Hospitality Highlights

Q1 2026 Hotel Industry Performance

May 7, 2026 — Newport Beach, CA

• The Industry Is Rebounding — and Faster Than Expected. After a bruising 2025 that delivered the first non-recessionary RevPAR decline on record (-0.3%, with occupancy at 62.3% and ADR at $161), the industry entered 2026 fearing another year of underperformance — and Q1 has surprised to the upside. In the trailing 28 days ending March 21, national RevPAR was up 3.9% YoY per STR/CoStar; February came in even stronger at +4.3%. The reason: 2025’s headwinds — tariff-related consumer anxiety, DOGE-driven government travel disruption, the shock of tariffs announced on “Liberation Day”, a 43-day government shutdown, and the L.A. fires — are largely non-recurring. HVS President Rod Clough noted in March that even their above-consensus forecast “may be too conservative.” For the full year, HVS now projects occupancy of 62.7%, ADR of $163 (+1.5%), and RevPAR of $102 (+2.2%) — a meaningful step forward. [Sources: STR/CoStar, HVS Market Pulse March 2026]

• The C-Corps Confirm It — Hilton Beats and Raises. The earnings calls are telling the same story. Hilton reported Q1 system-wide comparable RevPAR growth of 3.6% YoY on total revenues of approximately $2.94 billion and adjusted EBITDA of $901 million — beating expectations with adjusted EPS of $2.01. Crucially, Hilton raised its full-year RevPAR guidance to +2% to +3% and net unit growth to 6–7%. CEO Chris Nassetta called demand “healthy across all major segments” — leisure, group, and business transient all moving in the right direction. Marriott and Hyatt have also raised YE 2026 guidance. [Source: Hilton Q1 2026 Earnings Call]

• Demand Segments Are Not Created Equal — Group Is the Clear Winner. RevPAR growth may be the headline, but the composition of demand is what really matters for asset positioning. Group is the standout: STR reported Group RevPAR up 7.5% for the week ended March 7, driven primarily by rate — not just heads in beds. Xenia Hotels reported group pacing approximately 10% ahead for the balance of the year, with nearly 70% of 2026 already definite as of January. The why: remote work has made in-person meetings more valuable, not less. Convention bookings at the 30 largest U.S. centers are expected to be up 8% in 2026, and groups are willing to pay more for the right product. As Monty Bennett of Ashford put it: “Asset quality matters most when demand gets selective. If you own a full-service hotel that is properly positioned and capitalized, the back half of 2026 is yours to capture.” Corporate transient, meanwhile, is expected to remain roughly 10% below pre-pandemic levels — AI and hybrid work have structurally reduced one-night commercial travel. [Sources: STR/CoStar, Chairman’s Brief #5, LARC Q1-2026 Webinar]

• The K-Shape Deepens — Luxury Wins, Economy Struggles, and the Middle Feels It. The bifurcation that defined 2025 is intensifying. CoStar/STR’s 2026 chain-scale RevPAR forecast is stark: Luxury +3.2%, Upper Upscale +1.6%, Upscale -0.1%, Upper Midscale +0.1%, Midscale -0.6%, Economy -1.5%. Kalibri Labs data adds context: reductions in one-night stays are disproportionately hitting lower/mid-tier hotels, where commercial drop-off vs. leisure is most acute. The structural reason is income concentration: the top 10% of U.S. households now account for 52.5% of all U.S. leisure travel spending, averaging 4.3 trips per year at approximately $7,900 per trip — up 55% since 2022. That cohort is not price-sensitive, and their share of the travel economy keeps growing. Extended Stay is the other outperformer, buoyed by project-based corporate demand and insurance displacement travel. [Sources: CoStar/STR, Kalibri Labs, Kemmons Wilson Hospitality Partners]

• Market Performance Is Wildly Uneven — Location Is Everything. National averages obscure more than they reveal. LARC’s Ryan Meliker flagged it directly in the Q1 webinar: in 2025, markets like San Francisco, Palm Beach, and St. Louis posted RevPAR growth of roughly +9%, while Houston, Las Vegas, and Savannah fell close to -9% — an 18-point spread in a single year. San Francisco, an industry laggard for several years, is benefiting from strong AI sector expansion, a recovering convention calendar, improved city leadership, and the tail of Super Bowl demand. Washington, D.C. faces structural headwinds from DOGE-related government travel cuts, difficult YoY comparisons and excess supply near Capitol Hill. Geopolitical tensions, inflation, short-term booking windows and policy uncertainty all contribute to a challenging environment for underwriters and forecasters. [Sources: LARC Q1-2026 Webinar, HVS Market Pulse March 2026, CBRE Hotels]

