U.S. Hotel Sector Navigates RevPAR Shifts & Capital Markets

By Majid Radaei, RadCRE · · Industry Insights

Despite a slight moderation in RevPAR growth, the U.S. hotel sector demonstrates resilience, with STR reporting national RevPAR up 2.8% year-over-year in Q1 2026. Transaction volume remains robust in select segments.

U.S. Hotel Sector Navigates RevPAR Shifts & Capital Markets

The U.S. hotel sector continues to exhibit resilience, albeit with varied performance across segments, as it navigates evolving macroeconomic conditions and a dynamic capital markets landscape. While the robust post-pandemic recovery has moderated, key performance indicators (KPIs) like Revenue Per Available Room (RevPAR) still show positive, albeit decelerating, growth.

Moderated RevPAR Growth and Segment Performance

According to data from STR, a division of CoStar, national RevPAR increased by 2.8% year-over-year in the first quarter of 2026. This growth is primarily driven by Average Daily Rate (ADR) increases, as occupancy rates have largely stabilized to pre-pandemic levels. The luxury and upper-upscale segments continue to outperform, benefiting from strong international inbound travel and sustained corporate demand. For instance, properties in key gateway cities like New York and Los Angeles have seen ADR growth averaging 4-6% in Q1 2026, according to CBRE Hotels Research.

Conversely, the economy and midscale segments are facing increased pressure from new supply entering the market in select areas and more price-sensitive consumer behavior. While overall occupancy remains healthy at around 63.5% nationally, according to STR, certain submarkets are experiencing supply-driven dilution.

Capital Markets Activity and Lending Environment

Transaction volume in the hotel sector, while down from the peaks of 2021-2022, remains active for well-positioned assets. Green Street Advisors reported transaction volume for U.S. hotels reaching approximately $8.5 billion in Q1 2026, down from $11.2 billion in Q1 2025. Institutional investors like Blackstone and Brookfield continue to selectively deploy capital, focusing on value-add opportunities and premium brands. Notably, Starwood Capital Group recently closed a deal for a portfolio of select-service hotels totaling over $500 million, targeting properties in high-growth secondary markets.

The lending environment for hotel assets remains discerning. While SOFR has stabilized around 4.31%, lenders are still cautious, particularly for full-service hotels requiring significant capital expenditure. Bridge loans are available, typically priced at SOFR + 300-600 bps, enabling acquisitions or refinancings for properties with strong business plans. Agency lenders (Fannie Mae, Freddie Mac) remain competitive for stabilized multifamily assets, but their direct involvement in hospitality is limited. CMBS spreads for hospitality assets have tightened slightly but are still generally in the T + 200-400 bps range, reflecting the perceived cyclicality of the sector.

Our Take

Majid Radaei, Founder of RAD Commercial Realty, notes, "The current hotel market presents distinct opportunities for discerning investors. While headline RevPAR growth has slowed, the underlying performance of premium segments and certain high-barrier-to-entry markets is strong. We're advising clients to focus on properties with clear competitive advantages – whether that's superior branding, irreplaceable locations, or significant upside through operational efficiencies. On the financing side, understanding the nuances between bridge, CMBS, and even the potential for structured preferred equity is critical. We're seeing situations where a well-structured mezzanine component at 12-18% can bridge the gap for a strong sponsor, preventing a deal from stalling due to conventional debt limitations. It's about creative capital stacks and identifying where the real value lies, not just chasing broad market trends."

Forward Outlook and Investment Strategies

Analysts from JLL and Cushman & Wakefield anticipate continued stability for the U.S. hotel sector through 2026, with an emphasis on market-specific performance. Leisure travel is expected to remain robust, while modest improvements in corporate transient and group business will support demand. Strategic acquisitions, active asset management, and smart capital deployment will be critical for investors looking to capitalize on this evolving landscape. The focus is shifting from pure top-line growth to optimizing net operating income (NOI) through meticulous cost management and revenue strategies.

RadCRE excels at providing institutional-grade advisory services for clients navigating the complexities of hotel investment sales and financing, leveraging deep market insights and a robust network of capital partners to structure optimal outcomes.

Tags: hotel investment sales, RevPAR trends, commercial real estate financing, capital markets, hospitality sector performance

Sources: STR (CoStar), CBRE Hotels Research, Green Street Advisors, JLL, Cushman & Wakefield