U.S. hotel net operating margins have fallen 20% since 2019, AI Hospitality Group founder and CEO Sloan Dean told a panel at this year's Lodging Conference in Phoenix. Yet deals are still getting done in 2026, and several development chiefs expressed optimism about the year ahead — including for new construction.

The margin compression comes alongside rising labor, operating, construction and insurance costs. "Nothing has ever gotten less expensive," said Julienne Smith, head of Americas growth at Hyatt Hotels, appointed to the role earlier this year. "But we, as brand leaders, what we can do is try to take out some of that pain."

Smith said Hyatt scrutinizes build costs alongside operational efficiency: "Are we being as efficient as we possibly can while still delivering that promise?" The company recently updated its Hyatt Place and Hyatt Studios prototypes with models that cut room counts, reduce required space and lower overall costs.

Why do conversions keep outpacing construction?

With new supply growth essentially flat at 0.4% year over year in 2026, according to CoStar, conversions remain a critical growth engine for brands.

The math is simple, said David Wilner, EVP and chief development officer at Wyndham Hotels & Resorts: "Conversions will always outweigh construction until the cost of construction is aligned with the cost of acquisition."

Mark Sergot, chief development officer for the Americas at IHG Hotels & Resorts, called conversions "a longer-term phenomenon" because they deliver commercial performance. Owners, he said, are asking: "What have I got? What was I sold? What was I getting? And is there an opportunity out there?"

Does the industry have too many brands?

Panelists also debated brand proliferation, including the recent wave of soft brands.

"I think brands are trying to create their own ecosystems," said David Pepper, chief development officer at Choice Hotels International. "They're going to capture their client and get the greatest share of that wallet."

Acquisitions extend those ecosystems. Pepper pointed to Choice's $130 million acquisition of RV travel membership company Harvest Hosts, noting that about 2 million members of Choice's loyalty program own an RV.

Wilner offered a blunt market test for new brands: "If you're still stuck at three, four or even five hotels, five years later [after launching a brand], is there really a need?" Wyndham's Dazzler Select, launched in 2025, has opened 14 properties this year, while Echo Suites has opened nearly 30 extended stay hotels since its 2022 launch.

Where is demand actually growing?

Luxury has been "the darling" of the industry, in Dean's words, but Matthew Hostetler, chief development officer at Red Roof, noted most U.S. travelers stay in select-service hotels from upscale down to economy. Sergot described a K-shaped leisure market — strong at both the luxury and value ends — while corporate travel among Fortune 500 companies "feels like a more balanced environment."

Smith added that brands spanning segments keep guests engaged, since customers often trade down one tier — a luxury guest, for example, may choose upper upscale.

What is driving extended stay?

Extended stay accounts for 38% of the U.S. new-construction pipeline, Wilner said. Demand is rising — driven in part by a project-based workforce — even as less supply enters the market. Smith said the category yields higher owner returns thanks to a less expensive labor model and lower construction costs.

The extended stay customer has also shifted over the past decade, with some guests staying longer and expecting amenities beyond full-sized kitchens. "While the sector is growing, the customer who's using it is also growing," Sergot said, citing white space for the segment across the U.S. and Canada.

Looking ahead, Wilner predicts RevPAR will rise and hold steady, potentially reviving new construction — and he expects owners to see more profitability over the next 30 years than in the past 20, putting more money back into deals, acquisitions and refinancing.