Hotel investors need to prioritize returns over wish lists as the industry prepares for a slowdown in growth through 2027. Justin Jabara, president of Meyer Jabara Hotels, outlines a strategy for the coming years that emphasizes disciplined operations and purposeful capital deployment. The company will celebrate its 50th anniversary in 2027, a milestone that provides a long-term perspective on the cyclical nature of the hospitality business.
Growth is expected to normalize
Performance has been strong recently, driven by leisure and business travel, as well as events like the World Cup. The latest forecasts from STR and Tourism Economics predict U.S. RevPAR to increase 4.4% in 2026, supported by a 1.7% rise in demand and 3.1% growth in average daily rates. However, the outlook for 2027 suggests a more normalized environment. STR expects RevPAR growth to slow to 2.1% with ADR increasing 1.6% and demand growing 1.1%. This lower-growth environment makes operational execution and capital discipline even more critical for owners.
Owners must avoid building 2027 expectations based on 2026’s record performance. Business travel has strengthened, and the industry sold a record number of room nights during the first half of 2026, up 11.4 million from the same period in 2025. Recent data shows this momentum did not disappear after the World Cup. U.S. hotel RevPAR increased 6.2% year over year for the week ending August 15, marking the 19th consecutive week of growth. The message for owners is to budget carefully and understand what drove their property’s 2026 results. A full-service hotel dependent on group business faces a different opportunity than a select-service property driven by corporate transient demand or leisure travelers.
Capital budgets require a clear purpose
Capital expenditures should answer specific questions to justify their inclusion in a budget. Every significant expense must protect assets, improve guest experiences, lower operating costs, or create additional revenue. Some investments are unavoidable, such as roofs, HVAC systems, and life-safety systems. Deferring these projects may help today’s cash flow but creates a larger expense later. Other investments should be evaluated through the guest’s eyes. If guestrooms or public spaces prevent a hotel from competing effectively, postponing investment can eventually affect rates, reviews, and market share.
Read Also: Integrated resorts raising the bar for MENA tourism
Owners should also consider growth-oriented CapEx. Underutilized space can become a revenue-producing venue, and energy-management systems can lower utility expenses. Technology may reduce repetitive work, and a renovation might reposition a property to support a higher ADR. These are the issues reflected in the agenda for The Lodging Conference in October, which includes sessions on proactive CapEx, managing renovations, and using design to drive ROI. The goal is to ensure capital works harder in 2027.
Financing is selective but available
The lending environment is evolving, but financing remains available. According to JLL’s 2026 Global Hotel Investment Outlook, U.S. hotel debt liquidity improved in 2025, with $64 billion in originations. Banks, debt funds, and CMBS lenders remain active, and approximately $88 billion in hotel loans are scheduled to mature through 2027. This creates pressure and opportunity for owners. Those facing refinancing while also confronting a property improvement plan or major renovation need a credible plan.
Lenders want to understand not only what a property is worth today, but how it will perform tomorrow. That makes the operating story critical. Owners need to define the hotel’s competitive position, the drivers of demand, and where margins can improve. They must also articulate what capital is required and how that investment will affect performance. The operator needs to be part of these conversations to help build a convincing narrative for lenders.
Focus on profitability, not just RevPAR
Owners should move beyond RevPAR and focus on profitability and asset value. STR expects hotel expenses to grow faster than revenues, which creates continued margin pressure. In a lower-growth environment, owners need to think in terms of Total Revenue Per Available Room, or TRevPAR. This metric looks at how effectively a property monetizes the entire guest relationship, including food and beverage, parking, meeting and event spending, and other offerings.
Read Also: Middle East hotels adapt to evolving traveler demands
A guest’s economic value extends beyond the room rate. Capturing more of this spending becomes just as important as pushing room rates. Ancillary revenue requires an operational discipline, not just an opportunity. Hotels should identify products and services guests value, price them appropriately, and ensure they are easy to purchase. Staff must be trained to offer them naturally, and every legitimate charge must be consistently captured and collected. Small amounts of revenue leakage across thousands of transactions add up to meaningful dollars over the course of a year.
Operational precision drives margins
Rising costs across food, beverages, labor, supplies, and utilities continue to challenge margins. In this environment, menu pricing cannot be a once-a-year exercise. Operators need to understand the true cost and contribution margin of what they sell. This means routinely evaluating purchasing, portion sizes, menu engineering, waste, labor, pricing, and product mix. The goal is to price intelligently and protect profitability without compromising quality or experience.
If RevPAR growth moderates to roughly 2% next year, owners must ask how to make profit grow faster than revenue. This requires looking everywhere: labor productivity, procurement, energy consumption, distribution costs, revenue management, food and beverage, ancillary revenue, technology, and AI. There may not be one initiative that transforms profitability on its own. The opportunity is often found in disciplined improvements across the entire operation. Technology investments should be evaluated with the same rigor as any other capital expenditure. Owners should not buy new systems simply because they are available. They must ask what revenue they generate, what expense they reduce, and what guest friction they eliminate. If the answer is unclear, the investment should be questioned.
