Hotel gross operating profit margins stayed flat year-over-year through July 2026 even as revenue per available room rose 5%, CoStar data shared at this week's Lodging Conference showed — a divergence that HVS executives framed as the central concern for owners heading into 2027.

About 3,000 operators, owners, lenders, and brand representatives convened at the JW Marriott Phoenix Desert Ridge Resort & Spa for the event. HVS fielded teams from Consulting & Valuation, Brokerage & Advisory, Asset Management, Design, and Executive Search, with Rod Clough, MAI, CRE, MRICS, opening Tuesday's general session.

What is driving flat margins despite rising RevPAR?

"Undistributed expenses — administrative and general, technology, and utilities — have risen at the property level," said Marcus Lee, executive vice president of development at HVS Asset Management & Advisory. "Greater understanding about where profitability is being gained or lost will be critical."

Luigi Major, MAI, managing director of advisory at HVS Consulting & Valuation, called 2026 "a stronger year" operationally, with roughly 5% RevPAR growth expected by year-end and additional increases anticipated in 2027. Yet the transaction market has cooled as Treasury yields, interest rates, and inflation pressure sellers, Major said, and the bid-ask gap persists between buyer pricing expectations and financing realities.

How urgent is the AI push now?

Speakers described AI adoption as no longer optional for owners, brands, and operators. "The conversation has shifted from potential to urgency," Major said.

Ryan Mark, HVS senior vice president for the Mountain West region, flagged two operational payoffs. AI search could push more guests toward direct hotel bookings, reducing OTA commissions, while robotics already handle back-of-house laundry and carpet cleaning. Forecasting and labor-management systems drew equal attention.

How serious is the loan-maturity wall?

Several owners raised alarms about maturities coming due in the next twelve months. Many of those loans were originated at rates far below today's cost of capital, and revenues at some properties fall short of current debt-service requirements.

Where is new supply heading?

Roughly 40% of the U.S. pipeline comprises extended-stay product, Mark noted. Construction costs remain elevated, holding new-supply growth muted and supporting existing-hotel performance. Texas and Florida draw the most development interest for their favorable tax structures even as owners elsewhere watch margins.

What are owners asking brands to change?

Owners increasingly question whether franchise fees, brand-mandated technology, and renovation requirements under property improvement plans actually produce incremental revenue or profit, Lee said. Brand responses include longer renovation cycles tied to guest-satisfaction scores, conversion-friendly brand launches, simpler fee structures, and a sharper focus on ancillary revenue.

Lee put the underlying question plainly: "Should an owner necessarily deploy capital because a prescribed renovation cycle has arrived? The answer should depend on the expected ROI of the renovation rather than arbitrary compliance requirements."

The industry's mood heading into 2027 amounts to "measured optimism," Major said: participants see stronger fundamentals, alongside real risks from rates, costs, and global events that demand greater urgency.