U.S. lodging tax base rebounds in 2026, but 2027 faces an event hurdle

By Marcus Bennett

What changed in the 2026 lodging tax base?

Room revenue across the top 25 U.S. hotel markets rose 7.8% to approximately $37.3 billion through August 2026, according to HVS.

That gain offers a firmer tax base after a weak 2025. HVS's 16th annual U.S. Lodging Tax Study covers city, state and special-district lodging and sales taxes across all 50 states and the 150 largest U.S. cities. It supplies historical rates, collections and revenue distribution, plus comparisons for 25 major markets.

More of the 25 markets declined in 2025 than grew. RevPAR increased everywhere except Austin through August 2026. HVS says modest gains in several large markets may slow the tax recovery.

What did 2025 reveal about tax capacity?

Room revenue serves as the base for most lodging taxes, and each market's revenue and tax rate determine collection scale. Full-year 2025 results diverged sharply: 10 markets posted gains, Philadelphia stayed flat, and 14 declined.

HVS said results point to "a softening of the revenue base on which lodging taxes are levied." It expects collections in many major markets to flatten or decline near term. The 2026 recovery changes the direction, not the certainty.

Room-revenue changes from 2024 to 2025 included:

• San Francisco led growth at 14.5%, followed by New York City at 6.8%, Oklahoma City at 6.4% and Columbus at 5.8%.
• Las Vegas fell 10.4%, Houston fell 8.7% and El Paso fell 7.3%.

CoStar reports room revenue net of taxes, so the figures show pre-tax sales and exclude the taxes at issue. Short-term rentals generate lodging taxes in nearly all jurisdictions, but CoStar data does not capture that impact.

The top 25 markets produced about $54.0 billion in room revenue in 2025, but the total was concentrated. New York City and Las Vegas accounted for more than 40%. New York City alone produced more than four times Chicago's room revenue; Chicago ranked third. Most other markets generated $1 billion to $3 billion; the nine below $1 billion contributed about one-tenth.

Scale did not equal revenue per available room. New York City and Boston posted 2025 RevPAR above $200, roughly four times Oklahoma City's level. Las Vegas and Houston ranked in the top 10 for revenue but lower in RevPAR. Boston ranked second in RevPAR and seventh in revenue. Boston supports stronger collections per room; Las Vegas and Houston produce larger totals through market size.

What powered the rebound through August?

RevPAR equals ADR multiplied by occupancy. ADR, or average daily rate, measures revenue per rented room. CoStar's national data show why revenue totals cannot explain the tax outlook.

Occupancy fell in 2025, while reduced leisure travel and greater price sensitivity slowed ADR growth. RevPAR fell slightly. ADR and RevPAR had increased in 2024. Through August 2026, occupancy rose about 1.4% year over year, ADR rose 3.4% and RevPAR nearly 5%. All three improved from the same period in 2025.

San Francisco led 2026 RevPAR growth at 21.5%, and San Jose followed at 18.0%. HVS links those gains to AI and technology conventions, Super Bowl LX and FIFA World Cup play in Santa Clara. Austin alone fell as redevelopment closed its convention center and removed citywide convention demand. New York City and Las Vegas posted moderate growth.

How much did the World Cup add?

Many host markets staged 2026 FIFA World Cup matches, which HVS says likely helped RevPAR through August. Across 11 U.S. host markets, the tournament produced an estimated $680 million in incremental room revenue.

New York City captured $339.2 million, or $42.4 million per match. Boston ranked second in revenue per match at $9.9 million, narrowly ahead of Los Angeles. Kansas City also out-earned larger Houston and San Francisco markets on total and per-match revenue relative to its size.

No event of comparable scale is scheduled for 2027. The host markets will face an elevated comparison base, and HVS expects lodging tax growth may fall below historical trends next year.

What could derail the recovery?

The report was prepared amid policy uncertainty. Shifting trade policy and litigation over tariff legality created uncertainty through 2025 and 2026. Since late February 2026, conflict with Iran has pushed energy prices higher, added inflation pressure and prompted Federal Reserve rate increases. Later policy shifts could alter the forecast.

Higher energy and borrowing costs, combined with inflation, can increase hotel operating expenses and weaken new development economics. Tighter household budgets may reduce domestic transient and group travel. Immigration and visa policies may also constrain the hospitality labor supply.

Geopolitical tension has affected international travel to the United States. Tourism Economics estimates that international overnight visits fell 5.7% in 2025, driven largely by a 25.7% decline in visits from Canada. It expects policy uncertainty to limit the recovery in 2026.

Inflation, higher interest rates and weakening consumer confidence leave the near-term outlook uncertain. HVS still expects resilience. The report says: "We are confident the industry will prove to be similarly resilient following the current period of uncertainty." Its argument rests on recoveries after 9/11, the Great Recession and the COVID-19 pandemic.

Who produced the study?

HVS, established in 1980, calls itself a consulting and services firm focused on hotels, mixed-use, shared ownership, gaming and leisure. It performs more than 4,500 assignments each year for owners, operators, investors, banks and developers. Its network spans about 60 offices and more than 300 professionals worldwide, including principals it calls leading regional experts.

HVS expects lodging tax growth may fall below historical trends in 2027 as host markets face a World Cup-sized comparison base.