Chapter 10
Hotels
U.S. Real Estate Market Outlook Midyear Review 2026
2 Minute Read
2 Minute Read
Midyear Outlook
- CBRE forecasts U.S. hotel RevPAR growth of 2.5% in 2026 and 2.1% in 2027, with occupancy rising to 62.8% in 2026 and 63.0% in 2027 and ADR growth of 1.7% in both years. This outlook is underpinned by stronger-than-expected momentum in Q1: RevPAR grew by 3.8% year-over-year, its best quarterly performance since Q1 2023, driven by a 1.1% gain in occupancy and 2.4% in ADR. All hotel segments posted occupancy growth, with premium locations leading the way.
- A meaningful recovery in business transient and group travel emerged as a key driver, with 5.4% year-over-year growth in convention-linked group RevPAR by April 2026. Excluding the summer World Cup effect, business transient and convention-linked group demand together are expected to contribute more than half of 2026 RevPAR growth, with major tech hubs such as the San Francisco Bay Area and AI data center construction markets such as Memphis, Houston and St. Louis positioned to benefit most. We expect this convention-linked momentum to continue through 2027, supported by a robust group and event booking pipeline.
- We expect performance to remain bifurcated this year: Luxury RevPAR is forecast to grow by 5.2%—roughly double the national pace—while midscale lags at 0.7% and economy declines by 0.6%. This extends the divergence already evident in Q1 2026, when luxury (+7.0%) and resort locations (+6.6%) led RevPAR growth, midscale (+0.9%) trailed the national average and economy declined by 1.8%.
- Persistent supply constraints, with hotel construction declining for 15 consecutive months and inventory projected to grow at just 0.7% CAGR over the next three years, provide a structural floor for ADR growth and support a gradual recovery in occupancy to pre-COVID levels.
Figure 13: Annual Hotel Fundamentals
Key Updates to Forecast
- We have increased our 2026 U.S. hotel RevPAR growth forecast to 2.5% from 1.2% at the start of the year, driven by resilient leisure demand and a meaningful recovery in business travel.
- Compared with the previous forecast, the primary drivers of demand growth are expected to shift to leisure and domestic business travel. Following the U.S./Iran conflict, the FIFA World Cup’s contribution to RevPAR growth has been revised down to 0.5-0.8 percentage points, from 0.8-1.1 points at the start of the year The World Cup’s contribution has been weighed down by room block cancellations, elevated long-haul airfares and steep match ticket prices. However, the shortfall has been more than offset by a robust recovery in domestic business travel and convention demand, which is the principal driver of the forecast upgrade and has emerged as the primary near-term growth catalyst after a difficult 2025.
- There are several potential near-term risks, including the ongoing U.S./Iran conflict, inflation above 3%, and depressed consumer sentiment. However, we view the balance of risks to the current forecast as skewed to the upside given the strength of underlying fundamentals.
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Hotels
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