The hospitality investment cycle entering 2026 is defined less by volatility and more by dispersion.
Consensus forecasts suggest modest growth in U.S. hotel performance. RevPAR is expected to increase approximately 1 to 1.5%. Cap rates appear relatively stable. The broader economy remains steady.
Yet beneath those averages, structural divergence is widening across segments and markets.
In a recent episode of Peachtree Point of View, Greg Friedman, CEO of Peachtree Group, spoke with Mark Woodworth of Woodworth Core Group and Jack Corgel, Professor Emeritus at Cornell’s Nolan School of Hotel Administration, about how to interpret current market signals and where risk may be mispriced in today’s lodging sector.
Their analysis reframes how investors should approach hotel real estate in 2026.
What Does the 2026 Hotel Investment Outlook Really Signal?
Headline forecasts suggest stability.
But as Jack Corgel noted, aggregate projections can obscure structural differences: “These numbers that Mark and I were talking about, the one and a half percent, those are gross aggregate numbers.”
Luxury and upper upscale assets continue to outperform, supported by long-term wealth creation and resilient high-income travel demand.At the same time, many midscale and economy properties face margin pressure, slower rate growth, and increased operating costs.
Mark Woodworth described the divergence clearly: “The disparity in performance across the chain scales has got to be greater than I’ve ever seen in my 40-plus years of doing this stuff.”
For investors, this means sector-level exposure is insufficient. Market selection, asset quality, and segment positioning now drive outcomes more than broad hospitality allocation. The 2026 outlook is not about a uniform recovery. It is about widening spreads.
Why Real ADR Growth Matters More Than RevPAR
One of the most actionable insights from the discussion centered on real ADR growth. Average Daily Rate growth is often cited as a positive indicator. However, in an environment where CPI inflation remains near 2.7%, nominal ADR growth does not automatically translate into real income expansion.
Corgel was direct: “If we’re tracking along on that path, I want to see ADR growth north of that number to be excited about making an investment in a hotel space.”
What Is Real ADR Growth?
Real ADR growth equals nominal ADR growth minus inflation. If ADR grows at 2% while inflation runs at 2.7%, pricing power is negative in real terms.
This distinction matters because:
• Occupancy has natural ceilings
• Expense growth remains persistent
• NOI expansion depends disproportionately on rate growth
Sustained real ADR growth above inflation is a leading indicator of durable demand and long-term stability of asset values. Without it, underwriting assumptions must be conservative. For hotel investors evaluating opportunities in 2026, real pricing power is a more reliable signal than aggregate RevPAR growth.
Have Hotel Cap Rates Fully Repriced?
Interest rates have reset meaningfully compared to the prior decade. The 10-year Treasury yield remains materially higher than the sub-2% environment that defined much of the 2010s. Yet hotel cap rates have remained relatively stable.
Why?
Cap rates reflect three primary drivers:
• The risk-free rate
• The risk premium
• Expected income growth
In today’s market, modest income growth expectations and stable risk premiums are offsetting higher Treasury yields. The result is relative equilibrium.
However, equilibrium does not necessarily imply attractive equity upside when
• NOI growth remains moderate
• Cap rate compression is limited
• Financing costs remain elevated
Then, total return expectations must be recalibrated.This is particularly relevant for investors underwriting hotel acquisitions in 2026.
Where Is Risk Mispriced in the Hospitality Capital Stack?
Against this backdrop, both Woodworth and Corgel expressed greater conviction in credit positioning than in aggressive equity deployment. “If you can get an eight, eight and a half percent coupon on a mortgage debt investment, that looks pretty good,” Corgel observed. In a cycle characterized by modest aggregate growth and widening dispersion, capital stack discipline becomes critical.
Senior debt can provide:
• Contractual yield
• Priority position in the capital structure
• Downside protection
• Exposure to improving fundamentals through enhanced credit quality
This does not eliminate equity opportunities. Certain markets, particularly those with strong employment growth, in-migration, and favorable tax environments, may generate outsized returns. But dispersion increases underwriting risk. For investors assessing hotel real estate allocations in 2026, the central question becomes:
Are you adequately compensated for last-dollar risk?
In many cases, senior credit may offer more compelling risk-adjusted returns than equity.
Signals to Monitor in the Current Hotel Cycle
As the hospitality cycle progresses, several structural indicators deserve attention:
• Real ADR growth relative to CPI
• Segment-level RevPAR dispersion
• Employment expansion in key Sunbelt markets
• Long-term Treasury yield stability
• Senior debt pricing and availability
Cycles rarely reverse on headlines. They shift gradually through pricing power, capital flows, and employment trends. Woodworth expressed optimism that the latter half of the decade could produce stronger income growth as demographic and wealth trends continue to support travel demand. Whether that scenario materializes depends on sustained pricing power and disciplined capital allocation.
A Structural, Not Sentimental, Market
The 2026 hospitality investment environment is not defined by crisis. It is defined by selectivity. Dispersion across segments, muted real pricing growth, and relatively stable cap rates require disciplined underwriting and thoughtful capital stack positioning. For investors navigating hotel real estate today, structure matters more than sentiment.
To hear the full discussion on hospitality cycle timing, real ADR growth, and where risk may be mispriced, listen to this episode of Peachtree Point of View.
