NEW YORK -- CoStar and Tourism Economics unveiled significant upward revisions to their 2026 U.S. hotel forecasts during the NYU International Hospitality Industry Investment Forum here on Monday.
The revised forecast projects RevPAR growth of 2.8% for the year, up from a prior estimate of just 0.6% and last year's 0.3% RevPAR decline.
"We revised it up by a lot," said Jan Freitag, national director of hospitality analytics at CoStar Group during a Monday panel. "The cautious optimism that framed our outlook earlier in the year has made way for a more robust forecast, driven by stronger demand from both the group and transient segments."
He attributed the revision to a strong first quarter, with room demand up more than 8 million room nights year over year through the first four months of 2026, and major hotel companies reporting better-than-anticipated Q1 earnings.
"The momentum just came out of the gate stronger than we had thought," Freitag told Travel Weekly. He added that FIFA World Cup-related demand had already been baked into the previous forecasts and didn't play a role in the latest revision.
Luxury hotels continue to lead the way, with RevPAR growth for that sector expected to be up 5.3% this year. However, all price segments are projected to make gains.
"What's really good to see is that we have a widespread demand growth forecast, specifically in the middle of the chain scale," Freitag explained, 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%.
The factors impacting hotel demand
Despite the rosy outlook, Freitag warned that inflation is expected to continue squeezing hotel profit margins, with rising costs expected to outpace revenue growth.
"We're projecting some margin expansion, but not enough to outrace inflation," said Freitag. "In real terms, we are still around 20% below 2019 in margin terms."
The revised forecast comes as the U.S. hotel industry stands to benefit from several demand tailwinds.
During an earlier presentation, Adam Sacks, president of Tourism Economics, said that despite consumer sentiment falling to its lowest recorded level in 75 years in April, "we've seen real consumption continue to grow."
He credited a relatively low unemployment rate, which is currently at 4.3%, with helping to drive that consumption.
"The labor market is hanging in there pretty impressively," said Sacks, adding that he expects the labor landscape to remain fairly stable, despite an expected slowdown in job growth this year.
He pointed to the K-shaped economy as another advantage for U.S. hotels, citing the fact that 51% of leisure travel spending on lodging comes from households earning $150,000 or more. Additionally, households earning $200,000 or more now represent 11% of all U.S. households, up from 6% in 2018.
"It's one of the reasons that the hotel industry has managed to grow, even with the economic effects on the lower end of the spectrum," he said.
International vs. domestic travel
Hotels are also outpacing short-term rentals in demand growth for the first four months of 2026, with hotel room nights sold up 2% versus roughly 1% to 1.5% growth for short-term rentals, according to Sacks.
And while international travel into the U.S. was down 4.3% in the first four months of the year, on the heels of a 2.5% decline in 2025, he said an uptick in domestic travel could help make up some of the difference this year.
"The fact that outbound travel is down about 2% this year means that we're likely to reshore some of those U.S. outbound trips to domestic trips, helping to fill in some of the losses on international impact," he said.
He added that international inbound travel to the U.S. is expected to make some recovery this year. Tourism Economics is forecasting roughly 3% growth in international inbound travel to the U.S. for 2026, following a 5.5% decline last year.
"We're still down 15% from 2019, but it does begin to turn this market from a negative to a positive, and we should see acceleration further in 2027," said Sacks.