Revenue per available room (RevPAR) is expected to rise by approximately 4%, reflecting Canadians’ renewed enthusiasm for exploring their own country–at levels not seen since the early stages of pandemic recovery. This surge in domestic travel is anticipated to persist throughout 2026, providing a solid foundation for continued sector resilience.

Although broader economic growth projections for 2026 remain modest, demand fundamentals within hospitality appear notably stable. Major urban markets report strong meeting and conference bookings, signaling confidence in group travel and corporate events. Business travel, while not yet fully recovered to pre-pandemic levels, continues to rebound steadily, complemented by sustained growth in leisure segments. Together, these dynamics point to a healthy demand environment, even as
macroeconomic headwinds linger.

On the supply side, the industry has seen only incremental additions since the onset of COVID-19. However, new construction activity has accelerated significantly and is forecasted to surpass 2019 levels by year-end. While supply growth is expected to be notably higher, occupancy rates are projected to remain near record highs for another consecutive year–a testament to the strength of underlying demand drivers and the market’s ability to absorb new inventory without significant disruption.

Pricing dynamics further reinforce this positive outlook. Average Daily Rate (ADR) growth is anticipated to remain strong, supported by favorable market conditions and marquee events such as the FIFA World Cup. These factors are expected to sustain RevPAR growth in the range of 2% to 3%. Operators who effectively leverage these opportunities through strategic pricing and targeted marketing will be well-positioned to capture incremental revenue gains.

In summary, Canada enters 2026 with a balanced and optimistic outlook: steady demand, expanding supply, and continued pricing power. While operators should remain vigilant regarding economic uncertainties and competitive pressures from new inventory, the combination of resilient domestic travel, robust group business, and high-profile events positions the market for another year of solid performance. Strategic focus on revenue management, cost control, and guest experience will be critical as the industry navigates an evolving landscape marked by both opportunity and challenge.

The United States

Despite an economy that has outperformed expectations and recent interest rate cuts aimed at stimulating growth, the U.S. hotel sector faced a challenging landscape in 2025. Revenue per available room (RevPAR) is projected to inch forward by only 0.1%, reflecting a market constrained by declining occupancy levels. This softness in demand stems largely from stagnant inbound international travel and a notable reduction in meeting and conference activity and transient business travel.

Adding to the complexity, average daily rate (ADR) growth has been moderate and inconsistent across markets. While some urban destinations have managed to sustain pricing power, others have struggled to maintain rate integrity amid competitive pressures and fluctuating demand patterns. The result is a top-line performance that, even with incremental gains, falls short of inflationary benchmarks–posing a challenge to RevPAR for operators and owners alike.

Looking ahead to 2026, there is cautious optimism for improvement in fundamentals. High-profile events such as the FIFA World Cup and the celebration of the nation’s 250th anniversary are expected to provide a temporary lift in demand, particularly in gateway cities and markets hosting these marquee occasions. These events should bolster both leisure and group segments, creating opportunities for operators to capture premium rates and drive occupancy during peak periods.

However, these gains are likely to be episodic rather than structural, meaning sustained growth beyond these events will depend on broader economic and travel trends.

Looking ahead to 2026, there is cautious optimism for improvement in fundamentals.

On the supply side, development activity remains muted. Elevated construction, operating, and financing costs—now at historic highs—have rendered many new-build projects financially unfeasible. As a result, supply growth is projected to be below 1%, marking one of the slowest expansion periods in recent history. While this limited pipeline may help temper competitive pressures in the near term, it also underscores the challenges facing developers and investors navigating an environment of compressed margins and heightened risk.

In summary, the U.S. hotel industry enters 2026 with a mixed outlook. Economic tailwinds and special events offer pockets of opportunity, yet structural headwinds–ranging from uneven demand recovery to escalating costs–continue to weigh on performance. Operators will need to adopt agile revenue management strategies, optimize cost structures, and leverage technology to maintain profitability in an environment where growth remains elusive.

Operating Fundamentals

Hotel market fundamentals in both Canada and the United States are expected to remain under pressure for the foreseeable future. Despite pockets of demand
resilience, top-line growth continues to face headwinds, and operators are grappling with persistent labor shortages and escalating operating costs. These structural
challenges are compressing margins and creating an environment where profitability is increasingly difficult to sustain.

In this context, strategic discipline will be critical. Operators and asset managers must identify opportunities to optimize revenue management strategies, leveraging data-driven pricing models and dynamic distribution channels to capture incremental demand. Equally important is a rigorous focus on cost control— streamlining operations, improving labor efficiency, and adopting technology solutions that enhance productivity without compromising service standards.

At the same time, guest expectations remain high. Delivering clean, safe, and comfortable experiences is non-negotiable, even as cost pressures mount. Balancing operational efficiency with service quality will require innovative approaches, from rethinking staffing models to investing in automation and sustainability initiatives
that reduce long-term expenses.

Ultimately, success in this environment will hinge on adaptability. Those who can align pricing strategies with shifting demand patterns, maintain strict expense oversight, and uphold brand standards will be best positioned to navigate ongoing challenges and protect asset value in a market defined by uncertainty and rising costs.