CoStar, Tourism Economics Raise Hotel Growth Forecast

(Hotel stock photo credit: StockSnap)

Hotel sector analysts CoStar and Tourism Economics significantly improved their hotel forecast for 2026 and 2027.

For 2026, the firms upgraded projected gains in average daily rate and revenue per available room by 1.0 ppts and 2.2 percentage points, respectively. They now expect occupancy to grow after their previous forecast in January projected a year-over-year decline in the metric.

“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,” noted Jan Freitag, national director of hospitality analytics at CoStar Group. “Since our last revision, the industry has seen sustained performance growth, with room demand up by more than 8 million room nights year over year through the first four months of 2026.”

Freitag said he expects a moderation in demand growth for the remainder of the year, “but the pace will remain conducive for solid ADR and RevPAR gains, even though both will continue to increase below the rate of inflation.”

Aran Ryan, director of industry studies at Tourism Economics, said travel activity “appears resilient” heading into the summer. “Stable job markets and rising household wealth are supporting leisure travel demand despite higher fuel prices,” he said. “Group travel is also improving alongside robust corporate profits, while international visitation remains weak with hopes of a World Cup bounce. Looking ahead, easing inflation should support a modestly stronger economy next year.”

Freitag said gross operating profit will likely rise on increasing total revenues, “with the largest growth contribution coming from the rooms department. However, expenses are anticipated to grow at a higher rate, resulting in a continued squeeze in profit margin,” he noted.