CEO Perspective: How the Improved Forecast Should Shape Your 2027 Budget

The outlook for the U.S. hotel industry just got considerably brighter.

At the Hotel Data Conference, STR and Tourism Economics raised their 2026 forecast to 4.4% RevPAR growth, driven by a 3.1% increase in ADR and 1.7% demand growth. The outlook for 2027 improved as well, with RevPAR now expected to grow 2.1% on a combination of 1.6% ADR growth and 1.1% demand growth.

Perhaps the most encouraging signal came from STR President Amanda Hite, who said revenue growth has outpaced expense growth every month since March – an inflection point the industry had not seen in more than a year. STR now expects gross operating profit to increase 4% in 2026 and another 1% in 2027.

After an extended period of rising costs and uneven demand, hotel owners and operators finally have some positive momentum behind them.

But as budgeting season gets underway, the question is: What do these national trends mean for your 2027 plan?

Use industry forecasts as a guide

STR’s forecasts give hotel leaders an informed baseline for understanding where the industry is headed broadly and which forces are likely to shape performance. But no hotel operates in the aggregate.

Results will vary considerably by market, chain scale and demand segment. Luxury hotels are expected to produce some of the strongest rate growth in 2026, while RevPAR growth at midscale and economy hotels is being driven primarily by demand. World Cup host markets experienced significant rate premiums that will create difficult year-over-year comparisons next summer.

That means the national forecast should help steer your direction – not dictate your budget.

Before applying an industry growth rate to next year’s plan, look closely at what is happening within your own portfolio. How have your hotels performed so far in 2026? How are your individual markets trending? Are your hotels seeing the same rate and demand trends reflected in the national data?

The answers should provide the real foundation for your 2027 budget.

Connect your financial and demand forecasts

Let's start with an important distinction that I often hear hoteliers misunderstand – the difference between financial forecasting and demand forecasting. They serve different purposes, but each should inform the other.

Hospitality budgeting typically begins in the finance department with historical operating results. Those results provide a baseline that leadership teams can adjust based on anticipated changes to revenue, labor, operating costs and capital priorities.

A strong budget also requires a bottom-up perspective from the people closest to each hotel and market. General managers and directors of sales can provide context that financial statements cannot. They may see opportunities to operate with fewer staff in specific areas, identify a need for increased marketing or distribution spending, or anticipate changes in local accounts.

Once that initial baseline is established, begin layering in more real-time and forward-looking information. Incorporate on-the-books data from the PMS, then work with the commercial team to understand the demand forecast for each property.

That forecast should account for pace and pickup trends, local event calendars, market benchmarking, web-shopping behavior and other indicators of future demand.

The demand forecast should shape the financial forecast. If pace is softening, the budget may need to reflect additional marketing investment or more conservative rate assumptions. If compression dates and group demand are strengthening, the hotel may have an opportunity to push rate, adjust staffing plans or capture more ancillary revenue.

The relationship works in the other direction, too. Financial targets can help commercial teams understand how much demand must be generated, which segments offer the greatest opportunity and where pricing or distribution strategies may need to change.

Build one plan across the organization

The challenge for many hotel companies is that the people contributing to the budget are often working in different systems, spreadsheets and versions of the plan.

Finance may be building the operating budget while revenue leaders update demand forecasts, property teams submit departmental assumptions and executives review portfolio targets.

This is where shared visibility becomes critical.

Modern budgeting software gives finance, operations and commercial teams a single baseline version of the budget where they can collaborate, communicate and incorporate new information as conditions change. Instead of treating the annual budget as a static finance exercise, hotel companies can build a connected plan informed by historical performance, property-level knowledge and forward-looking demand data.

The improved outlook should give hotel leaders confidence heading into budgeting season, but optimism alone is not a strategy. Use the national forecast as your guide, and use the data from your hotels and markets to build the plan. Then bring finance, operations and commercial leaders together around one version of what 2027 can look like.

As you get started and as your budgeting process progresses, review Otelier’s Hotel Budgeting Timeline for a step-by-step guide to the annual planning process and the key milestones your team should be working toward.