Will Hospitality Franchises Remain Profitable in 2026?

Listen to the post 17 minutes This audio is auto-generated. Please let us know if you have feedback. Following a year of broad economic uncertainty that stifled development for hotels, hospitality market leaders are looking toward 2026 with mindful optimism. Rising functional expenses are slated to challenge owners this year and lower-tier sectors might struggle amid a growing wealth bifurcation.

And through it all, hotel companies are expected to strengthen their portfolios with new brand offerings and partnerships. As the year gets underway, Hotel Dive talked with hospitality leaders from differing corners of the industry about their 2026 predictions. Below are the leading trends expected to impact hotel operations, efficiency, net unit growth and more this year.

Overall incomes, salaries and advantages paid by U.S. hotels rose to $127 billion in 2025, according to data 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 present a difficulty to net operating income development, Kevin Davis, Americas CEO at JLL Hotels & Hospitality, told Hotel Dive.

Will Hospitality Franchises Be Profitable in 2026?

"It is an outright issue." Rising labor costs have been a challenge for hoteliers for many years, Davis said, especially following the COVID-19 pandemic. In general, hotel labor expenses have actually increased 15.3% from 2019 to 2025, exceeding the 12.8% development in total operating profits, according to AHLA. Over the last few years, thousands of union hotel employees have gone on strike demanding greater incomes in order to keep up with the rising cost of living in locations such as California, Hawaii and Las Vegas.

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

In 2015, the union backed New york city City's freshly elected Mayor Zorhan Mamdani, who ran on a promise to raise New York City's base pay to $30 per hour by 2030. Hotel market associations, consisting of AHLA, have knocked comparable legislation across the country, including the just recently passed $30 wage regulation in Los Angeles. "Need has actually not kept up with this rate," she said. "We're likewise seeing these obstacles compounded 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 soaring, the math just does not accumulate." Wages, salaries and payroll-related expenses paid by hotels now represent more than 32% of overall profits, according to AHLA.

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As more hotel visitors turn to artificial intelligence to improve their travel experience, booking hotels directly through large language designs (LLMs) may be next, hospitality experts said. Agentic commerce a process 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 Holiday Outlook report, 76% of millennials stated they're most likely to utilize AI for travel suggestions. A smaller sized percentage (57%) stated they 'd be most likely to utilize it for booking travel. However that number is growing, Jonathan Kletzel, PwC's travel, transportation and logistics leader, informed Hotel Dive. "The number of consumers that are searching [through LLMs] for product or services in travel has ballooned in the last 12 months and is speeding up every day," Kletzel stated, including that undoubtedly, hotels will "take a difficult look at how they can allow commerce and transactions through agentic [AI]"" [Brands] can construct on the trust they currently have if they do a terrific job with how they deal with AI in 2026." Michael Klein Head of retail, travel and hospitality product marketing at Talkdesk To stay competitive with direct reservation, larger multibrand hotel business will "embed LLMs into their own brand name sites and mobile apps, and change the way the customer searches," Kletzel said.

"If you are not discoverable in an LLM search engine result which numerous brand names aren't, and this is the huge panic that they're all going through right now customers aren't going to consider you," he said. Michael Klein, head of retail, travel and hospitality item marketing at AI consumer experience platform Talkdesk, similarly informed Hotel Dive that hospitality players need to guarantee their home info is being indexed by LLMs to appear in tourist inquiries.