Can Hospitality Franchises Remain Lucrative in 2026?

Listen to the article 17 min This audio is auto-generated. Please let us know if you have feedback. Following a year of broad economic uncertainty that suppressed growth for hotels, hospitality industry leaders are looking towards 2026 with mindful optimism. Rising functional costs are slated to challenge owners this year and lower-tier sections could struggle in the middle of a growing wealth bifurcation.

And through it all, hotel companies are anticipated to fortify their portfolios with brand-new brand offerings and partnerships. As the year gets underway, Hotel Dive consulted with hospitality leaders from differing corners of the market about their 2026 forecasts. Below are the leading patterns expected to impact hotel operations, efficiency, net system growth and more this year.

Total salaries, earnings and benefits paid by U.S. hotels rose to $127 billion in 2025, according to information from the American Hotel & Accommodations Association, shared with Hotel Dive. In 2026, that figure is projected to reach $131 billion, representing a roughly 3% year-over-year boost, per AHLA. For hotel owners, increasing labor costs posture an obstacle to net operating income growth, Kevin Davis, Americas CEO at JLL Hotels & Hospitality, informed Hotel Dive.

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Rising labor expenses have been an obstacle for hoteliers for years, Davis said, particularly following the COVID-19 pandemic. Overall, hotel labor costs have increased 15.3% from 2019 to 2025, outpacing the 12.8% growth in total operating profits, according to AHLA.

3, 2024 in San Francisco, California. Justin Sullivan by means of Getty Images In 2026, Davis kept in mind, union negotiations will be "front and center" in New york city City, where the New York Hotel and Video gaming Trades Council's union agreement with the Hotel Association of New York City is set to expire in July.

Last year, the union backed New york city City's recently elected Mayor Zorhan Mamdani, who ran on a promise to raise New York City's minimum wage to $30 per hour by 2030. Hotel industry associations, including AHLA, have actually denounced comparable legislation throughout the nation, including the recently passed $30 wage regulation in Los Angeles. "Need has not kept up with this pace," she said. Incomes, salaries and payroll-related expenditures paid by hotels now account for more than 32% of overall earnings, according to AHLA.

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As more hotel visitors turn to expert system to improve their travel experience, reserving hotels directly through large language models (LLMs) may be next, hospitality specialists said. Agentic commerce a procedure by which self-governing AI representatives act upon behalf of a consumer to find, compare and complete purchases is a pattern that has accelerated across markets like retail.

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According to PwC's 2025 Vacation Outlook report, 76% of millennials stated they're most likely to utilize AI for travel recommendations. A smaller sized portion (57%) stated they 'd be likely to use it for scheduling travel. That number is growing, Jonathan Kletzel, PwC's travel, transport and logistics leader, informed Hotel Dive. "The variety of consumers that are browsing [via LLMs] for product or services in travel has actually ballooned in the last 12 months and is speeding up every day," Kletzel said, including that inevitably, hotels will "take a tough take a look at how they can allow commerce and transactions through agentic [AI]"" [Brands] can build on the trust they currently have if they do a fantastic job with how they handle AI in 2026." Michael Klein Head of retail, travel and hospitality product marketing at Talkdesk To remain competitive with direct booking, bigger multibrand hotel business will "embed LLMs into their own brand sites and mobile apps, and alter the method the consumer searches," Kletzel said.

"If you are not discoverable in an LLM search result which many brand names aren't, and this is the big panic that they're all going through today consumers aren't going to consider you," he stated. Michael Klein, head of retail, travel and hospitality product marketing at AI client experience platform Talkdesk, similarly told Hotel Dive that hospitality players require to ensure their property info is being indexed by LLMs to appear in tourist questions.