• The World Cup Is Coming — But It’s a Micro-Location Trade, Not a Market-Wide Lift. The 2026 FIFA World Cup, which in the U.S. will be held in 11 cities, is generating legitimate excitement — and legitimate caution from sophisticated analysts. CoStar/STR projects host-city RevPAR growth of 12.7% in June/July, with Houston hotels alone reportedly seeing bookings up 130% and rates up 300% for the match window. Nationally, the net effect is approximately 40 basis points of incremental full-year RevPAR — the equivalent of roughly 10 Super Bowls compressed into six weeks. According to Monty Bennett, “The World Cup is not a broad U.S. lodging trade. It is a micro-location trade.” The winners will be hotels in stadium districts, fan festival zones, and convention-adjacent corridors, not general citywide inventory. For owners and investors, the World Cup is an important phenomenon but the likely impact is often overstated. [Sources: CoStar/STR, Chairman’s Brief #5, Tourism Economics]

• Low Supply Is the Industry’s Most Durable Tailwind. Whatever the macro environment delivers, one structural fact remains firmly in the industry’s favor: there is almost no new supply coming. LARC forecasts U.S. supply growth of just 0.6% in 2026 and a 5-year CAGR of 0.8% — less than half the long-run historical average of 1.8%. Construction costs have risen 30–40% above 2019 levels, making ground-up hotel development largely uneconomic. At the Upper Upscale level, only 0.7% of existing inventory is currently under construction. History is instructive: when supply is at or below the 1.6% long-run threshold, RevPAR has historically grown at 5.1% annually — more than six times the 0.8% growth rate seen in high-supply environments. Supply growth is expected remain below the long-term average for the foreseeable future. [Sources: LARC Q1-2026 Webinar, CoStar/STR, Kemmons Wilson Hospitality Partners]

TRANSACTIONS & CAPITAL MARKETS 

• Notable Transaction — Host Hotels Sells Two Four Seasons Resorts at Premium Multiples. Host Hotels & Resorts sold two marquee assets — the Four Seasons Jackson Hole and the Four Seasons Resort Orlando at Walt Disney World — to an affiliate of merchant bank BDT & MSD Partners, and separately confirmed the January close of its previously announced sale of the 232-key St. Regis Houston for $51 million. Since 2018, Host has sold hotels for a combined $6.4 billion at a blended 16.7x EBITDA multiple. These transactions confirm that well-capitalized buyers are willing to pay institutional pricing for trophy resort assets even in an uncertain macro environment, and that REITs trading at NAV discounts will continue using asset sales to unlock value rather than issuing equity at depressed prices.

• The Transaction Market Is Thawing — Slowly, Selectively, and With Eyes Wide Open. Hotel transaction volume rose approximately 7% in 2025 to roughly $6.5 billion, with price-per-key trending upward through the year. HVS’s survey of top U.S. hotel brokers found 65% expect market conditions to improve or significantly improve in H1 2026. But as the Hunter Conference made clear, no one is confusing renewed activity with easy money. Disciplined underwriting has returned: lender selectivity, increased operating expenses. and high-cost, brand-mandated PIPs are forcing every deal to stand on firmer financial footing. Hotel REITs, historically the most active buyers, remain largely sidelined, trading at 30–50% discounts to NAV. The active buyers today are private equity, family offices, and specialist operators who can move with certainty of close when sellers face pressure. [Sources: CoStar, HVS Market Pulse March 2026, Kemmons Wilson Hospitality Partners, Hunter Conference 2026 Recap]

• $46 Billion in Hotel Debt Matures in 2026 Alone — Forced Action Is Coming. Over $114 billion in U.S. hotel debt matures through 2027, with $46 billion peaking in 2026. Many owners face a punishing refinancing landscape: higher rates, stricter underwriting, increased operating expenses and margin compression, banks that have actively reduced hotel exposure, and PIP requirements compounding the pressure. Capital structures that worked in a near-zero rate environment are breaking. For undercapitalized owners, the math is simple: refinance at materially worse terms, sell at buyer-friendly pricing, take on high cost rescue capital, or hand back the keys. For disciplined, well-capitalized buyers, this wave creates a deep pipeline of actionable opportunities. Cap rates for stabilized full-service and limited-service assets are pricing at 8.0–8.5% with exit caps 100 basis points higher. [Sources: Kemmons Wilson Hospitality Partners, HVS Market Pulse March 2026, JLL Research, MSCI Real Capital Analytics]

