The Pricing-Power Divide: Why Luxury Is Leading the US Hotel Recovery

The H1 Hotel Profitability Report by HotelData.com showed ADR increased by 7.1%, RevPAR by 8.9%, and TRevPAR by 9.2% year over year. Occupancy also rose 1.1 percentage points.

Those are healthy numbers. But pull the data apart by chain scale, and a much more consequential trend emerges. Luxury hotels increased ADR by 10.1% while simultaneously raising occupancy by 3.4 percentage points. RevPAR climbed 15.9%, and TRevPAR increased 15.1%. Economy hotels also attracted more demand. In fact, occupancy increased by 4.6 points, more than in any other chain scale in the sample. Yet Economy ADR fell -9.3%. The result was a -2.7% decline in RevPAR and a -1.5% decline in TRevPAR.

This is not simply a story about who is traveling and who is staying home. Both groups of consumers are traveling. It is a story about pricing power.

Luxury is getting both rate and volume

Hotels often face a trade-off between price and occupancy. Raise rates too aggressively, and demand can weaken. Discount too heavily, and hotels may fill rooms without generating sufficient revenue or profit.

Luxury hotels largely escaped that trade-off during H1. ADR increased from $302.97 to $333.49, while occupancy rose from 64.1% to 67.5%. RevPAR consequently increased from $194.28 to $225.27. The pattern became even stronger in Q2. Luxury ADR increased 12.6% year over year, while RevPAR jumped 18.4%.

That is not a normal rate-volume relationship. It suggests demand among higher-spending travelers remains resilient enough to absorb substantial price increases.

The wider market supports that conclusion. STR and Tourism Economics said in their August outlook that US travel spending and RevPAR growth remain concentrated at the higher end of the income ladder. Households earning $200,000 or more account for roughly 25% of travel spending despite representing only 11% of households. STR expects Luxury chains to achieve double-digit RevPAR growth in both Q2 and Q3, with full-year Luxury ADR growth forecast at 5.9%.

That concentration of spending power matters. Luxury hotels are not simply benefiting from more travelers. They are benefiting from guests with greater capacity to absorb price increases and spend beyond the room.

The HotelData.com TRevPAR numbers reinforce the point. Luxury TRevPAR increased 15.1% during H1, suggesting the revenue opportunity extended into F&B, amenities, and other ancillary spend.

Economy’s problem was not demand

At the other end of the market, Economy occupancy increased from 63.9% to 68.5% during H1. Demand was there, but ADR fell from $120.34 to $109.11.

That distinction is important because high occupancy can create the appearance of commercial strength while concealing weaker revenue quality. Economy hotels sold more rooms, but at prices that left H1 RevPAR and TRevPAR below 2025 levels.

The picture did improve as the half progressed. In Q2, the ADR decline narrowed to 4.9%, occupancy increased 5.7 points, and RevPAR returned to 3.3% growth.

That is a meaningful recovery. But it remained a volume-led recovery, rather than the combination of price and volume seen in Luxury.

STR is seeing a similar dynamic. Its August outlook says RevPAR gains among Midscale and Economy hotels are being driven primarily by stronger demand, while financial pressure on consumers continues to limit consistent rate growth at the lower chain scales.

The K shape is becoming a pricing-power curve

The hotel industry has spent several years discussing a K-shaped consumer economy. That description remains useful, but hotel leaders may need to think about it differently.

The data does not show one group traveling while another disappears from the market. Instead, it shows consumers traveling with very different levels of price tolerance.

• At the top of the market, travelers are accepting higher room rates while continuing to support occupancy and ancillary spend.

• At the lower end, travelers are still filling rooms, but rate appears to play a much larger role in stimulating that demand.

Luxury operators should resist the temptation to judge pricing against historical norms alone. When demand supports higher rates, the cost of underpricing inventory can be considerable. Compression dates, event periods, premium room types, packages, and high-value ancillary experiences all need to be managed with that in mind.

Economy operators face a different challenge. The goal is not simply to increase occupancy. It is to understand the rate at which incremental demand remains profitable.

More occupied rooms bring additional variable costs. Housekeeping, breakfast, utilities, distribution, and labor all rise with volume. A busier hotel does not automatically produce a stronger bottom line.

The recovery is stronger, but it is not uniform

STR and Tourism Economics upgraded their US hotel forecast in August after the industry sold a record number of room nights during the first half, 11.4 million more than in 2025. Room revenue increased by more than $5.4 billion. That is an encouraging backdrop.

But national averages will become less useful if the economics of different travelers continue to diverge.

Hotel leaders need to understand not only whether demand is growing, but what kind of demand is growing, what that customer will pay, and how much profitable revenue the hotel can capture from each stay. Profitability remains locked to productivity.

Read the full report: https://hoteldata.com/reports/h1-2026-profit-report/