US hotel RevPAR is pacing toward 5% growth in 2026. I don’t see a reason it can’t hit 4% in 2027, split roughly between 1% occupancy growth and 3% average rate growth. That puts me ahead of where most of the big forecasters sit right now, so let me walk through what I’m seeing and where I could be wrong.
CoStar’s mid-August numbers tell the story better than I can. Seven of the top 25 markets posted double-digit RevPAR gains last week alone. San Diego led all of them, carried by business travel and entertainment events. Outside the major markets, 74 percent of tracked markets grew RevPAR, a lot of it tied to data-center construction activity; Texas alone had ten markets post double-digit gains. Luxury is still leading on ADR and RevPAR, but midscale is picking up more of the actual room-night growth. Five months into this run, the gains are broad: strong weekdays, steady group business, and transient travel improving as summer winds down.
That national pattern matches what I’m tracking on the West Coast. Here’s where the five markets I follow closed out July.
RevPAR by market
Western US hotel markets, July 2026
Source: Kalibri Labs
See the updated July metrics across these markets.
Los Angeles and San Francisco both grew RevPAR faster than 11 percent; LA was helped by two World Cup matches in July, and San Francisco is still benefiting from how weak that market was earlier in the decade. San Diego’s 8.9 percent lines up with what CoStar is seeing nationally, business travel and events doing the heavy lifting. Phoenix is the one market that looks soft at 0.4 percent, but that’s a tough comparison against a strong summer of 2025, not a demand problem.
Why I think 2026 is running this hot
Three things are doing most of the work. First, the comps are easy. Q3 and Q4 of 2025 were weak, so almost anything this year clears that bar. Second, the Fed has held rates steady, which has kept both consumer spending and hotel development financing more predictable than the last few years. Third, AI-related capital spending is real, and it’s flowing. Corporate capex on AI infrastructure and data centers has picked up a lot of the slack as household spending has moderated, and that capex brings people who need hotel rooms: contractors, engineers, sales teams, executives. Texas’s data-center-driven RevPAR growth is that story showing up directly in occupancy data.
GDP backs this up. Growth came in at an annualized 2.1 percent in the first quarter, a real rebound from just 0.5 percent in the back half of 2025, and most major institutions are projecting 2.2 to 2.5 percent for the full year. The mix matters here too. Momentum has shifted from consumer spending toward business investment, and that shift shows up in the segment data: luxury still leads on rate, but midscale is picking up more of the room-night growth, which suggests broader business and blue-collar travel returning, not just affluent leisure spending.
How this compares to what the other forecasters are saying
I’m not the only one calling for growth this year, but I’m on the higher end of the range. STR and Tourism Economics recently upgraded their 2026 call to 4.4 percent RevPAR growth, with occupancy up 1.7 percent and rate up 3.1 percent, largely on the strength of the first half of the year and the World Cup lift. PwC’s most recent update has moved up too, now calling for 2.9 percent RevPAR growth in 2026 with demand growth of 3.2 percent outpacing supply growth of 2.3 percent, a real upgrade from where they started the year. The two firms are closer together than they were in January, but there’s still a real gap, a percent and a half, between a firm calling for demand to keep outrunning new supply and one already near 4.5 percent.
I sit above STR’s number because the markets I actually operate in are running hotter than the national average. When Los Angeles and San Francisco are both growing RevPAR above 11 percent and 74 percent of markets nationally are growing, a national call in the 4s feels conservative to me, not aggressive.
One number worth flagging alongside all of this: AHLA’s 2026 State of the Industry report shows gross operating profit per available room still sitting around 90 percent of 2019 levels once you adjust for the operating costs hotels are carrying now. RevPAR growth is real, but it isn’t automatically showing up on the bottom line the way it used to. That’s a separate piece I want to write, but owners should have that number in the back of their mind while they’re celebrating this year’s rate growth.
My call for 2027: a slower year, not a bad one
I think 2027 lands around 4 percent RevPAR growth, roughly 1 percent from occupancy and 3 percent from rate. That’s a deceleration from 2026, and it should be. This year’s comps were easy, and a chunk of 2026’s growth came from World Cup matches and the run-up to America’s 250th anniversary celebrations next year, neither of which repeats. STR’s own 2027 call is more conservative than mine, 2.1 percent, and they’re accounting for that same event lap-effect directly. I lean higher because I don’t think the underlying demand goes away just because the events do. AI capex should keep flowing, the Fed looks likely to ease rather than tighten from here, and the consumer has held up better than many expected all year.
Am I worried about a recession? Not yet.
I’m not an economist, but my read is that 2027 and 2028 can both avoid a recession. 2029 is the year I’d watch. The election cycle will be behind us by then, and regardless of who’s in office, something usually has to give after a run like the one we’re in. That’s not only my own instinct. Some institutions forecasting the broader economy are flagging the same kind of pressure further out: a federal deficit running above 7 percent of GDP doesn’t resolve itself, and at some point, something has to give. I just don’t think it’s a 2027 problem.
Robert Rauch, CHA
Bob has been an owner-operator of hotels for decades, founding chairman of Brick Hospitality and CEO of R. A. Rauch & Associates. He’s published Hospitality Innsights since 1984 and has taught Hospitality Entrepreneurship at Arizona State University and San Diego State University.
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