Hotel asset managers found 2025 challenging, with several headwinds hampering revenue growth. However, they have a positive outlook for 2026. Hotel Business caught up with James Cole, partner, asset management, Ohana Real Estate Investors; Michelle Russo, founder/CEO, hotelAVE; and Dina Winder, principal, Highgate, to discuss the challenges of 2025 and what’s in store for 2026.
—Adam Perkowsky
How did your hotel portfolio perform in 2025 compared with expectations?
Cole: Overall, 2025 was a challenging year for the hospitality industry, as softer travel trends tested the resilience of owners, operators and asset managers across the board. Like many in the market, we entered the year with higher expectations for travel demand than ultimately materialized and had to adjust our strategies to remain competitive and maintain margins. We focused on taking proactive measures to improve efficiency and got creative in our solutions amid rising costs. Ultimately, we achieved bottom-line growth over the prior year in our same-store portfolio and feel more confident we can do so again in 2026.
Russo: Like the industry expected in late 2024 for 2025, we also assumed stronger RevPAR growth in our 2025 budgeting process. Our portfolio’s RevPAR will end down 3% to budget, almost entirely driven by occupancy. However, due to early-year emphasis on cost containment and rate management, we flexed almost 45%, which is very strong given the diversity of our portfolio. Versus last year, we’ve grown RevPAR and GOP. Contrary to the industry’s margin erosion (as measured by HotStats and reporting by the public companies), our GOP margin expanded.
Winder: 2025 was a challenging year for the hotel market generally across the U.S., with some markets exceeding expectations and others facing increasing headwinds. Overall, our full-service portfolio exceeded 2024 performance and will end 2025 slightly below budgeted expectations. Properties in markets such as Washington, DC, and Las Vegas saw significant revenue drops compared to expectations, while properties in New York City and San Francisco exceeded expectations.
What operational or financial challenges had the greatest impact?
Cole: Operationally, labor continues to present a significant challenge across the hospitality sector, driven by rising costs and evolving policies influenced by the broader political landscape. Financially, market uncertainty has led to more cautious consumer behavior, with both transient guests and groups hesitating to book trips. Additionally, rising costs in labor, insurance and taxes have further pressured profit margins. Despite these headwinds, the outlook for 2026 is more optimistic, supported by recent and anticipated rate cuts, improving consumer confidence and the boost expected from the World Cup being hosted in the U.S.
Russo: Challenges were largely around managing the impact of economic uncertainty on top-line growth, minimizing unnecessary discounting and forecast accuracy. After a strong first quarter, the industry’s RevPAR turned negative. In the second quarter, group pickup slowed to a trickle. We reacted in February by working with our hotels to address what was within our control, including a more aggressive cost-contingency plan and a greater focus on labor efficiency.
Winder: The biggest impact on the hotel market and hotel performance this year was demand and the uncertainty of that demand. This year, we saw a stronger pullback in leisure travel with more uncertainty in consumer confidence due to tariffs and immigration, combined with higher airfares. Furthermore, DOGE cuts impacted transient, group government and government-related travel. With increased uncertainty, the booking window continues to shorten for both transient and group bookings, making forecasting even more difficult.
Where did you see the most opportunity for value creation?
Cole: This year, the primary drivers of value creation across our properties were expanding the group pipeline and enhancing labor efficiency. By maintaining a strong group pipeline, our properties secured a solid base of business, enabling them to pursue more aggressive rates and sustain higher occupancy during softer transient travel periods. In addition, by aligning personnel and implementing more efficient scheduling and labor practices, we were able to cut costs while upholding the high service standards we expect. Beyond that, we activated underutilized spaces across our portfolio to maximize profitability and renegotiate key contracts to protect margins.
Russo: This year has been more about value preservation than broad-based value creation in the U.S. lodging industry, as owners navigated uneven demand, rising labor costs and capital-market uncertainty. Still, the luxury and upper-upscale segments have created incremental value through rate resilience, experience-driven travel spend and supply constraints. The most consistent value creation has come from high ROI, efficiency-focused capital investments—such as smart thermostats, occupancy sensors and energy-efficient systems—that reduced labor and utility costs. Winder: The biggest opportunities for value creation this year, and into 2026, come from ancillary revenue—those revenue sources outside of room and F&B revenue. We’ve looked at every nook in our properties to find underutilized spaces and try to monetize them. For example, leasing out a former storage closet next to the spa to a hairdresser—a unique additional amenity for our spa and hotel guests.
What is your forecast for the hotel investment landscape in 2026?
Cole: We continue to maintain a positive outlook on the hotel investment landscape, supported by strengthening market dynamics. Lower interest rates should lead to increased transaction activity, creating an attractive environment for disciplined investment. Our strategy remains centered on assets where we believe we can add meaningful value through thoughtful execution and active management.
Russo: For the industry, we are projecting 1.2% RevPAR growth (with room for improvement) and another 50-100 bps of margin erosion, as labor will continue to grow above inflation. Our RevPAR growth includes 20-40 bps of FIFA World Cup impact. We are more positive for the upper upscale and luxury segments.
Winder: We are excited for the 2026 investment landscape. We have several deals tied up already that will close in late Q4 / early Q1 and others in the pipeline. The deals we like are messier and more complicated, but as an active investor and operator, these are the deals that we like—they allow us to use our expertise to create value throughout the capital stack.
