PHOENIX - Conversations between hotel owners and brands are becoming more candid as rising costs continue to squeeze profits, even as hotel fundamentals improve. At the same time, industry leaders believe AI is poised to disrupt how travelers discover and book hotels, potentially reshaping the value proposition of brands themselves. Those themes dominated on-stage discussions this week at The Lodging Conference.
While panelists in one of the C-Suite discussions agreed that demand has been stronger than anticipated in 2026, many argued that owners have yet to fully benefit from that strength.
"Owner profitability has been under pressure for the better part of a decade," said Justin Knight, CEO of Apple Hospitality REIT. He noted that increased labor costs, higher interest rates and rising operating expenses have widened the gap between owner economics and brand economics.
"I think brands are coming to the table in a much more meaningful way to have a conversation about how economics get better for owners," Knight said. "There will be hard decisions that impact short-term profitability potentially, but drive long-term health for the business overall."
The pressure is being amplified by higher borrowing costs. Greg Friedman, CEO of Peachtree Group, said many hotel owners are refinancing loans at rates that are roughly double what they paid a few years ago. "You've got a lot of assets that need CapEx dollars," Friedman said. "The real challenge is dealing with higher-for-longer interest rates."
For owners, that means strong RevPAR growth doesn't necessarily translate into stronger profitability. "Any of the incremental benefit is being eaten up by increasing interest rates," Knight added.
Are Brands Delivering Enough Value?
he discussion reflected a broader shift occurring throughout the hotel industry. Historically, brands have been viewed largely as standards setters, responsible for maintaining consistency across portfolios. Today, owners are increasingly looking for brands to be strategic partners that help drive asset performance.
Omer Acar, CEO of Fairmont Hotels & Resorts and Raffles Hotels & Resorts Americas, said that expectation is changing how brand companies work with ownership groups. "The brands have always looked as standard enforcer, and that era is over," Acar said.
Instead, owners want brands to understand the realities of their individual properties and help create differentiation. "Owners are paying us also to find ways how we can create uniqueness," Acar said.
The challenge becomes particularly important in luxury hotels, where guests increasingly seek experiences rather than standardized products. "We sell an experience," Acar said. "The guest goes back home remembering how we make them feel instead of what they get as a service."
Aimbridge Hospitality CEO Craig Smith said stronger owner-brand communication will be essential moving forward. He noted that brands have legitimate concerns about protecting standards, but many owners have been navigating several years of economic headwinds while trying to keep properties competitive. "There are others that are good owners and they want the best for the property and for the brand," Smith said.
That dialogue is becoming more pointed as owners scrutinize whether brands are delivering sufficient value relative to their costs.
Shai Zelering, managing partner, Real Estate Group at Brookfield, argued that the rapid expansion of hotel brand families has made differentiation increasingly difficult. "There is a diminishing value of the brands because they are falling on top of each other," he said.
While brands continue to provide scale, loyalty programs and distribution, Zelering suggested many owners are reassessing whether those benefits are keeping pace with rising fees and requirements.
Knight defended the importance of brands, particularly in select-service lodging, where loyalty platforms continue to generate significant business. However, he acknowledged that the economic equation has become more challenging for owners.
"The brands continue to be incredibly effective generators of business," Knight said. "The challenge that owners have had is that during a period of time where owners have faced challenges from an economic perspective, it's gotten more expensive to participate with brands than it was before."
That tension is likely to remain a defining issue for the industry as both sides work to preserve growth while improving owner returns.
The AI Impact
Smith suggested that AI-powered trip planning and booking could fundamentally reshape hotel distribution, beginning with leisure travel. "We know it's probably going to start with leisure AI," he said.
Unlike managed corporate travel, leisure travelers have greater flexibility in how they research destinations and make booking decisions. As AI tools become more sophisticated, consumers may increasingly rely on intelligent assistants to build itineraries, compare hotels and complete reservations.
For brands, the potential shift is significant because distribution remains one of their most important value propositions. If AI platforms become a primary gateway between travelers and hotels, owners may begin reevaluating how much they depend on traditional brand-driven booking channels.
"We have a couple owners that are actually experimenting," Smith said. "They're saying, 'Do I need a brand with the advent of AI?'"
Friedman sees the same challenge emerging. "The value of the brand is giving consistency of product and being able to drive reservations," he said. "If someone else can drive reservations at high rates, you're going to go to that system."
That does not mean brands become irrelevant. Instead, panelists suggested the bar for demonstrating value may simply become higher.
Acar noted that brand companies are already investing heavily in AI-enabled guest engagement tools, including concierge technology designed to personalize the travel journey. "Once you're on the guest journey, then you have a real competitive advantage," he said.
But the broader challenge for owners, operators and brands may be preparing hotel content and systems for the AI-driven future.
"Brands, owners, operators, we all have to come together," Smith said. "How are we going to get on this new train track that's going to roll right next to the digital train track, but is moving faster?"