HVS U.S. Market Pulse Signals Cautious Hotel Upswing

The latest HVS U.S. Market Pulse, authored by Rod Clough for March 2026, points to a U.S. hotel sector edging into a cautiously improving phase, with modest revenue gains, stabilizing demand, and a more active but highly selective investment landscape.

Soft RevPAR Growth as 2026 Gets Underway

Recent HVS commentary indicates that the U.S. hotel industry entered 2026 with flat occupancy and only marginal average daily rate growth, translating into subdued gains in revenue per available room. After a year in which RevPAR declined slightly at the national level in 2025, analysts now characterize the first months of 2026 as a period of stabilization rather than robust recovery.

Data summarized in the February 2026 HVS U.S. Market Pulse showed January occupancy hovering near the low-50 percent range with ADR around the mid-150 dollar mark, leaving RevPAR comparisons only slightly ahead of the prior year. HVS expects full-year 2026 RevPAR growth to remain modest, with greater acceleration forecast for 2027 and 2028 as economic clarity improves and event-driven demand builds across major markets.

Other industry outlooks for 2026 align with this restrained tone. Research coverage from hospitality and real estate firms describes U.S. lodging performance as stable but pressured by operating costs, with RevPAR expansion generally expected in the low single digits. Analysts note that top-line growth is being driven more by small rate increases than by a meaningful rebound in occupancy, underscoring the fragile nature of demand in some segments.

Within this environment, the March 2026 HVS pulse suggests that the sector’s next leg of growth is likely to be uneven, with stronger results concentrated in select markets and asset classes that can leverage pricing power, special events, or renewed group and corporate travel.

Markets Diverge as Events and Sector Mix Shape Performance

HVS tracking through early 2026 highlights sharply contrasting results across individual metropolitan areas. In the February pulse, the firm pointed to the San Francisco Bay Area posting double-digit RevPAR gains, aided by high-profile sports events and an ongoing recovery in technology and convention-related travel. Minneapolis also registered robust growth, reflecting temporary demand from large-scale government and media activity tied to recent national developments.

At the same time, several markets that outperformed in earlier years displayed softer metrics. HVS previously identified Tampa Bay, Atlanta, and Washington, D.C. among those experiencing weaker comparisons, in some cases due to the absence of one-time political or sporting events that boosted prior-year figures. Industry commentary from other research providers has similarly emphasized a shift away from the uniformly strong leisure surge of the immediate post-pandemic years toward a more nuanced, market-by-market pattern.

Segment mix continues to be a defining factor. Reports from real estate brokerages and hospitality analysts suggest that luxury and upper-upscale hotels in gateway cities and high-barrier coastal markets are generally achieving better rate growth and maintaining healthier margins. In contrast, midscale and economy properties, especially in drive-to and suburban locations, are seeing more pronounced demand softness and heightened competition from both new supply and alternative accommodations.

Group and convention demand is gradually improving in several urban centers, according to recent hospitality outlooks, but remains sensitive to corporate budget decisions and shifting event calendars. HVS notes that better convention schedules are expected in some cities during 2026, while others face tougher comparisons following a strong 2024 and 2025 slate, reinforcing the theme of divergence across the national landscape.

Capital Markets: Cap Rates Ease as Distress Filters Through

The March 2026 HVS U.S. Market Pulse builds on trends the firm flagged in February around capital markets and valuations. HVS reported that average cap rates for U.S. hotel transactions have begun to trend lower, influenced in part by a growing share of sales involving underperforming or lender-controlled assets with depressed near-term cash flows.

According to HVS, transactions closing in late 2025 and early 2026 show average cap rates in the low-8 percent range, with a typical “normal” rate for stabilized properties clustered around 8 to 8.5 percent and exit cap assumptions roughly 100 basis points higher. Distressed and turnaround assets, where buyers are underwriting significant upside tied to renovation and repositioning, can trade at materially lower in-place cap rates, which in turn pulls the overall average down.

