The 2.1 Percent Budget: Why Next Year’s Revenue Forecast Won’t Pay Next Year’s Bills

Two forecasters who disagree about 2026 landed on the same number for 2027, and it is smaller than the raise hotel workers got this year.

The One Number Everyone Agrees On

Hotel forecasters rarely agree. This year they could not even agree on the year we are living in. In August, CoStar and Tourism Economics raised their 2026 call to RevPAR growth of 4.4 percent. CBRE’s midyear outlook, even after its own upgrade from 1.2 percent, has 2026 at 2.5 percent.

Then they looked at 2027 and wrote down the same thing: 2.1 percent RevPAR growth.

CoStar and Tourism Economics break it down as average daily rate up 1.6 percent and demand up 1.1 percent, with occupancy at 63.4 percent. CBRE has ADR up 1.7 percent and occupancy at 63.0 percent. CoStar’s own summary calls 2027 “sustained recovery” rather than acceleration. Jan Freitag of CoStar called the coming year “smooth sailing” from a revenue perspective.

Smooth is the right word for the top line. The trouble is in the line next to it: gross operating profit per available room is forecast to grow just 1 percent in 2027, according to CoStar and Tourism Economics as reported by HotelData.com. Revenue up 2.1, profit up 1. Something in the middle of the P&L is eating the difference, and it is the same thing that ate it in 2025.

Rate Is Lagging Inflation, and That Is the Whole Problem

The forecast that pairs with that 1.6 percent ADR assumes inflation of 2.3 percent in 2027. At STR’s Hotel Data Conference in August, senior forecasting analyst Jake Bruno told the room that ADR is “expected to remain below the inflation rate.”

Read that again as an owner. Your room rate, the one number you set yourself, is projected to lose ground to the price of everything you buy.

We have already seen this movie. In 2025, total operating revenue for U.S. hotels rose 2.6 percent and rooms revenue just 1.1 percent, according to Tommy Crozier’s analysis in Lodging magazine, while total hotel expenses rose 3.1 percent. The GOP margin slipped from 35.1 percent to 34.8 percent, and the EBITDA margin from 23.3 percent to 22.8 percent. EBITDA dollars rose 0.3 percent, which is a rounding error dressed up as growth. Crozier’s verdict: “Revenue growth is stalling, while expenses accelerate at an unsustainable pace.”

CoStar’s numbers through October 2025 told the same story from another angle: labor rose from 34 percent of revenue in 2024 to 35 percent in 2025.

Where the Money Goes in 2027

Labor: cheaper per hour worked, pricier per room sold

Labor is the largest line on any hotel P&L, and it is still climbing. In the first quarter of 2026, wages at about 5,000 hotels tracked by Actabl rose 2.91 percent year over year, according to HotelData.com. Select-service wages rose 2.81 percent.

Here is the part worth copying: those same hotels cut hours per occupied room by 2.3 percent, and select-service hotels cut them 4.2 percent. Room attendants went from 24.99 to 23.91 minutes per occupied room. The result: labor cost per occupied room at select-service hotels rose only 2.5 percent, to $30.36, instead of tracking wages. Hotels paid people more and scheduled them better. That is the only labor strategy that survives a 1.6 percent rate year.

Insurance: the property bill is falling, the liability bill is not

This is the one line where many owners can find real money in 2027. Insurance premiums fell 5.3 percent in 2025, per Crozier. In September, Insurance Journal reported on Amwins’ hospitality market study, which found hotels in favorable locations commonly getting property premium reductions of 15 to 25 percent.

But Amwins’ Dana Fansler called it “a tale of two markets,” with casualty still hard because of social inflation, nuclear verdicts and more litigation. Lockton’s February 2026 update said umbrella and excess capacity has tightened, with $5 million lead layers now common and some insurers offering only $2 million. Amwins also warns that two quotes with similar premiums can carry very different coverage, with assault and battery, human trafficking and liquor liability often sub-limited or excluded.

Translation: if your renewal comes back flat, you may be paying the same money for less coverage.

Fees and taxes ride along with revenue, or faster

Management fees rose 3.8 percent and property taxes 2.4 percent in 2025, per Crozier. If you fly a flag, your royalty, marketing and loyalty charges are percentages of revenue that grow with every dollar you add, and some brands add more lines than others. Our free 164-brand franchise fee spreadsheet shows exactly what your brand charges.