• Buying Below Replacement Cost — A Structural Entry Point, Not Just a Discount. S. full-service urban hotels are trading at an implied ~71% discount to replacement cost as of H1 2025—meaning assets can be acquired for roughly 30 cents on the dollar relative to new development. This gap is unlikely to close in the near term: construction costs remain 30–40% above pre-2019 levels, development financing is constrained, and entitlement timelines continue to extend. At the same time, institutional capital has pulled back materially, with hospitality allocations declining from ~12% (2007–2011) to ~6% today—signaling a trough in the capital cycle. The result is a rare convergence of depressed pricing and limited future supply, creating an attractive basis for disciplined, operationally driven investors. As Kemmons Wilson Hospitality Partners notes, “each of these dynamics alone would merit attention…together, they define a window.” [Sources: Kemmons Wilson Hospitality Partners, JLL Research, Green Street Advisors]

• AI Is Becoming a Distribution Filter — Operators Need to Adapt Now. Discussions at Hunter Hotel Investment Conference and in the Chairman’s Brief highlighted a major shift underway in hotel distribution: AI is increasingly influencing how travelers discover and book hotels, yet many operators still lack a clear strategy for deploying the technology effectively. As AI assistants become more integrated into trip planning, hotel visibility will depend heavily on whether a property’s rates, availability, and digital positioning are structured in ways AI systems can easily interpret and prioritize. The adoption gap is already apparent — 78% of AI users report booking travel primarily based on AI recommendations, while only 32% of hotel owners have successfully integrated AI across operations. At the same time, revenue quality remains one of the most important operational themes of the current cycle. Data from Kalibri Labs continues to show that Brand.com bookings generate meaningfully higher net ADR than OTA channels, reinforcing that operators allowing OTA mix to expand may be increasing headline ADR while quietly compressing profitability. [Sources: Chairman’s Brief #5, Hunter Conference 2026 Recap, Kalibri Labs]

• The Outlook: 2026 Is a Recovery Year. The Real Upside Is 2027–2028. The consensus across every major forecaster is aligned. HVS projects RevPAR of $102 for 2026 (+2.2%), accelerating to $106 in 2027 (+3.6%) and $110 in 2028 (+4.3%). Hilton’s raised guidance of +2–3% system-wide RevPAR is consistent with that trajectory. Marriott’s 1Q 2026 RevPAR increased 4.0% YoY in the U.S. and Canada, and showed growth across chain scales. LARC expects supply to remain constrained at 0.6% in 2026 and 0.8% over the next five years, providing a structural occupancy floor. The setup is real: durable demand from an affluent consumer base, historically low new supply, a debt maturity wall forcing capital events, and institutional underallocation creating a less competitive buyer landscape. As was said at Hunter 2026: the next phase of hospitality will not be defined by who grows fastest — it will be defined by who grows smartest. [Sources: HVS Market Pulse March 2026, Hilton Q1 2026 Earnings Call, LARC Q1-2026 Webinar, Hunter Conference 2026 Recap]

Sources: STR/CoStar (Jan Freitag), HVS (Rod Clough, Market Pulse March 2026), LARC Analytics (Ryan Meliker, Q1-2026 Webinar), Hilton Q1 2026 Earnings Call, Kalibri Labs (Cindy Estis Green), Kemmons Wilson Hospitality Partners (Why Hospitality Now, March 2026), Hunter Conference 2026 Recap, Chairman’s Brief #5 (Monty Bennett/Ashford, March 2026), CBRE Hotels, MSCI Real Capital Analytics, JLL Research, Tourism Economics, Green Street Advisors. Marriott and Host Hotels earnings call data to be incorporated as available.

About Talonvest Capital, Inc.

Talonvest Capital is a Newport Beach, California-based commercial real estate advisory firm specializing in sourcing cutting-edge lending programs and advising on capital market trends for industrial, self-storage, multifamily, office, retail and hospitality property owners. Talonvest Capital was formed in 2010 and offers a unique boutique approach by leveraging the company’s collective institutional knowledge and remaining highly engaged throughout the entire assignment, including the closing process, to deliver tailored capital solutions for their clients.