RISING TIDES
Observations from the IMC Research Process

Full House – The K-Shaped Consumer Fills the Hotels

Despite fears of a slowing economy outside of the AI complex, hotel demand continues to surprise to the upside as affluent consumers keep traveling and global events amplify pricing power.

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• The Hospitality Acceleration. The hospitality sector is outperforming previous expectations, shifting from a period of cautious expectations to a more durable growth outlook. While parts of the economy show signs of cooling, a resilient upper-tier consumer and a wave of event-driven demand are injecting significant pricing power into existing properties, turning premium lodging into a structural growth play.
• The Inflection Point. Three forces are creating this new paradigm:

1. The Return of Corporate Margin: While leisure travel remains a core pillar, powering a recent blowout jobs report with a +70k surge in hospitality employment, the real margin story is the substantial rebound in higher-margin corporate and group bookings.
2. The Decade-Low Supply Squeeze: New hotel supply is expanding at just 0.4%, its lowest growth level in over ten years. With effectively zero new competition coming online, established players possess immense pricing power to sustain record Average Daily Rates (ADR).
3. The World Cup Tailwind: The FIFA World Cup 2026 across North America is providing an incremental demand boost, particularly in host markets where room rates and occupancy are already tightening.

• The Lodging Leaders. These dynamics are resetting growth expectations, with industry forecasters aggressively hiking 2026 RevPAR growth projections from a flat 0.6% to a robust 2.8%. The beneficiaries are the asset-light global brands and premium property owners positioned directly in this slipstream. Giants like Marriott International (MAR), Hilton Worldwide (HLT), and Hyatt Hotels (H) are capturing unmatched recurring royalty fees, while asset-heavy REITs like Host Hotels & Resorts (HST) are directly pocketing the immediate windfall from soaring room rates and a capacity-constrained market. Additionally, Melia Hotels (MEL SM) is gaining momentum, supported by accelerating RevPAR growth, double-digit forward bookings, and an expanding development pipeline that should drive growth into 2026.