Industry-wide investment outlooks for 2026 from global brokerage and advisory firms echo this dynamic, describing an environment in which improved debt availability, slightly lower interest rates, and re-priced assets are beginning to unlock more deal activity. However, commentary also points to a highly selective market, where capital is focused on well-located properties, clear value-add stories, or markets expected to benefit from upcoming mega-events and infrastructure investments.

HVS warns that underwriting assumptions are under closer scrutiny, particularly where discount rates or exit cap rates appear aggressively low for assets in secondary locations or low-barrier markets. Analysts emphasize that underwriting predicated on unusually tight exit cap rates can be a warning sign for investment committees, given the still-evolving macroeconomic backdrop and the potential for additional interest-rate or demand volatility.

Development, Supply Growth, and the 2026 Events Calendar

While demand patterns are shifting, supply dynamics are also beginning to change the narrative. Industry pipeline reports through early 2026 point to an acceleration in new hotel openings after several years of subdued construction. Research from real estate and lodging data providers indicates that national room supply growth, which hovered below 1 percent in 2025, is on track to move closer to the mid-2 percent range as projects delayed by financing and cost constraints finally deliver.

New development is concentrated primarily in the upscale, upper-midscale, and midscale segments, with luxury growth expected to decelerate and economy brands remaining comparatively flat. Analysts note that this mix could amplify competitive pressures for select-service and limited-service hotels in certain metros, particularly where demand growth is only modest. HVS commentary on valuations suggests that older properties facing major renovations may see upward pressure on cap rates as they compete with newer inventory.

The 2026 events calendar, highlighted repeatedly in industry outlooks, remains a key offsetting force. Major sports and entertainment events, including preparations for the 2026 World Cup and other large-scale tournaments and festivals, are expected to lift ADR and occupancy in host and feeder markets. HVS indicates that special events should help support rate integrity during peak periods, even if annualized demand growth stays muted.

Advisory firms also point to secondary and tertiary markets positioned along major travel corridors or near event-related training bases as potential beneficiaries. In these locations, relatively limited new supply combined with short-term surges in demand may create pockets of outperformance, a trend that the latest HVS U.S. Market Pulse suggests investors are watching closely.

Investment Strategies Adjust to a More Nuanced Cycle

The March 2026 HVS U.S. Market Pulse situates the U.S. lodging industry in what many observers label a “reset” phase. After rapid post-pandemic recovery and a subsequent cooling in 2025, both operators and investors are recalibrating expectations around growth, capital costs, and asset values. Survey work cited in HVS’s broader global perspectives indicates that a majority of U.S. hotel brokers anticipate improved transaction conditions in the first half of 2026, driven by an increasing flow of listings and more realistic price expectations.

Market commentary from commercial real estate platforms and consulting firms notes that distressed or transitional assets, particularly older full-service properties and underperforming select-service hotels, are drawing heightened interest from opportunistic buyers. These investors are targeting assets where repositioning, brand conversion, or intensive asset management can unlock value once demand fully normalizes. Conversely, stabilized, high-performing hotels in prime locations continue to command strong attention but at pricing that reflects lower perceived risk rather than aggressive growth assumptions.

Operationally, the focus for many owners and operators remains on cost discipline and mix optimization. Industry research points to ongoing labor and utility cost pressures, even as rate growth slows, encouraging hoteliers to lean more heavily on revenue management, direct booking strategies, and technology-enabled efficiencies. HVS commentary underscores that properties with stronger local demand drivers, diversified customer bases, and flexible group and transient mix are generally better positioned to navigate this mid-cycle transition.

As March 2026 unfolds, the overarching message from HVS and other market observers is that the U.S. hotel sector is moving away from broad-brush narratives of boom or bust and into a more finely grained phase. Performance, valuations, and deal activity are increasingly determined city by city and asset by asset, rewarding participants who pay close attention to the evolving pulse of each individual market.