The consumer backdrop entering 2026 is best described as measured rather than exuberant. Data from Bank of America Institute, paired with commentary from major investment banks, suggest a consumer that remains resilient but increasingly selective. Income growth is present across cohorts, spending activity stabilized through late 2025, and tax refunds are expected to provide a near-term lift. However, the structural divides that have characterized the post-pandemic economy—particularly the “K-shaped” consumer—remain firmly in place. As a result, the path forward for consumer-driven sectors in 2026 appears incremental and uneven rather than broadly expansionary.
While much of the data shaping the 2026 consumer outlook is macroeconomic in nature, the implications extend directly into travel and hospitality. Uneven income growth, rising price sensitivity, and the timing of tax refunds all influence how, when, and where consumers choose to travel. As this report progresses, we examine how these trends translate into demand across lodging segments, pricing behavior, and capital market activity—highlighting why the outlook for hotels is likely to remain selective rather than uniform.
A Measured Improvement in the Consumer Backdrop
Disposable Personal Income Growth Remains Positive but Uneven
Disposable personal income is expected to grow across all income quintiles in 2026, though the pace and distribution of those gains remain uneven. Bank of America internal data show that after-tax wage growth slowed across income cohorts toward the end of 2025. Lower-income households posted approximately 1.1% year-over-year wage growth in December, while middle-income households slowed to roughly 1.5% and higher-income households to about 3.0%.
Income Gains Support Stability, Not Acceleration
While this deceleration warrants monitoring, the key takeaway is that income growth differentials are no longer widening materially. The gap between higher- and lower-income households has stabilized rather than expanded. This suggests that the consumer economy is not deteriorating, but it is also not reaccelerating. Income gains appear sufficient to support incremental spending capacity rather than fuel a broad-based surge in consumption.
The K-Shaped Consumer Still Defines the Market
Higher-Income Households Continue to Drive Spending
The uneven nature of consumer spending continues to define the landscape. Higher-income households remain responsible for a disproportionate share of total consumption, a dynamic that persisted throughout 2025 and into early 2026. Bank of America card data indicate that higher-income households recorded roughly 2.4% year-over-year spending growth late in 2025.
Lower-Income Participation Remains, but with Constraints
Lower-income households saw spending growth of approximately 0.4% year over year. Importantly, this gap has remained relatively stable over the past six months. The absence of further divergence suggests resilience at the lower end, even as absolute spending power remains concentrated at the top. Lower-income households continue to participate in the consumer economy, but their behavior is increasingly shaped by price sensitivity and necessity rather than discretionary expansion.
What Recent Spending Patterns Reveal About Consumer Behavior
Holiday Spending Shows Resilience Despite Caution
Backward-looking spending data from late 2025 provide insight into how consumers are navigating this environment. Holiday spending delivered solid year-over-year growth, with Bank of America reporting a 4.7% increase in spending on holiday-related categories between early October and early January.
Smaller Ticket Sizes Reflect Price Sensitivity
This growth was driven primarily by transaction volume rather than higher prices. Consumers leaned into earlier shopping and smaller-ticket purchases. The share of transactions under $100 increased or remained stable across categories such as electronics, clothing, and general merchandise.
Value-Oriented Spending Spanned Income Cohorts
While the “K-shaped” pattern persisted, the gap between income groups was narrower in holiday spending than in overall consumption. This suggests that consumers across income levels were able to stretch dollars through deal-seeking and purchase timing, particularly during peak seasonal periods.
Income Growth and Implications Across Hotel Segments
Price Sensitivity Shapes Economy and Value-Oriented Lodging
Uneven income growth has meaningful implications for lodging demand. Slower income gains among lower-income households do not necessarily imply reduced travel participation, but they do point to heightened price sensitivity. This may translate into shorter stays, lower nightly rates, or substitution toward more value-oriented accommodations rather than a complete pullback from travel.
Midscale Segments May Benefit from Middle-Income Stability
Middle-income households, which experienced comparatively stronger income growth earlier in the cycle, may be better positioned to support demand for midscale and upper-midscale properties. These segments may benefit disproportionately from incremental income gains that support discretionary travel without stretching budgets.
Institutional Capital Remains Cautious Toward Hotels
Higher-income travelers continue to spend selectively, prioritizing quality and experience over frequency. At the same time, capital markets reflect a cautious stance toward hotels. Recent REIT screening shows limited institutional interest in hotel REITs relative to other real estate sub-sectors, suggesting restrained liquidity and muted enthusiasm for the sector at the asset level.
Tax Refunds as a Short-Term Spending Catalyst in 2026
Refund Growth Provides Temporary Cash-Flow Relief
One of the most tangible supports for consumer spending in early 2026 is the projected increase in tax refunds. Provisions within the One Big Beautiful Bill Act, combined with unadjusted IRS withholdings in 2025, are expected to result in refunds that are approximately $65 billion higher than the prior year—an 18% increase. Most payments are expected to be distributed between February and April.
Lower-Income Households See the Largest Proportional Impact
Refunds represent a significantly larger share of average monthly spending for lower-income households than for middle- or higher-income groups. Bank of America deposit data show that lower-income households were the only cohort for which the average refund exceeded average monthly spending.
Post-Refund Spending Patterns Favor Goods and Leisure
Historical patterns reinforce this dynamic. In the three weeks following receipt of a tax refund, spending increased meaningfully across goods, travel, and leisure categories. The proportional boost was largest for lower-income households, with goods spending rising roughly 25% overall and closer to 40% for lower-income consumers, with similar increases across electronics, furniture and home improvement, and apparel.
Why the Upside Remains Selective
Refunds Are Not a Structural Growth Driver
Despite this near-term boost, refund-driven spending is best viewed as temporary rather than structural. While refunds may briefly narrow the K-shaped dynamic, longer-term momentum remains dependent on labor market conditions and sustained wage growth.
Credit Stress Is Contained, Not Systemic
Commentary from Goldman Sachs highlights rising auto and credit card delinquencies concentrated primarily among subprime borrowers. These trends are framed as credit score migration effects rather than broad-based consumer deterioration, suggesting that stress remains contained rather than systemic.
What to Watch as 2026 Progresses
Will Refund Spending Extend Beyond Spring?
A key question is whether refund-related spending merely pauses the K-shaped dynamic or meaningfully narrows it beyond the spring months.
Discretionary Demand After One-Time Cash Events
Another consideration is whether discretionary demand holds once one-time cash-flow events fade and consumers revert to income-driven spending behavior.
Income, Inflation, and Rate Expectations
Finally, shifts in income growth, inflation trends, and interest rate expectations will shape consumer behavior and investment outcomes. Early data suggest that consumer strength continues to translate unevenly across sectors and asset types.
Key Takeaways for 2026
Taken together, the outlook for consumer spending in 2026 points to stability rather than acceleration. Income growth is present but uneven; the K-shaped dynamic remains intact, and tax refunds are likely to provide a meaningful yet temporary lift—particularly lower-income households—without fundamentally altering longer-term trends. For businesses and investors, this environment favors selectivity over scale and discipline over broad-based optimism. As the year progresses, careful monitoring of labor markets, discretionary demand, and regional performance will be essential. For those seeking to better understand how these consumer and economic dynamics translate into actionable insights for specific markets, assets, or strategies, we encourage you to contact our team to discuss how we can help navigate the evolving landscape in 2026.