Resilient travel demand drives brighter outlook for hotels in 2026

Article originally posted on CoStar on August 14, 2026

Despite several unexpected industry setbacks this year, sentiment at last week’s 18th Hotel Data Conference in Nashville, Tennessee, was largely upbeat, as solid performance during the first half of the year drove industry forecasts upward for the remainder of 2026.

The overarching theme of the conference was clear: Travel demand remains far more resilient than what the broader macroeconomic narrative would suggest.

The hospitality industry has faced several hurdles, including global geopolitical tensions that have led to higher fuel prices, inflationary pressure and weaker consumer sentiment. However, strong corporate activity, renewed confidence in group demand, and the World Cup largely keeping Americans at home over the summer contributed to healthy hotel room revenue nationwide.

Industry experts also linked success to several outperforming demand segments, including sports groups, luxury transient and experiential travel. Youth and amateur tournaments serve as the backbone for weekend group business, especially in smaller regional markets where leisure amenities are limited.

Specifically, one attendee noted that although consumers might cut back on other discretionary spending, traveling for youth sports games is something they are not willing to compromise on.

Affluent travelers continue to drive luxury hotel room rates. However, hospitality professionals noted that these consumers are increasingly selective, favoring exclusive access and experiences that cannot be purchased on the shelf. As such, luxury hotels are becoming more creative to curate unique, differentiated offerings, such as specialized sleep programs.

Many conference attendees also highlighted experiential travel centered around events. Concerts have become a major draw, as evidenced by K-pop band BTS’ sold-out shows creating a spike in demand in Tampa Bay and Alan Jackson’s performance resulting in the highest RevPAR, or revenue per available room, in Nashville this year. Revenue managers stressed the importance of capturing ancillary revenue around event dates to maximize the total impact.

On the other hand, economy properties continue to be pressured by limited pricing power, and hotels that rely on a volume strategy — maximizing rooms sold instead of chasing the highest possible rate — especially those located in markets with saturated supply, face topline challenges. As one executive noted, hotels need to drive rates in a high-inflation environment.

On the supply side, hotel development remains challenging, especially in large metropolitan areas. However, secondary and tertiary markets, such as Bentonville, Arkansas, and Chattanooga, Tennessee, received positive commentary from attendees. Not only do these markets offer a reasonable cost basis, but they also extend revenue opportunities due to robust corporate activity or unmet demand from local communities, making development projects pencil out. At these locations, hotels are becoming more integrated with their surroundings, serving as gathering places.

Lastly, labor remains the most frequently cited operating risk. Labor availability, retention, wage inflation, union negotiations, housing affordability for workers and reliance on contract labor continue to pressure margins across multiple markets. Operators are increasingly turning to automation and artificial intelligence to offset staffing challenges, leveraging AI-driven efficiencies to reallocate time spent on manual, time-intensive tasks to duties such as enhancing the customer experience and training new team members.