NASHVILLE—The U.S. hotel industry's outlook improved significantly heading into the second half of 2026, with CoStar and Tourism Economics raising the forecasts for both 2026 and 2027 after stronger-than-expected demand and pricing performance through the year's first seven months. STR President Amanda Hite opened the Hotel Data Conference today with the upgraded outlook for both 2026 and 2027.
For 2026, projected gains in average daily rate and revenue per available room were upgraded 1.1 ppts and 1.6 ppts, respectively. Occupancy was lifted to 63.1 percent – a 0.3 ppt lift from the previous forecast.
“This year has brought renewed optimism across travel, and we've seen strengthening in the hotel performance across many markets,” Hite told attendees.
"The hotel industry sold a record number of room nights in the first half of the year, an increase of 11.4 million compared with 2025, while room revenue climbed by more than $5.4 billion. The industry outperformed our expectations on stronger leisure and business travel, fueled in part by the World Cup and America 250 celebrations. In the next six months, we expect slightly lower gains than in the first half of the year, but top-line growth will still be driven by ADR. We also expect to see a stronger 2027 than what we initially projected in our past forecasts, although there will be some mid-year weakness due to difficult year-over-year comparisons.”
Upgraded Forecasts
Hite noted that while demand forecasts have been largely accurate, ADR growth has outperformed expectations, providing a stronger revenue backdrop going into 2027.
Looking ahead, Hite said the 2027 forecast has also been revised upward, with solid gains expected across ADR, occupancy and RevPAR for every chain scale segment.
“As we look at the 2027 RevPAR growth, the nice thing that we see here is across each metric, ADR, RPC, and RevPAR, solid gains for each chain scale segment,” she said.
The industry’s pronounced “K-shaped” performance is beginning to ease, although upper midscale and upscale segments are still seeing more muted occupancy gains due to lingering supply impacts. Overall, industry supply growth remains below 1 percent, supporting continued occupancy and rate improvement.
World Cup Boost But It's Not the Whole Story
A major catalyst for this year’s outperformance has been the World Cup, which drove exceptional ADR gains in June and July, particularly in host markets.
“We’ve had incredible performance. ADR has surpassed expectations in June and July, and really positive momentum coming out of July,” Hite said.
Hite said one of the biggest surprises was not the impact of the FIFA World Cup itself, but the strength shown by markets outside of host destinations. "We got demand spot on," Hite said in an interview with Hotel Management. "The story is really the strength of non-World Cup markets. That's where you start to see the momentum that is in the industry in terms of demand growth."
Hite expects much of the demand displaced from host markets during the World Cup to re-distribute across other U.S. markets in 2027, supporting continued performance even as the event’s direct impact fades.
“Group and corporate travel really started to come back this year,” Hite said, noting that occupancy gains accelerated around March and have been particularly evident during midweek periods. Tuesday and Wednesday occupancy gains have outpaced weekend growth, a sign that business-related travel is once again becoming a meaningful contributor to industry performance.
Jan Freitag, national director of hospitality analytics at CoStar Group, echoed that assessment. He pointed to recovering group demand, resilient leisure travel and easier year-over-year comparisons as key drivers behind the stronger forecast.
“Group really cratered after the tariff announcements in April 2025 and didn't rebound until earlier this year,” he said. “We're going to see continued momentum from the group demand side.”
At the same time, leisure demand remains remarkably resilient despite persistent economic uncertainty. Freitag said consumers continue to prioritize experiences over goods, helping sustain travel demand across income levels. Higher-income households, in particular, continue to support luxury hotel performance.
The improving demand environment is one reason forecasters remain optimistic heading into 2027 despite tough comparisons following this year's World Cup-driven performance surge. Hite said fundamentals remain strong, supported by economic growth, recovering corporate travel and expectations for increasing international visitation.
Luxury Leads, Other Segments Fight Inflation
Hite highlighted the luxury segment as a standout performer, with strong growth in June and July and expectations for continued demand strength.
“We do expect that the luxury segment will continue to see significant gains. We saw very strong growth in June and July of this year, and we're going to see that demand for luxury travel continue,” she said.
In 2027, inflation is forecast at 2.4 percent, according to Oxford Economics and Tourism Economics. Hite said no segment’s ADR growth is expected to exceed that inflation rate. Luxury and upper-upscale properties should see ADR growth generally in line with or slightly ahead of inflation once the distortion from World Cup comparison months is removed, while other segments will struggle to keep pace with rising costs.
Profitability Turns a Corner
While revenue growth is now outpacing expense growth, owners are still grappling with rising operating costs that continue to erode margins. According to Hite, hotel profitability has improved in areas operators directly control, but costs such as utilities, taxes and other undistributed expenses continue to pressure the bottom line. “We've gained ground here,” she said. “But margins are not increasing.”
Freitag said owners need to focus on both growing revenue and scrutinizing expenses. “You've got to continue to find the right customer and sell them the room at the right price,” he said. “But it's also about cost containment.”
He cited labor planning, insurance costs and other expenses as areas requiring increased attention heading into 2027 budget planning.
One bright spot for owners is the continued lack of new supply. With hotel development remaining constrained, some owners are using the opportunity to renovate and reposition existing assets.
Freitag said forward-looking owners see an opportunity to differentiate themselves by updating guestrooms, enhancing food-and-beverage offerings and creating new experiences that keep guests on property longer.
Both Hite and Freitag also highlighted food and beverage as an increasingly important profitability lever, particularly for full-service properties. Beyond traditional RevPAR metrics, operators should pay closer attention to total revenue performance and ways to capture more guest spending beyond the room.