Will Hospitality Investments Remain Profitable in 2026?

Listen to the article 17 min This audio is auto-generated. Please let us understand if you have feedback. Following a year of broad financial unpredictability that suppressed development for hotels, hospitality market leaders are looking towards 2026 with mindful optimism. Rising functional costs are slated to challenge owners this year and lower-tier sectors could have a hard time in the middle of a growing wealth bifurcation.

And through all of it, hotel business are expected to strengthen their portfolios with brand-new brand name offerings and partnerships. As the year gets underway, Hotel Dive talked with hospitality leaders from differing corners of the market about their 2026 predictions. Below are the leading trends anticipated to effect hotel operations, efficiency, net unit growth and more this year.

Overall incomes, salaries and benefits paid by U.S. hotels rose to $127 billion in 2025, according to information from the American Hotel & Lodging Association, shared with Hotel Dive. In 2026, that figure is projected to reach $131 billion, representing a roughly 3% year-over-year increase, per AHLA. For hotel owners, increasing labor expenses pose a challenge to net operating earnings development, Kevin Davis, Americas CEO at JLL Hotels & Hospitality, informed Hotel Dive.

Identifying High-ROI Hospitality Ventures in 2026

Rising labor costs have been a challenge for hoteliers for years, Davis said, especially following the COVID-19 pandemic. Overall, hotel labor costs have actually increased 15.3% from 2019 to 2025, exceeding the 12.8% growth in overall operating income, according to AHLA.

3, 2024 in San Francisco, California. Justin Sullivan through Getty Images In 2026, Davis kept in mind, union settlements will be "front and center" in New York City, where the New York Hotel and Gaming Trades Council's union contract with the Hotel Association of New York City is set to expire in July.

"Demand has not kept up with this rate," she said. "We're likewise seeing these obstacles intensified by legislation that targets hotel operations, such as extreme labor and licensing policies like the New York City City Safe Hotels Act. When demand is falling and costs are soaring, the mathematics merely does not accumulate." Wages, incomes and payroll-related costs paid by hotels now represent more than 32% of overall earnings, according to AHLA.

Can Hospitality Franchises Be Lucrative in 2026?

As more hotel visitors turn to artificial intelligence to enhance their travel experience, booking hotels straight through large language models (LLMs) may be next, hospitality experts said. Agentic commerce a procedure by which autonomous AI agents act upon behalf of a customer to discover, compare and complete purchases is a pattern that has sped up across markets like retail.

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According to PwC's 2025 Holiday Outlook report, 76% of millennials said they're likely to utilize AI for travel suggestions. That number is growing, Jonathan Kletzel, PwC's travel, transportation and logistics leader, told Hotel Dive. Michael Klein Head of retail, travel and hospitality item marketing at Talkdesk To stay competitive with direct reservation, bigger multibrand hotel business will "embed LLMs into their own brand sites and mobile apps, and change the way the consumer searches," Kletzel stated.

"If you are not visible in an LLM search engine result which lots of brand names aren't, and this is the huge panic that they're all going through today consumers aren't going to consider you," he stated. Michael Klein, head of retail, travel and hospitality product marketing at AI client experience platform Talkdesk, likewise told Hotel Dive that hospitality gamers need to guarantee their property details is being indexed by LLMs to appear in traveler queries.