Sector Overview and Key Performance Metrics
After a challenging 2025 marked by uneven performance and declining RevPAR, the US hospitality sector is showing signs of a broad-based recovery in 2026. RevPAR, a key industry metric that combines occupancy and average daily rate, is projected to grow by 2.9% year-over-year. This follows a 0.2% decline in 2025, with early 2026 data indicating a reversal: RevPAR increased by 4.3% in February and 5.9% in March compared to the same months the previous year.
Demand for hotel rooms is expected to grow by 3.2% in 2026, outpacing the projected 2.3% growth in supply. This shift marks a healthier sector balance and is the widest favorable spread between demand and supply since before the pandemic. The improved balance is expected to provide hotel operators with greater pricing power and more stable performance.
Market Segmentation and Recovery Patterns
The divide between high-end and economy hotel properties, which was pronounced in 2025, is narrowing. Lower-priced hotels that lagged in the previous year are now regaining momentum, suggesting a more even recovery across market segments. This trend reflects increasing consumer confidence and spending, particularly among leisure travelers.
Supply constraints continue to influence the market, with new development activity tempered by uncertainty around interest rates and inflation. Geopolitical tensions, such as conflicts in the Middle East, have also impacted both supply and demand. These factors have limited the pace of new hotel openings, allowing demand to catch up and, in some cases, surpass supply.
Consumer Behavior and Technology Adoption
Consumer engagement with travel is strengthening, as indicated by PwC’s US Consumer Poll on Summer Spending. According to the poll, 71% of adults plan to spend the same or more on summer travel compared to last year. Younger generations, particularly Gen Z and millennials, are leading this trend, with nearly half of Gen Z respondents planning to travel over Memorial Day weekend.
A significant shift in booking behavior is occurring due to the adoption of artificial intelligence (AI) and agentic commerce. The poll found that 44% of consumers use AI tools to compare prices, 42% to research destinations, and one-third to book parts of their trip using AI agents or bots. This trend highlights the importance of hotel brands ensuring their rates and loyalty programs are accessible and optimized for machine-readable platforms.
Impact of Major Events and Domestic Travel
A major international soccer tournament in the US this summer is generating high consumer engagement, with 59% of survey respondents planning to watch or follow the event. However, hotel bookings related to the tournament have been lower than expected. Only 11% of fans plan to attend games in person, with most ticket holders residing near host cities, reducing the need for hotel stays. Softer international demand and higher ticket prices have also limited the impact on hotel occupancy.
Despite this, domestic travel continues to provide a tailwind for the sector. Some would-be international travelers are opting for domestic destinations amid geopolitical risks and shifting sentiment, further bolstering demand for US hotels, especially in leisure-oriented markets.
Regional Highlights: Manhattan’s Performance
Manhattan stands out as a market with strong pricing power. In the first quarter of 2026, RevPAR in Manhattan rose by approximately 5% year-over-year, driven by a 6.5% increase in average daily rates, even as occupancy declined slightly. Luxury properties continue to command high rates, but upper midscale hotels are notable for achieving higher occupancy and rates than the previous year.
Industry Outlook and Strategic Considerations
Looking ahead, the US lodging sector is not returning to the post-pandemic peaks but is moving toward a more sustainable and balanced footing. Owners and investors may find selective opportunities as RevPAR trends improve and supply remains constrained. For operators, margin management, technology adoption, and dynamic pricing will be crucial for maintaining competitiveness.
The summer travel season and upcoming events present opportunities for brands to deepen guest loyalty, particularly among younger, digitally native consumers. The industry’s path forward will depend on effective execution, technology integration, and alignment with evolving consumer behaviors.
While challenges remain, including inflation and geopolitical uncertainty, the overall direction for the US hospitality sector in 2026 is one of cautious but clear forward momentum.
Download the PwC Hospitality Directions report.