The Math on a 100-Room Hotel

Here is a simple illustration. These are round, made-up numbers for one hypothetical hotel, not data from any real property.

Say a hotel books $3,000,000 in total revenue in 2026 at the 2025 industry GOP margin of 34.8 percent. That is $1,044,000 in GOP and $1,956,000 in operating expenses.

Now grow revenue by the forecast 2.1 percent. That adds $63,000.

• If expenses grow 2.9 percent, GOP rises $6,276, or 0.6 percent.
• If expenses grow 3.1 percent, the 2025 industry pace, GOP rises $2,364, or 0.2 percent.
• If expenses grow 3.5 percent, GOP falls $5,460, and the margin drops to 33.9 percent.

The break-even point is about 3.2 percent. If your expenses rise faster than that, you will have a “good” revenue year and a smaller profit. For a hotel with a loan, that is less cash to cover debt service.

Not Every Hotel Gets the Average

The 2.1 percent is a national blend, and three things will pull your hotel off it.

The World Cup hangover. CoStar’s 2027 ADR forecast is 1.6 percent, but 2.1 percent excluding the June and July World Cup effect. STR’s Bruno said RevPAR in June 2027 is expected to fall 0.8 percent year over year. If you operate in a host market, do not budget June and July 2027 off this summer’s numbers.

The calendar. Easter moves from April in 2026 to March in 2027, Bruno noted. Budget your spring months as one block, or your March and April variances will mislead you all year.

Your chain scale. CBRE expects luxury RevPAR to grow 5.2 percent this year, midscale 0.7 percent and economy to fall 0.6 percent. Bruno said economy hotels are the most exposed to stressed consumers: each 1 percent rise in credit card delinquencies has been associated with a 40-basis-point decline. CoStar’s own summary says travel spending remains concentrated among higher-income households.

Five Things to Put in Your 2027 Budget This Month

1. Build the budget from expenses up, not from rate down. Set a cost-growth ceiling of about 3 percent and make every department show how it gets there.
2. Budget labor in hours per occupied room, not just dollars. The hotels in Actabl’s data paid 2.9 percent more per hour and still held cost per occupied room growth to 1.8 percent.
3. Shop your property insurance early, and read the liability form line by line. Ask your broker in writing what is excluded or sub-limited for assault and battery, trafficking and liquor, and what your umbrella limit actually is.
4. Model June and July 2027 separately if you are in or near a World Cup host market, and move Easter into March.
5. Put your fee stack on one page. Royalty, marketing, loyalty, reservation and management fees together. Compare yours with the brand averages in our free franchise fee spreadsheet.

The Bottom Line

The forecasters gave the industry a calm number for 2027, and calm is better than the alternative. But 2.1 percent is a revenue number, and owners do not deposit revenue. With rate expected to trail inflation and the liability market still hardening, the hotels that grow profit next year will be the ones that win on cost, not the ones that wait for rate to rescue them. HVS put it plainly last December: “rate will not carry the 2026 budget.” It will not carry 2027’s either.

Sources and further reading

• U.S. Hotel Forecast Assumptions, August 2026 — CoStar via Hospitality Net, 2026-08-11
• HDC 2026: What the New Hotel Forecast Means for 2027 Budget — HotelData.com, 2026-08-11
• U.S. Hotel Outlook for 2027 Points to Moderate Growth Amid Limited New Supply — Hotel News Resource, 2026-09-01
• U.S. Real Estate Market Outlook Midyear Review 2026: Hotels — CBRE, 2026
• U.S. hotel forecast 2027 RevPAR outlook — DSH Hotel Advisors (CoStar News), 2026-08-12
• Profitability Under Pressure — Lodging, 2026-05-26
• What to watch in 2026: hotel owners will be laser focused on operating margins — CoStar, 2026-01-02
• Q1 2026 Hotel Labor Costs Report — HotelData.com, 2026-06-11
• Hospitality insurance market — Insurance Journal, 2026-09-07
• Real Estate and Hospitality Market Update, February 2026 — Lockton, 2026-02
• Hotel Profitability in Transition — HVS, 2025-12-19