Lodging Analytics Research & Consulting (LARC) has sharply upgraded its outlook for the U.S. hotel industry, driven by renewed strength in corporate transient demand. But the forecast also raises questions about whether AI will provide a long-term tailwind for those same demand trends.
The new forecast also points to rising operating costs as a potential dividing line between hotels and markets that can translate revenue growth into higher values and those that can't.
We spoke with Ryan Meliker, president and co-founder of New York City-based LARC, about the forecast and the four biggest insights it gives about the current state of the U.S. hotel industry.
1. Corporate travel drove LARC’s forecast upgrade
LARC’s 2026 RevPAR forecast jumped from 3.4% in June to 5.1% in September. The forecast calls for ADR growth of 4.4% to $167.90 and a 0.7% increase in occupancy to 62.7%. LARC also expects U.S. RevPAR to increase by 2.1% in 2027 to $107.56, driven by ADR growth of 1.2% to $169.91, while occupancy improves 0.9% to 63.3%.
Not surprisingly, LARC also forecasts hotel EBITDA to increase in 2026 (+7.7%) as well as hotel values (+3%). LARC specifically says the improvement is being driven by stronger-than-expected corporate transient performance.
While leisure and group have remained strong, Meliker said the biggest surprise was the renewed strength of corporate transient.
“The vast majority of our outlook shift has been tied to corporate transient strength,” he said, noting that it feels like corporate America, buoyed by all-time stock highs and millions invested in AI infrastructure, collectively decided to get back on the road. “(They said) it’s time to run our businesses. Let’s get on the road, meet with customers and generate revenues and meet with investors and lenders to drive revenues and raise the necessary capital for our spending.”
2. But LARC isn’t convinced the corporate transient recovery is a long-term trend
LARC said weekday RevPAR growth flipped positive in February and accelerated through June, remaining elevated in July. But it also expects underlying RevPAR growth to moderate from about 4% in 2026 to 3% in 2027, partly because of slowing group trends and tougher comparisons.
So while the current corporate transient demand strength is real, whether it remains a long-term trend remains to be seen.
Still, there’s reason for optimism. The corporate transient demand strength of the past six months has persisted through government shutdowns, an ongoing war with Iran and tariffs “that continue to ping-pong around like Marty Supreme is in charge,” Meliker said.
“It seems clear that, at least for now, corporate America is not going to let policy uncertainty and economic unknowns get in the way of their travel plans,” he said.
3. AI could become a paradox for the hotel industry
LARC argues that GDP is becoming a less useful indicator of hotel performance because economic growth increasingly reflects AI infrastructure investment and high-end consumers rather than traditional business investment and the middle-class consumer.
More provocatively, it says AI investment could ultimately reduce hotel demand because companies are using AI to increase productivity and reduce labor costs.
Meliker said that while AI may ultimately be a headwind for demand, that doesn’t necessarily make it a headwind for hotel profitability.
“Today companies are investing in AI and figuring out their AI strategy rather than truly leveraging it to replace people. However, I believe it has had an impact on hiring,” he said. “As the investment and infrastructure buildout of AI matures, any demand impact from it will slow. The good news is that is not a near-term concern.”
But AI disruption could ultimately hurt hotel demand by creating fewer business travelers while also boosting hotel profitability.
“That may limit demand growth in the long term, but hotels that leverage AI to increase operational efficiencies may see higher profitability despite lower revenues,” he said.
4. Expense growth is becoming a market-selection tool for investors
LARC said expense pressures will become a major factor in identifying market winners and losers, especially as several major cities negotiate labor deals. LARC said it expects non-union hotels to keep pace with union properties in wage growth. Those potential pressures on profitability have materially shaped LARC’s views of the best and worst markets for hotel investors.
LARC’s market forecasts provide an interesting backdrop: its five-year RevPAR leaders include Maui, Palm Beach, Memphis, Orlando and Sedona, while Dallas, Savannah, Austin, Dayton and Washington, D.C. rank at the bottom. For hotel-value growth, Orlando, Tampa, Anaheim, Miami and San Diego lead, while Dallas, Washington, D.C., New York, Austin and Atlanta are at the bottom.
Meliker said market nuances can drive investment decisions.
“The reality is, nationally we see growth. But every market is different… Some run EBITDA margins under 20% and thus rising labor costs have a bigger impact on profit levels and values than markets that run close to 40% margins,” he said.
For example, Meliker compares two hotels with the same revenue but different cost structures — one with an EBITDA margin of 20% and the other with a 35% margin. If both see labor costs rise 10%, the lower-margin hotel would see EBITDA decline 14%, compared with 7% for the higher-margin hotel.
“Revenue growth aside, the impact of cost structures and expense growth can have a huge impact on profitability and valuation,” he said. “We focus too much on the top line and not enough on the bottom line.”