After years of post-pandemic rebound, with leisure travel demand surging and lenders enthusiastically re-entering the market, a wave of commercial mortgage maturities, especially in the US, is about to test how robust sector optimism really was.
With interest rates still stubbornly high even as central banks edge towards cuts — the European Central Bank has largely completed its rate reductions while the US Federal Reserve continues to annoy President Trump and the Bank of England moves cautiously — the hospitality industry has found itself in a delicate position. Loans sized for a lower-rate world are coming due against a backdrop of compressed margins, selective lenders and a rising tide of loan extensions.
Yet the market remains resilient, opening up the question of which way global hotel debt markets may move in 2026.
At the heart of the challenge is a looming $48 billion wave of CMBS hotel loan maturities between 2025 and 2026, a structural shift that began to bite in earnest in the US late in 2024 and has carried into the current cycle. Owners who locked in financing during the low-rate era now face refinancing environments where debt costs can exceed 6.25–7 per cent, a jump of roughly 40 per cent in servicing costs. That sharp repricing comes against a backdrop of squeezed operating income and higher fixed and operational costs.
This dynamic has created a potential fixed income dislocation and hotel CMBS tranches now often trade at spreads 150–200 basis points wider than multifamily or industrial debt.
Fitch Ratings’ overall US CMBS delinquency rate increased 12 basis points to 3.37 per cent in December from 3.25 per cent in November, driven by the retail sector, mixed-use and hotel new delinquencies. New 60+ day delinquency volume totalled $2.08 billion in December, with hotels accounting for 15 per cent, or $303 million, of the overall total.
Debt issuers face choice
As these loans age towards maturity, owners have faced the choice between refinancing at materially higher costs, restructuring existing debt, or shifting into distress regimes with special servicers. However, many lenders have opted to lean into loan extensions and modifications as a way to manage risk and in the third quarter of 2025, roughly two-thirds of the $11.2 billion worth of modified commercial real estate loans involved maturity date extensions, with hotels accounting for nearly half of that volume.
“Following several years of post-pandemic normalisation, the industry has shifted from expansion to optimisation. Deal activity has remained steady but more selective, with strategic buyers accounting for the majority of transactions,” PwC US Hospitality & Leisure Deals Leader Jonathan Shing says. “These buyers are looking for differentiated assets that extend digital capabilities, reinforce brand strength and unlock new experiential value.”
And despite these headwinds, the US hotel investment market demonstrated remarkable resilience in 2025 according to JLL’s Hotels & Hospitality Group, which says that transaction volumes climbed 17.5 per cent year-on-year to reach $24 billion, driven by strong private equity activity and strengthening debt markets, especially in key growth markets like New York, Phoenix and Washington DC.
High-net-worth individuals and foreign capital also became increasingly active and this momentum is expected to continue into 2026.
US benefits despite slow Fed rate action
"Since September 2024 when the Fed started lowering interest rates, the overall cost of debt has decreased by almost 300 basis points, which has enabled investors to get positive leverage when acquiring an asset, thereby driving increased investment activity,” JLL Hotels & Hospitality Group CEO Kevin Davis says. “This dynamic fuelled transaction activity in the second half of 2025 and will drive increased transaction activity in 2026 and will be the catalyst for transactions in 2026.”
This summer’s FIFA World Cup will also provide a one-off boost for host cities. With over 70 games across 39 days, many host cities could experience mid-double digit RevPAR growth this year.
"The World Cup represents a transformational opportunity for US hotel markets. Combined with America's 250th anniversary celebrations, select cities are positioned for exceptional performance in 2026. Our forward-looking analysis indicates this could be a watershed moment for the hospitality sector,” stresses JLL Hotels & Hospitality Group Americas President Dan Peek.
European dynamics less debt exposed
Europe’s hotel debt landscape tells a slightly different story but one with similar fundamentals. While the continent has not seen the same scale of CMBS issuance as the US, although its popularity is rising, refinancing pressure is increasing as Euribor-linked commercial bank facilities come due. European lenders remain disciplined, favouring core markets and institutional-grade assets with strong brands and cash flows and conservative loan-to-value ratios.
“Return expectations have remained broadly stable over the past 12 months, underlining a continued belief in the resilience of the hotel sector despite cost pressure,” according to Savills Head of Hospitality Thought Leadership, Thomas Emanuel. “Transaction volumes are widely expected to increase modestly through 2026 as bid–ask spreads narrow and refinancing events drive liquidity…with debt availability seen as less of a constraint than the cost of financing.”
Indeed, a cautious, selective approach has moderated outright distress challenges in Europe relative to the US. Yet the pressure on hotel margins remains, particularly for assets outside prime gateways. Rising operational costs, from labour to utilities, and ongoing inflationary pressures on services have kept net operating income growth modest. Even in southern European markets, where performance has remained relatively resilient, lenders are still focused on cash flow sustainability and downside protection, pushing sponsors to engage early on capital planning rather than leave refinancing to the final quarter before maturity.
“European tourism is still set for healthy growth in 2026. Southern European cities are set to outperform, on the back of strong momentum from visitor growth combined with a limited development pipeline. Rising costs, especially labour, and tax pressure, have started to bite operators' profitability in several European countries,” Morningstar SVP, Lead European Structured Finance Research Mudasar Chaudhry says, citing the UK, the Netherlands, and Belgium as examples.
“Nevertheless, investor appetite remains robust, and we expect further yield compression in 2026, supported by falling interest rates and strong capital availability,” Mudasar stresses.
As a result, the hotel sectors in the US and Europe should dodge the distress bullet. Economic conditions may not be ideal, but their direction of travel appears to be reassuring investors that they are well placed to ride out the uncertainties of 2026.
Picture: Sam valadi/Flickr