The hotel industry is experiencing a period of cautious optimism, with RevPAR growth expected to reach 5% in 2026, supported by limited new supply. However, rising operating costs, interest rates, and loan maturities are constraining profitability and transactions.
At the recent Lodging Conference, 3,000 industry professionals gathered to discuss the state of the industry. HVS, a leading consulting and services organization, had a large team present, and Rod Clough, MAI, CRE, MRICS, kicked off the general session with the company’s forecast and insights.
Luigi Major, MAI, Managing Director – Advisory, HVS Consulting & Valuation, noted that the tone of the conference was more upbeat than last year, despite many of the same themes carrying over. Operationally, 2026 has been a stronger year, with RevPAR growth expected to continue into 2027.
However, expenses continue to rise, and the transaction market has been tempered by rising Treasury yields, higher interest rates, and renewed inflation concerns. The bid-ask gap persists, with buyers and sellers still working to close the distance between pricing expectations and financing realities.
New supply remains muted, with construction costs staying high, which continues to support the performance of existing hotels. Geopolitical risk, including ongoing conflicts and inflation, remains a backdrop that the industry is watching closely.
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Artificial Intelligence Key
Artificial intelligence was a central topic at the conference, with speakers emphasizing the need for owners, brands, and operators to integrate this technology urgently. AI can be applied to forecasting and labor management, and hotels need to be properly represented as guests increasingly use AI tools to search and book.
Ryan Mark, Senior Vice President – Mountain West Region, HVS Consulting & Valuation, noted that AI can help drive guests to book directly with hotel websites, rather than through online travel agency platforms, limiting the costs associated with OTA commissions.
Despite the overall RevPAR growth, higher operating and capital costs have eroded profitability for many hotel investments. The luxury segment still leads in performance strength and outlook, and roughly 40% of all new supply in the pipeline comprises extended-stay products.
Marcus Lee, Executive Vice President – Development, HVS Asset Management & Advisory, pointed out that while RevPAR growth has been strong, it is not necessarily translating to profitability for every hotel. GOP margins have remained flat year-over-year, mainly due to a rise in undistributed expenses.
As operating costs remain high, owners are increasingly questioning whether franchise fees, brand standards, and renovation requirements generate incremental revenue or profitability. Brands are responding with greater flexibility, such as longer renovation cycles tied to strong guest satisfaction scores.
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Evaluating New Developments
For owners evaluating new developments, conversions, or repositioning, the focus should extend beyond brand contribution to topline revenue and into the underlying economics of the partnership. An independent brand/operator selection process can help owners evaluate competing affiliations based on total costs, operating requirements, revenue potential, and expected returns.
HVS offers guidance to lodging industry stakeholders throughout every stage of the investment life cycle, providing data-driven solutions tailored to their goals. The company performs over 4,500 assignments each year for hotel and real estate owners, operators, investors, banks, and developers worldwide.
According to the report, HVS principals are regarded as the leading experts in their respective regions of the globe, and through a network of some 50 offices and more than 250 professionals, HVS provides a range of complementary services for the hospitality industry. The company was established in 1980 and has since become the world’s leading consulting and services organization focused on the hotel, mixed-use, shared ownership, gaming, and leisure industries.
Maximizing Revenue Growth
Marcus Lee noted that active asset management or a hotel performance analysis can help maximize the impact of revenue growth by benchmarking operating performance, identifying expense and margin opportunities, and ensuring that incremental revenues flow to the GOP and ultimately asset value. This approach can help owners and operators better understand the challenges of the current market and make informed decisions about their investments.
The issue of hotel loan maturities is also a concern, with many loans originated at significantly lower interest rates, and owners may be forced to sell as their revenues may not meet current debt-service requirements. This highlights the need for hotel owners and operators to carefully manage their debt and financing obligations, and to explore options for refinancing or restructuring their loans in order to maintain profitability and stability.
