Quarterly Industry Pulse - Q3 2026

For the first time outside of a recession, U.S. hotel RevPAR (revenue per available room) slipped in 2025, down 0.3% as occupancy softened and room rates ticked up only slightly. A few forces combined to create that headwind: softer international inbound travel, cuts to government travel budgets, and inflationary cost pressures all weighed on performance. The U.S. also continues to be a “net exporter” of travel, meaning more Americans are traveling abroad than international visitors are coming to the U.S.

The good news: 2026 is already outperforming expectations. Forecasts have climbed from an initial 0.8% RevPAR gain to nearly 3%, with group demand standing out as a particular bright spot and weekday business travel growing again since February. Luxury demand is especially strong, up 7.8% year-over-year, continuing a “bifurcation” trend where higher-end hotels are outperforming—a trend expected to continue, while economy-scale properties are the only chain scale forecast to decline in 2026.

New hotel construction also hit a five-year low in the fourth quarter of 2025, and while supply has ticked up slightly, rising construction costs and timelines continue to keep new inventory limited.

Behind the scenes, hotel owners are navigating real margin pressure. Rising costs are outpacing revenue growth, and gross operating profit margins have declined for three straight years as labor, insurance, and brand costs reset structurally higher. Wages per occupied room rose 21% year-over-year in the fourth quarter of 2025, and insurance premiums jumped 17.4% in 2024 alone—a cost hotels can’t control.

As a result, margin preservation has become the top budgeting priority for owners in 2026. Many are responding by “shrinking” their hotels, limiting available inventory to reduce staffing needs and overhead, rather than chasing occupancy by discounting rates. For meeting planners, this reinforces a trend worth watching: hotels are prioritizing rate integrity and group business that supports healthier margins, which is good news if your program brings meaningful room block value.

European RevPAR is positive overall, up to 1.1% from 0.4% the prior year, but performance varies widely by market. Milan and Paris are notable outperformers, with the Milan Winter Olympics and Paris luxury demand offsetting softer results elsewhere. Southern Europe, including Spain, Italy, and Portugal, is outperforming on both rate and occupancy while remaining more affordably priced than London or Paris.

On the other end, Germany, the Benelux countries, and the Nordics are lagging, driven by slower GDP growth and more price-sensitive consumers. The UK remains stable but not strong, weighed down by soft GDP growth and pressure on real wages. The Netherlands is a market to watch after a VAT increase on overnight stays from 9% to 21%, effective in January, which is expected to drive a steep 5.6% RevPAR decline; Vienna and Edinburgh are reportedly considering similar hikes.

Despite the mixed picture, European hotel transaction volumes hit their highest level since 2019 in 2025, signaling continued investor confidence in the region.

APAC is forecast to grow RevPAR 3.6% in 2026, driven largely by rate growth of 2.4%. Vietnam and India are standout performers, while China remains sluggish, with Japan-China tensions and reduced flight capacity continuing to weigh on demand. Displaced demand from China is shifting toward Bangkok, Singapore, Hong Kong, and Auckland. Investment activity is also expected to rebound, with APAC hotel investment projected to reach $13.3 billion in 2026, up from $11.9 billion in 2025.

A few takeaways worth keeping in mind as you plan:

• Book early where you can. With supply staying tight and group demand strong, especially in the U.S. and top-tier European markets, availability and favorable rates will continue to reward advance planning.
  
  
• Be flexible with your dates. Oftentimes, date flexibility can yield better pricing for meetings and events.
  
  
• Expect continued rate discipline. Owners are prioritizing margin over occupancy, so don’t expect steep discounting; however, strong group business remains a valued piece of the puzzle for hotels.
  
  
• Watch emerging markets. Outside of the U.S., Southern Europe, Vietnam, and India offer strong value and momentum if you’re considering options beyond traditional gateway cities.