderate potential as soon as an accord is officially reached.

However, rapid demand rebound will come at the expense of ADR, with hotels expected to initially attract demand through discounted room rates. As the markets regain popularity and demand normalizes, pricing will also normalize—but at a much slower pace. Dubai is forecasted to reach 2025 ADR in 2029, while Abu Dhabi will have a slightly faster recovery in 2028.

A significant number of hotels in Dubai are using the downturn to close for refurbishment or renovation, while others are closing temporarily until demand improves. Roughly 5,400 rooms have been removed from supply in April 2026, with 2,800 returning in May; another 1,000 returning in October; and the remaining 1,500 reopening in January 2027.

Jeddah and Riyadh
Saudi Arabia’s geographic size, along with its reliance on domestic demand, has lent optimism to hotels in Jeddah and Riyadh throughout the conflict.

Jeddah has fared well year to date. Supply growth will continue to be a headwind from mid-2026 through 2027, but demand growth expectations have been revised up. Jeddah’s coastal location and distance from the conflict led to unexpectedly strong demand from March 2026, and the rebound is expected to continue through 2027.

Additionally, Saudi Arabia has remained open for first Umrah and later Hajj pilgrimages. Jeddah has benefited immensely from this, as it remains a key gateway to the Holy Cities, a factor heightened this year as the King Abdulaziz International Airport has remained open through the war.

Riyadh’s greater reliance on corporate demand, and especially international inbound corporate demand in support of giga projects, has led to significant demand decline in the Saudi capital.

However, those same developments will help engineer a rapid demand rebound from early 2027. Demand will reach 2025 levels from February, but even with double-digit demand growth, occupancy levels will remain below 2025 levels as supply growth picks up.

The conflict in Iran will not have long-term impact on demand in either Jeddah or Riyadh; rather, supply growth will remain the Saudi markets’ biggest headwind. However, the loss of pricing power in 2025, coupled with the new rooms, will stymie long-term ADR expectations. Riyadh rates are now expected to remain below SAR800 through 2030. Jeddah rates are less affected but are now expected to decline in 2027.

Long-term outlook: Long-term demand is expected to rise annually across all markets from 2028-30, and most markets can expect RevPAR growth across those three years as well. High supply growth in Mumbai, Edinburgh, and Hamburg will lead to modest RevPAR declines in 2028. Cologne RevPAR will decline the same year due to biennial and triennial trade fair offsets from 2027.

STR’s 31 European and 16 Asia Pacific markets do not anticipate long-term impact from the war in Iran.

Dubai and Abu Dhabi RevPAR growth will remain above the long-term average from 2028-29 as both markets rebound from the war impact. RevPAR is still expected to decline in 2030 due to two Ramadans in the same calendar year, running from early-January to early-February 2030 and again in December 2030.

Long-term RevPAR growth expectations have been upgraded for Riyadh and Jeddah as well due to the war. For Jeddah, stronger demand and occupancy growth as a result of the market’s recent return to popularity is expected to continue. For Riyadh, stronger rate growth as the market looks to return to 2025 ADR levels drives RevPAR growth. Both markets expect continued RevPAR growth in 2030; Jeddah due to its proximity to Makkah and Riyadh due to EXPO 2030.