Will Hospitality Franchises Remain Profitable in 2026?

Listen to the article 17 minutes This audio is auto-generated. Please let us know if you have feedback. Following a year of broad financial uncertainty that stifled development for hotels, hospitality market leaders are looking toward 2026 with careful optimism. Increasing functional costs are slated to challenge owners this year and lower-tier segments might struggle amidst a growing wealth bifurcation.

And through everything, hotel business are expected to strengthen their portfolios with brand-new brand name offerings and collaborations. As the year gets underway, Hotel Dive consulted with hospitality leaders from differing corners of the market about their 2026 predictions. Below are the leading trends expected to effect hotel operations, efficiency, net unit development and more this year.

Total wages, incomes and advantages paid by U.S. hotels rose to $127 billion in 2025, according to information from the American Hotel & Lodging Association, shared with Hotel Dive. In 2026, that figure is predicted to climb up to $131 billion, representing a roughly 3% year-over-year boost, per AHLA. For hotel owners, increasing labor costs posture a difficulty to net operating earnings growth, Kevin Davis, Americas CEO at JLL Hotels & Hospitality, told Hotel Dive.

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Rising labor expenses have been an obstacle for hoteliers for years, Davis stated, especially following the COVID-19 pandemic. In general, hotel labor costs have actually increased 15.3% from 2019 to 2025, outpacing the 12.8% development in total operating income, according to AHLA.

3, 2024 in San Francisco, California. Justin Sullivan by means of Getty Images In 2026, Davis noted, union settlements will be "front and center" in New York City, where the New York Hotel and Gaming Trades Council's union agreement with the Hotel Association of New York City City is set to end in July.

"Demand has actually not kept up with this rate," she stated. "We're also seeing these difficulties intensified by legislation that targets hotel operations, such as extreme labor and licensing policies like the New York City City Safe Hotels Act. When demand is falling and expenses are skyrocketing, the mathematics merely does not add up." Incomes, salaries and payroll-related costs paid by hotels now represent more than 32% of overall revenue, according to AHLA.

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As more hotel visitors turn to expert system to enhance their travel experience, scheduling hotels straight through large language models (LLMs) may be next, hospitality specialists said. Agentic commerce a procedure by which self-governing AI representatives act on behalf of a consumer to discover, compare and complete purchases is a trend that has actually accelerated across industries like retail.

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According to PwC's 2025 Vacation Outlook report, 76% of millennials stated they're most likely to use AI for travel recommendations. A smaller sized portion (57%) stated they 'd be likely to use it for reserving travel. But that number is growing, Jonathan Kletzel, PwC's travel, transport and logistics leader, informed Hotel Dive. "The number of consumers that are searching [by means of LLMs] for items and services in travel has swollen in the last 12 months and is speeding up every day," Kletzel said, adding that inevitably, hotels will "take a difficult take a look at how they can allow commerce and transactions through agentic [AI]"" [Brands] can construct on the trust they already have if they do a terrific task with how they manage AI in 2026." Michael Klein Head of retail, travel and hospitality item marketing at Talkdesk To stay competitive with direct booking, larger multibrand hotel business will "embed LLMs into their own brand name sites and mobile apps, and alter the method the consumer searches," Kletzel stated.

"If you are not visible in an LLM search engine result which lots of brand names aren't, and this is the huge panic that they're all going through today customers aren't going to consider you," he said. Michael Klein, head of retail, travel and hospitality item marketing at AI client experience platform Talkdesk, similarly informed Hotel Dive that hospitality gamers require to guarantee their property details is being indexed by LLMs to appear in traveler inquiries.