NEW YORK -- Throughout the first quarter, the U.S. hotel industry had good reason to expect a less-than-stellar 2026.
Geopolitical tensions, surging oil prices and inflation all weighed heavily on U.S. hotels, driving consumer sentiment to its lowest level in 75 years in April, according to Oxford Economics.
Despite these conditions, Q1 turned out better than expected, and forecasters responded with a significantly brighter outlook for the year.
At the NYU International Hospitality Investment Forum held here in early June, CoStar Group and Tourism Economics said they now expect U.S. RevPAR to grow 2.8% in 2026, up from the modest 0.6% growth they had forecast in February and the slight 0.3% decline they had projected in late 2025.
"We revised it up by a lot," said Jan Freitag, national director of hospitality analytics for CoStar Group, during a June 1 panel discussion at the NYU event. "The cautious optimism that framed our outlook earlier in the year has made way for a more robust forecast."
Freitag said group and individual bookings strengthened, and the demand increase gave back hotels some of the pricing power they had lost. He estimated that room demand was up more than 8 million room nights year over year through the first four months of 2026, contributing to better-than-anticipated Q1 earnings.
"The momentum just came out of the gate stronger than we had thought," said Freitag, adding that U.S. RevPAR was up about 5% through the first 20 days of May.
Momentum is expected to continue in the second half of 2026 due to a favorable year-over-year comparison, since the U.S. hotel industry slumped in 2025.
Notably, Freitag said that the FIFA World Cup, which kicked off last week, didn't play a role in the revision, saying CoStar had already built the soccer tournament into its previous forecast.
Low confidence but open wallets
During another NYU forum presentation, Tourism Economics president Adam Sacks discussed favorable conditions driving a better-than-expected performance, including a relatively stable job market.
Despite job growth slowing, Sacks said that the unemployment rate, currently hovering at around 4.3%, is unlikely to surpass 5% this year.
"The labor market is hanging in there pretty impressively," said Sacks.
He added that consumer debt payments as a share of personal income remain well below prepandemic levels and that asset values held by U.S. households are at record highs.
And despite consumer sentiment hitting a historic low, spending has kept growing, Sacks said.
"This decoupling of how people feel and how they act is a real thing," he said, adding that hotels continue to benefit from a broader shift in how consumers choose to spend their money.
"Experiences are still paramount to U.S. consumers. We continue to see prioritization of travel and experiences over the consumption of goods," Sacks said.
A midscale recovery
Notably, it's no longer just higher earners showing up with that spending power.
After years of a K-shaped economy, in which luxury and upscale hotels thrived while midscale and economy properties lagged, Hilton CEO Christopher Nassetta argued that the industry is shifting toward what he called a "C-shaped" economy, with the "C" standing for "convergence."
"It's not politically advantageous for people to be talking about things getting better," Nassetta said. "I'm just offering you hard data that says people in those other price points are traveling more. They're traveling more on weekends, they're traveling more on weekdays, they're traveling more for vacations, they're traveling more for business."
Nassetta attributed the shift in part to massive infrastructure and AI-related investment cycles that he said are putting money in the pockets of middle-class workers.
CoStar and Tourism Economics also expect to see improvement across all price points. Although luxury hotels are expected to lead all segments with RevPAR growth of 5.3% this year, Freitag said progress will be broad-based.
"What's really good to see is that we have a widespread demand growth forecast, specifically in the middle of the chain scale," Freitag said, citing projected demand growth across the upscale, upper-midscale and midscale segments. Even the economy segment, he said, is expected to eke out RevPAR growth of 0.2%.
Further bolstering the demand picture is the fact that Americans are traveling closer to home this year. According to Sacks, the number of Americans traveling internationally has fallen year over year for the first time in several years, with outbound travel down about 2% in 2026.
He said many of those international trips are redirecting toward domestic destinations this year.