The U.S. hotel industry is heading into 2027 following a stronger-than-expected year for travel demand and room revenue. While growth may moderate as the industry faces difficult year-over-year comparisons, limited new construction and continued consumer spending could support hotel performance.
On a recent episode of Peachtree Point of View, Greg Friedman, Managing Principal and CEO of Peachtree Group, spoke with Jan Freitag, National Director of Hospitality Analytics at CoStar Group, about the industry's 2026 performance, the outlook for 2027 and the trends shaping hotel demand.
The hotel industry entered 2026 facing uncertainty around consumer spending, geopolitical developments and international travel.
Yet demand proved more resilient than many anticipated.
"The year, in short, has been much better than expected," Freitag said, noting that CoStar had revised its 2026 forecast three times as hotel performance continued to improve.
According to data shared during the episode, year-to-date revenue per available room (RevPAR) increased approximately 5.6%, supported by 3.8% room rate growth and a 1.8% occupancy gain.
RevPAR is a key measure of hotel performance that reflects both room pricing and occupancy.
Several factors contributed to the stronger results, including a rebound in group travel, continued leisure spending and demand associated with the FIFA World Cup.
September was particularly strong, with RevPAR increasing 11%.
Freitag also noted that U.S. hotel room demand was expected to surpass its previous 2019 record in 2026, establishing a new high for the number of rooms sold.
Although 2026 has exceeded expectations, the outlook for 2027 is more complicated.
Freitag suggested approximately 2.5% RevPAR growth for 2027, but cautioned that the annual figure could be misleading because of unusually difficult comparisons in June and July.
Those months benefited from World Cup-related demand and pricing in 2026, creating a higher benchmark for the following year.
Freitag described the outlook as a "10 plus 2" scenario, with 10 relatively normal months and two months facing difficult comparisons.
Without another World Cup, June and July could report weaker year-over-year growth even if underlying travel demand remains healthy.
For hotel owners and investors, understanding these calendar effects will be important when evaluating 2027 performance.
Hotel performance continues to vary significantly across segments.
Luxury properties have experienced particularly strong pricing power. Freitag reported year-to-date luxury room rate growth of approximately 7.1%, compared with 3.8% nationally.
More moderately priced hotels have experienced slower increases, with upper-midscale properties recording approximately 2.7% room rate growth and midscale hotels increasing 1.7%.
Those differences matter as operating expenses continue to rise.
"But our top line isn't growing as quickly as our costs are growing," Freitag explained, pointing to higher labor, insurance and energy expenses as factors putting pressure on hotel profitability.
Even luxury hotels, which have benefited from stronger room rates, face substantial operating costs associated with elevated guest expectations.
For hotel owners, maintaining profitability will depend on balancing revenue growth with expense management.
One of the more significant trends shaping the industry's long-term outlook is the relatively limited amount of new hotel construction.
Freitag cited approximately 145,000 U.S. hotel rooms under construction, compared with roughly 220,000 in 2019.
Higher interest rates, construction costs and development financing challenges have constrained the hotel pipeline.
The impact varies by market. Some cities continue to experience meaningful development activity, while others have very little new supply planned.
For existing hotels, limited new competition could support occupancy and room rate performance over time, particularly in markets where travel demand continues to grow.
Friedman also emphasized the potential long-term benefits of constrained construction, noting that the lack of new competitive supply could "really pay dividends, down the road."
Despite encouraging demand trends, several challenges remain.
Rising labor costs, insurance premiums and energy expenses continue to pressure hotel operating margins. International travel patterns and broader economic uncertainty may also affect performance across markets.
Freitag highlighted the potential impact of insurance costs, particularly for coastal hotels, as well as local tax policies and labor availability.
These factors mean that stronger room revenue does not necessarily translate into stronger profitability.
The outlook will also differ by hotel segment and geography, making market-specific analysis important.
During the podcast, Jan Freitag discussed a preliminary outlook of approximately 2.5% RevPAR growth for 2027, noting that World Cup-related comparisons could affect June and July.
A rebound in group travel, continued leisure spending and demand associated with the FIFA World Cup contributed to stronger-than-expected hotel performance.
Luxury hotels have experienced stronger room rate growth than several lower-priced segments. However, operating expenses and profitability vary across properties.
Higher interest rates, construction costs and financing challenges have constrained hotel development in many markets.
The outlook discussed in the episode suggests continued RevPAR growth, although performance will vary by market and could be affected by difficult year-over-year comparisons.
Greg Friedman and CoStar's Jan Freitag discuss the trends shaping hotel demand, the 2027 outlook and what the latest industry data means for hotel owners and investors.
Listen to the full episode for their perspectives on the next phase of the lodging industry.
