The hospitality and real estate sectors are heading into 2026 with a mix of recalibration and early signs of stabilization. Hotel stocks, apartment REITs, transaction markets, and consumer financial health collectively point toward an industry digesting a difficult year but setting the stage for improved performance ahead. Based solely on the information provided, here are the five forces defining the landscape.
1. Hotel Stocks: From October Weakness to November Strength
Hotel stocks spent most of October under pressure, driven by soft domestic RevPAR—particularly in the lower-end chain scales—and a wave of reduced fourth-quarter expectations. This weakness was validated during 3Q25 earnings, when most companies reduced guidance ranges.
But once earnings wrapped, sentiment pivoted quickly. Investors shifted forward to a clearer 2026 outlook, and both the Global Hotel Brands and Hotel REITs rebounded sharply in November. With RevPAR trends roughly flat—demand modestly lower but ADR slightly positive—investors appear increasingly confident that the sector’s reset has largely played out.
Margins remain pressured by higher expenses, but the market is now looking forward, viewing 2026 as a more predictable, less volatile backdrop for hotel fundamentals.
2. Hotel REITs: A Full Guidance Reset Across the Sector
Few themes define 2025 as clearly as the downward revision cycle in Hotel REIT guidance. Most began the year expecting RevPAR growth of +1% to +3%, but after three straight quarters of cuts, the median expectation now sits at –0.7% to flat. The median decline versus initial outlooks is a significant –275 bps, with Host as the lone REIT that avoided guidance reductions.
Muted supply growth should be a tailwind, yet occupancy in many markets remains below 2019 levels, limiting ADR growth even before domestic fundamentals softened. Expense pressures continue to weigh margins.
Still, REIT valuations look historically discounted based on NAV and EV/EBITDA multiples. Investors focused on balance sheet strength, asset quality, and capital allocation discipline may find selective opportunities as the sector begins to stabilize next year.
3. Chain Scale and Market Divergence: A Defining Feature of 2025
Performance across the hotel industry has remained highly uneven. Luxury assets and urban markets are outperforming, while lower-end chain scales and select-service hotels are lagging. Domestic RevPAR has decelerated all year due to trade policy uncertainty, weaker government demand, softer inbound international travel, shorter booking windows, and less group demand booked in-the-year-for-the-year.
Industry-wide RevPAR is running 250–300 bps below the expectations set in early 2025. Global Hotel Brands confirmed the same pattern: weaker U.S. domestic fundamentals but stronger international growth nearly everywhere outside China.
The brands remain relatively insulated given their fee-based, asset-light models, which allow them to capture unit growth, maintain high loyalty penetration, and sidestep the margin pressures that hotel owners and REITs must manage. Increasingly, they function more like technology-enabled platforms than traditional brick-and-mortar operators.
4. Transactions: Real-Time Insights Into Market Positioning
Only one bulleted list appears in this article, and it summarizes the current deal landscape:
- Courtyard Amarillo Downtown: Sold for $20M at a 9% NOI cap rate (8% when the PIP is factored in). The hotel produced $1.8M in NOI, and the buyer secured a 74% LTV CMBS loan. The deal demonstrates that strong-performing assets in secondary markets can still command attractive yields.
- Ashford’s Embassy Suites Sales: Two 1998 Embassy Suites in Austin and Houston sold for $27M ($90K/key). Each asset needs considerable capex, underscoring the need for asset rotation for owners holding older properties through multiple cycles.
- Hyatt Studios Expansion: Hyatt opened its second Hyatt Studios property, with over 60 more in the pipeline—showing ongoing strength in the extended-stay segment.
- Loyalty Program Incentives: Marriott’s 70% transfer bonus from Chase Ultimate Rewards illustrates how loyalty programs and credit-card ecosystems continue to influence travel behavior.
- Cross-Border Travel Trends: Canadian travel to the U.S. has declined for 10 consecutive months, with travelers shifting preference toward Europe and the Caribbean.
Together, these deals and market signals highlight a bifurcated environment where asset quality, brand strength, and capex requirements dictate pricing, while local owner-operators remain active as participants in the market.
5. Apartment REITs: Oversupplied Today, Stabilizing for Tomorrow
The apartment sector continues to work through the final wave of heavy supply, but demand softened late in 3Q25, pushing the recovery further out. Several large REITs—CPT, CSR, MAA, and UDR—revised revenue expectations lower, although expense guidance also decreased. ESS and IRT held their same-store outlooks steady. New-lease trade-outs were negative across every company, while renewal increases remained solid, especially in coastal markets.
Early indicators suggest slightly negative to low-positive earn-ins for 2026, reflecting a lower starting point as the year begins. Even so, valuations across apartment REITs remain meaningfully more attractive than private-market pricing. Some REITs are selling assets specifically to repurchase shares at wide discounts. Markets like San Francisco are outperforming thanks to AI-driven demand and improved migration, while D.C. has softened in the last 60 days.
This reset within apartments also offers insights for hospitality. Apartments highlight how long it can take for any real estate sector to absorb a period of elevated supply or muted demand, even when fundamentals are otherwise stable. Hotels—particularly in lower-end chain scales facing oversupply, softening demand, or capex needs—may experience a similarly extended recovery curve. The valuation disconnect between public REITs and private assets in apartments also mirrors what we see in Hotel REITs today, suggesting that both sectors are entering a window where patient, long-term investors can capitalize on pricing dislocations.”
Apartments maintain structurally higher margins (roughly 65% NOI versus about 35% for hotels), and even with expense growth projected near 3% next year, the sector appears to be nearing a more supportive supply-demand balance.
Looking Ahead: A Market Reset Creating Opportunity for 2026
Taken together, these signals show a hospitality and real estate market that has endured a difficult year but is transitioning toward stability. Hotel stocks have already priced in the guidance reset; REITs are working through a margin squeeze, and apartment REITs are seeing valuations firm as supply begins to ease. Consumer financial data—despite a weaker 2024 for tenants across Retail Income’s dataset—shows households are not overstretched, supporting the foundation for travel and lodging demand heading into 2026.
Long-term, fixed-rate leverage remains one of the most powerful tools in commercial real estate, whether in hotels or apartments. In an environment where currency debasement compounds over decades, long-duration financing effectively becomes a strategic asset in itself.
If you’d like help evaluating acquisitions, dispositions, capital allocation, or how these dynamics shape your hospitality strategy heading into 2026, our team is ready to support you. Contact us to discuss opportunities tailored to your portfolio.