Baumohl Sees 4% RevPAR Growth in 2027 Despite Rate Risk

By Olivia Hart

Bernie Baumohl projects 4% revenue per available room (RevPAR) growth for U.S. hotels in 2027, alongside 2.1% GDP growth and no recession. The chief global economist at The Economic Outlook Group delivered the outlook at The Lodging Conference 2026 in Phoenix.

The Wall Street Journal ranked Baumohl its top economic forecaster in 2025, the second time he earned that distinction. He described the U.S. economy as “a new regime,” with elevated inflation, energy prices at or near records, and global demand for capital surging.

A slower, stable growth path

Baumohl expects GDP growth to moderate from 2.6% in 2026 to 2.1% in 2027 and 2.0% in 2028. That profile avoids recession but still puts pressure on consumer finances and hotel operating costs.

• AI investment becomes a dominant contributor to GDP, rising from 41.6% of growth in 2026 to 48% in 2027.
• Government spending also remains elevated.
• Consumer spending cools, falling from a reported 27.8% of GDP to roughly 20% by 2027.

Demand should remain intact, but its mix will shift. Higher-income travelers, business trips tied to AI and technology clusters, and government-related activity should carry more weight as lower-income households face increasing stress. Hotels therefore need to manage rate and demand segmentation carefully rather than rely on a uniformly strong leisure market.

Household stress is the main risk

Baumohl says household spending continues to exceed take-home pay. Savings rates are falling, credit-card balances and home-equity withdrawals are rising, inflation is outpacing wage gains, and 94% of workers are nonunion.

Early in 2026, the monetary-policy debate centered on cutting interest rates; the Federal Reserve has since moved in the opposite direction. On Sept. 16, the Fed raised rates by 25 basis points, or 0.25 percentage point. Baumohl expects another 25-basis-point increase late in 2026 and a 50-basis-point increase in 2027.

For hotel operators, he flags two indicators:

• Delinquency rates: A meaningful rise would signal softer leisure travel.
• Wage growth: Without real gains, lower-income households likely pull back.

The combination leaves revenue mix and daily repricing more important than chasing occupancy at any price. It also makes operating discipline more valuable as higher rates limit both discretionary travel and the capital available for hotel growth.

Rates tighten the capital environment

Baumohl expects the 10-year Treasury yield to exceed 5% in both 2027 and 2028. Four forces drive that forecast:

• Massive capital demand tied to AI investment.
• War-related spending adds pressure to government finances.
• Rising federal deficits keep borrowing needs elevated.
• Reduced foreign appetite for U.S. Treasuries limits incremental demand.

Baumohl also raised the possibility of “bond vigilantes” pushing yields toward 6%. For owners, that means higher capitalization rates, tougher refinancing conditions, and more conservative underwriting. Deals can still work, but exit assumptions and capital structures need discipline.

Constrained supply still favors hotels

• New supply remains constrained because construction costs are high and financing is expensive.
• Demand remains resilient; August consumer spending rose 5.9%, outpacing CPI by a wide margin.
• Hotels have restructured around sharper pricing discipline, leaner operations, and greater ability to reprice rooms daily.

Hotels do not need a broad consumer boom to gain in this environment; stable demand and limited supply can support results. Leaner operations and daily repricing give owners more control over net rate, while cost control matters as energy and wage pressures persist.

The risk factors to monitor

Baumohl identifies four sector-facing risks:

• Energy shocks: High gasoline, oil, and diesel prices raise travel costs and hotel operating expenses.
• Consumer slowdown: Lower-income households pull back on discretionary spending.
• Rate overshoot: A 10-year yield moving toward 6% would pressure valuations and transactions.
• AI volatility: A cooling in AI investment would remove one of the economy’s key growth engines.

Geopolitical scenarios involving Russia and NATO, China and Taiwan, and conflict in the Middle East carry lower probability but high impact. They could disrupt travel flows and capital markets quickly, although I do not expect them to derail 2027.

What does this change for hotel operators?

It calls for conservative underwriting, operational agility, and a precise understanding of which demand segments will fill rooms. Baumohl sees no recession in sight, only a slower, more complex economy in which well-run hotels continue to outperform expectations.

His 4% RevPAR forecast for 2027 divides into about 1% from occupancy and 3% from rate. My Aug. 25 hotel-industry outlook reached the same conclusion, and nothing heard in Phoenix changes the case for a solid 2027.