Will Hospitality Franchises Be Profitable in 2026?

Listen to the short article 17 minutes This audio is auto-generated. Please let us understand if you have feedback. Following a year of broad financial 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 could struggle amid a growing wealth bifurcation.

And through everything, hotel business are expected to strengthen their portfolios with brand-new brand name offerings and partnerships. As the year gets underway, Hotel Dive talked to hospitality leaders from differing corners of the industry about their 2026 predictions. Below are the top trends expected to impact hotel operations, performance, net system development and more this year.

Overall incomes, wages and benefits 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 projected to reach $131 billion, representing a roughly 3% year-over-year increase, per AHLA. For hotel owners, rising labor costs pose an obstacle to net operating earnings growth, Kevin Davis, Americas CEO at JLL Hotels & Hospitality, told Hotel Dive.

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Rising labor costs have been an obstacle for hoteliers for years, Davis stated, especially following the COVID-19 pandemic. Overall, hotel labor costs have increased 15.3% from 2019 to 2025, outmatching the 12.8% growth in total operating earnings, according to AHLA.

3, 2024 in San Francisco, California. Justin Sullivan via Getty Images In 2026, Davis kept in mind, union negotiations will be "front and center" in New York City, where the New York City Hotel and Video 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's newly elected Mayor Zorhan Mamdani, who ran on a pledge to raise New York City's minimum wage to $30 per hour by 2030. Hotel industry associations, including AHLA, have knocked similar legislation across the nation, including the recently passed $30 wage ordinance in Los Angeles. "Need has not kept up with this speed," she said. "We're also seeing these difficulties compounded by legislation that targets hotel operations, such as severe labor and licensing policies like the New York City Safe Hotels Act. When demand is falling and costs are soaring, the math merely doesn't accumulate." Salaries, wages and payroll-related costs paid by hotels now represent more than 32% of overall income, according to AHLA.

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As more hotel visitors turn to expert system to boost their travel experience, reserving hotels directly through large language models (LLMs) might be next, hospitality specialists said. Agentic commerce a process by which self-governing AI representatives act on behalf of a customer to find, compare and complete purchases is a trend that has sped up throughout industries like retail.

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According to PwC's 2025 Holiday Outlook report, 76% of millennials said they're likely to use AI for travel recommendations. A smaller percentage (57%) said they 'd be likely to use it for scheduling travel. That number is growing, Jonathan Kletzel, PwC's travel, transportation and logistics leader, informed Hotel Dive. "The variety of consumers that are searching [through LLMs] for items and services in travel has 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 make it possible for commerce and deals through agentic [AI]"" [Brands] can build on the trust they currently have if they do a great 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 reservation, bigger multibrand hotel companies 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 results page which numerous brands aren't, and this is the big panic that they're all going through today consumers aren't going to consider you," he said. Michael Klein, head of retail, travel and hospitality product marketing at AI customer experience platform Talkdesk, likewise informed Hotel Dive that hospitality players require to guarantee their residential or commercial property information is being indexed by LLMs to appear in traveler questions.