As the U.S. hotel industry moves into year-end, performance is no longer defined by national averages. Recent data shows a market increasingly shaped by local demand drivers, inventory growth, and event calendars rather than broad macro momentum.
While headline RevPAR continues to soften, the most meaningful signal sits beneath the surface: markets with group-driven demand and manageable supply are still outperforming, while others are seeing sharp declines tied to conference shifts, excess inventory, or calendar-related volatility. These forces—not a uniform slowdown—are driving the widening performance gap heading into 2026.
U.S. Hotel Performance Weakens Into Early December
Occupancy-led declines signal demand softness
The U.S. hotel industry experienced a difficult week from Nov. 30 to Dec. 6, with RevPAR down 3.7% year over year. Occupancy drove the decline, falling 1.9 percentage points, while ADR slipped 0.5%. Absolute room demand declined by more than 580,000 rooms, reinforcing signs of a year-end slowdown.
Weekday demand proved particularly weak. Sunday–Thursday RevPAR fell 4.3%, led by a 2.2-point drop in occupancy, while weekend RevPAR declined at roughly half that pace. This divergence highlights how dependent many markets remain on weekday group and business travel to support overall performance.
November marks the largest post-pandemic monthly decline
Preliminary November data shows U.S. RevPAR fell 2.4%, the largest post-pandemic decline and the sixth consecutive monthly decrease. Of the past eight months, RevPAR has been positive only once—and that reading was flat.
Calendar effects played a role, as November gained a Sunday and lost a Friday. On a day-matched basis, November RevPAR declined just 0.3%, indicating that part of the weakness reflects timing rather than a sharp deterioration in underlying demand.
Hurricane-affected markets were another drag. Excluding the 13 hurricane markets, November RevPAR declined 1.3%. Removing both those markets and Las Vegas, the rest of the country posted a 0.9% decline, broadly consistent with trends seen from June through September.
Market-Level Divergence Widens
Top markets find support from group demand
Despite national softness, 11 of the top 25 markets posted RevPAR gains during the week. New Orleans (+7%) and St. Louis (+5%) led the group, followed by Anaheim, Detroit, Nashville, Orlando, Phoenix, San Diego, and San Francisco.
In these outperforming markets, gains were driven largely by group demand. Group demand in luxury and upper upscale hotels increased 5.5%, lifting RevPAR 6.8% on balanced growth in both occupancy and ADR. These results underscore how powerful group business remains when events and conventions align with available inventory.
Sharp declines where group demand disappeared
At the other end of the spectrum, Tampa (-28.7%) and Seattle (-24.6%) posted the steepest declines among the top 25 markets, with Las Vegas, Los Angeles, and Philadelphia also recording double-digit RevPAR losses.
Falling group demand was a key driver in most of these markets. Collectively, group demand across luxury and upper upscale hotels declined 35%, resulting in a 13.5% RevPAR decrease. Conference scheduling shifts appear to be the primary culprit, reinforcing how sensitive short-term performance has become event timing.
Group Demand and Event Cycles Create Volatility
Convention size matters
In the 19 markets with more than 500,000 square feet of convention and exhibit space, group demand declined 5.9% during the week. Orlando stood out as a clear exception, with group demand surging 17.3%.
Over the past six weeks, group demand in the largest convention markets is down 0.8%, while mid-sized convention markets—those with 100,000 to 499,000 square feet—posted 1.2% growth. This suggests that mid-sized convention destinations are currently capturing a larger share of group demand momentum.
Sports and events provide uneven boosts
Weekend RevPAR surged in select non-top-25 markets, led by Wisconsin North (+96.8%). Buffalo saw clear benefits from NFL-related demand, while Milwaukee likely captured spillover weekend travel tied to regional sporting events and broader event-driven visitation rather than direct stadium demand.
Across the 95 college football markets tracked, weekend RevPAR declined 1.7% over the regular season, driven by lower occupancy and flat ADR. While this confirms weaker hotel performance during college football weekends, the data does not capture how much event-driven demand may have been absorbed by alternative accommodations, which could be contributing to muted hotel ADR growth.
Inventory Growth Shapes Winners and Losers
Supply supports growth in some markets
Five-year performance data highlights how inventory growth can support long-term gains when demand is strong enough to absorb it. Salt Lake City stands out, where upper upscale inventory has grown significantly, yet five-year RevPAR has more than doubled, indicating successful absorption of new supply.
Excess supply pressures performance elsewhere
In contrast, Austin and Nashville appear among the weakest-performing markets primarily due to inventory growth, rather than a collapse in demand. In these cases, new supply has pressured occupancy and RevPAR even as the broader market remains active.
Shrinking supply doesn’t always fix demand
San Francisco presents the opposite dynamic. While economy and midscale inventory has declined, those segments continue to underperform the broader market, suggesting that reducing supply alone is not enough to drive recovery when demand fundamentals remain challenged.
Monetary Policy Influences Capital Decisions
The Fed delivers another rate cut
In December 2025, the Federal Reserve cut the federal funds rate by 25 basis points to a range of 3.5%–3.75%, following similar cuts in September and October. Borrowing costs are now at their lowest level since 2022.
The decision, however, was not unanimous. Three members dissented, the most since September 2019. While current projections point to only one additional cut in 2026, changes in voting composition next year could alter the policy path.
Why this matters for hotels
Rate expectations influence development pipelines, transaction timing, and capital deployment. Even in markets posting solid operating results, uncertainty around future rate cuts can delay investment decisions and slow deal activity.
Global Risks Still Matter for U.S. Hotel Demand
Japan’s rate hikes and debt concerns
According to a Reuters poll cited in the report, the Bank of Japan is expected to raise rates to 0.75%, with borrowing costs potentially reaching 1.0% by next September. While a sharp unwind of the yen carry trade appears unlikely, higher domestic rates may reduce Japanese capital outflows over time.
Japan’s rising debt-servicing burden adds longer-term risk as interest costs increase.
Implications for U.S. travel
Japan remains important due to its historical contribution to U.S. inbound travel. Aging demographics and elevated government debt—challenges Japan faces today—are likely to emerge in other international source markets over time, creating longer-term headwinds for global travel demand.
What This Means Going Forward
Heading into 2026, hotel performance is being determined market by market, not by national averages. Group demand, event calendars, and inventory growth are increasingly decisive, while occupancy softness continues to weigh on headline results. The Fed’s recent rate cuts offer some relief on the capital side, but policy uncertainty and global risks—particularly from Japan—remain important variables for both demand and investment behavior.
If you want help translating these trends into a clear, market-by-market strategy – covering pricing discipline, group pacing, event opportunities, and supply positioning – contact us. We’ll turn the data into a practical playbook tailored to your portfolio, your markets, and your 2026 operating goals.