HVS U.S. Market Pulse: March 2026 - By Rod Clough

Why It Matters

Higher RevPAR and declining cap rates improve hotel asset valuations, prompting renewed investor interest and reshaping financing strategies across the hospitality sector.

Key Takeaways

• RevPAR up 3.9% in trailing 28‑day period
• Luxury segment posts strongest RevPAR gains
• Average cap rates expected near 8‑8.5% in 2026
• Discount rates hover 10‑11% for most markets
• Transaction volume modestly increasing after rate declines

Pulse Analysis

The latest HVS pulse underscores a resilient U.S. hospitality market that is defying macro‑headwinds. While inflation and geopolitical tensions have pressured consumer confidence, travel demand remains robust, driving RevPAR growth across all hotel classes. Luxury properties are capitalizing on higher discretionary spending, but even economy and midscale hotels benefit from improved occupancy, suggesting a broad‑based recovery rather than a niche rebound. This trend aligns with STR data showing a 3.9% RevPAR increase in the trailing 28‑day window, signaling that the sector’s fundamentals are strengthening.

From an investment perspective, the declining average cap rates—projected to hover between 8.0% and 8.5% for stabilized assets—signal tighter pricing and higher valuations. Lower cap rates typically reflect investor confidence and an expectation of stable cash flows, yet they also compress yields for new entrants. Discount rates remain in the 10%‑11% band, with premium pricing for gateway and luxury markets. Savvy investors will scrutinize exit cap assumptions, especially for assets in low‑barrier markets where a 6%‑7% exit cap could indicate overvaluation. The modest uptick in transaction volume suggests that the market is gradually rebalancing as interest‑rate pressures ease.

Looking ahead, special events such as the FIFA World Cup and a revitalized convention calendar are poised to boost ADRs further, while improved economic certainty could lift corporate travel budgets. However, lingering risks—continued oil price volatility, potential escalation of the Middle‑Eastern conflict, and funding gaps for TSA—could temper growth. Stakeholders should monitor these variables closely, balancing optimism about demand with disciplined valuation metrics to navigate the evolving hospitality landscape.