INTERNATIONAL
REPORT — Bifurcation in the hospitality industry will continue in 2026 as
high-income individuals continue to drive demand for hotel rooms in the U.S.
over the next year, according to Colliers 2026 CRE Outlook.
Affluent
travelers will continue to drive demand, as revenue for luxury and
upper-upscale properties is expected to outperform that of more economical
brands, according to the study. The report said that travelers with lower
incomes in the U.S. are moving away from global destinations and toward domestic value
destinations, which should help occupancy at economy and midscale hotels. Click
here for a copy of the report.
While the
report also said that foreign tourism numbers are continuing to vacillate with
Canada, Western Europe and East Asia, sending fewer visitors to the United
States. Mark Owens, vice chair and hospitality practice group leader for
Colliers, said there is a sense that things could be changing.
“The other
thing that has been interesting to see, and it was echoed over the meetings the
last couple of days with our international team, is while there has been and
continues to be noise of the international traveler, I’d say the return to
normalcy and/or acceptance of this is the way things are, is becoming more
common,” he said. “I don’t know if Canada gets back to our prior levels anytime
soon, as an example, but there is going to be a period of time as people resume
traveling, even when the world may be becoming a bit more insular from a
country-by-country perspective.”
Events like
the World Cup will draw many foreign visitors, but Owens also said it’s a
return to normalcy from a business-travel perspective.
“We don't
expect, barring anything unforeseen, a reduction necessarily in business that
takes place,” he said. “We have to be there and, just as you see in New York City,
whether it’s domestic travelers or international travelers, they have to be
here. [New York City] is having one of the greatest runs of Q4 that we’ve seen
in a long time, and we’re still below our historic highs when you look at the international visitation
penetration level.”
AI effect
The Colliers
report also said that generative AI will continue to change how hotels are
booked in 2026, noting that the use of AI tools for travel planning almost
doubled from 2024 to 2025, increasing from 10% to 18%, according to Oxford
Economics. This creates growth opportunities for AI-integrated platforms and
hospitality marketers to capture an increased market share.
[New York City] is having one of the greatest runs of Q4 that we've seen in a long time, and we're still, when you look at the International visitation penetration level, below our historic highs.
Mark Owens
AI will also
create opportunities for operators to control costs in an environment where NOI
growth is expected to decline next year, from -3.6% in Q1 to -1.2% in Q4,
according to Green Street. Rising labor, materials, insurance, and management
costs, along with softer demand in some markets, are limiting 2026 supply
growth to 1.3% and keeping NOI forecasted in negative territory.
“That is an
area, hopefully, where AI will help, from an operator efficiency perspective,
but it is really hugely dependent on the operators being able to maximize
expense savings,” Owens said. “Were also continuing to see cost pressures,
although they're stabilizing, at least on the property tax line of the
equation.”
Labor costs
remain the most significant question, Owens said, noting they can vary widely
from market to market.
“You have
some markets that may be impacted by some of what’s going on. Just from a
national perspective, you have others that have adapted, and are more or less
stable right now,” he said. “That’s a big question that everyone has, and
hopefully, with all of the tools that are coming out of technological
advancements, that can help owners and operators be as efficient as possible.”
Other
observations from the Colliers report:
- As leisure
travelers increasingly seek unique experiences, traditionally less popular
destinations are gaining attention, and vacationers are seeking local
experiences, wellness amenities, and authentic engagement. This is creating
opportunities for hotels to expand ancillary revenue through tour packages and
partnerships with local operators.
- While
demand is expected to grow next year, it could come at some cost to ADR, as hotel
operators moderate pricing to attract value-conscious travelers. This could be
especially true in markets like New York City, San Francisco, Los Angeles, and Miami
that are heavily reliant on international travelers. ADR is expected to remain
flat on the industry side over the next year, as Oxford Economics notes that
90% of consumers cited “value for money” as their primary travel decision
factor in 2025, up from 83% in 2024.