The signals beneath the headlines

Bellwether one: the market Is quietly hardening into a barbell

One of the most consequential changes since early autumn is not a surge or collapse in transaction volume, but a growing dispersion of outcomes.

In October, conversations across the industry shared a common tone: caution. Forecasts softened. Operators acknowledged margin pressure. Investors voiced frustration with persistent bid-ask gaps. The prevailing question was whether capital would meaningfully re-engage at all.

As the weeks progressed, capital did return—but selectively.

At one end of the spectrum, trophy and strategically irreplaceable assets continued to trade, often at headline-grabbing absolute values. High-profile luxury and upper-upscale transactions in New York and other global gateway markets demonstrated that institutional and long-term capital remains comfortable underwriting assets with scarcity, global demand drivers, and multi-cycle relevance. Similar conviction was evident in resort and land-based transactions tied to iconic destinations.

“These aren’t yield trades,” one global hotel investor told us privately this fall. “They’re control and duration trades. You’re buying something you simply can’t replicate.”

At the opposite end of the market, pricing pressure became unmistakable. Properties in secondary or structurally challenged markets changed hands at steep discounts to prior valuations. In several cases, sales were driven less by operational distress than by the cumulative impact of higher interest rates, looming capital expenditure requirements, and limited refinancing options.

What quietly eroded was the middle.

Hotels that are neither exceptional nor deeply discounted—solid assets in “good but not great” markets—found fewer clean exits. Capital remained available, but only with stricter terms: lower leverage, interest-only periods, shorter maturities, or more complex capital stacks. Private credit filled gaps that traditional lenders were unwilling to bridge.

This is the defining characteristic of a barbell market:

• On one side, assets capital actively pursues.
• On the other, assets that clear only after significant repricing.
• In between, assets that struggle to transact at all.

Public market behavior reinforced the same message. Even as major hotel companies posted resilient quarterly results, forward guidance remained cautious. Equity markets rewarded discipline and clarity, not broad optimism.

Why this matters for 2026

As the industry heads into 2026, this barbell structure suggests a market where price discovery continues without broad price recovery. Transaction activity may increase, but average pricing will mask sharp divergence beneath the surface.

Owners with truly differentiated assets will retain optionality. Owners in the middle will face increasingly strategic decisions around reinvestment, repositioning, recapitalization, or exit. For investors, portfolio construction and asset selection will matter more than macro timing.

The bellwether is not any single deal. It is the widening gap between what capital embraces and what it discounts. That gap has grown steadily over the past several months—and there is little evidence it will narrow in the year ahead.

Bellwether two: supply is expanding without looking like supply

Traditional discussions of hotel supply tend to focus on cranes, construction starts, and pipeline counts. By those measures, new supply entering 2026 appears relatively restrained. Ground-up development remains challenged by high construction costs, longer timelines, and limited financing availability.

And yet, competitive pressure across many markets tells a different story.

The explanation lies in how supply is being created.

Over the past several months, a steady drumbeat of conversion, re-flagging, and adaptive reuse activity has unfolded across geographies and segments. Office buildings are becoming hotels. Aging properties are reintroduced under new brands. Independent assets align with collections. Lifestyle concepts absorb existing real estate and present it to consumers as something new.

From a physical standpoint, these projects may not always register as “new supply.” From a competitive standpoint, they absolutely do.

“To the guest, these rooms are new,” one revenue executive at a national management company observed recently. “To the comp set, they’re disruptive. And they arrive a lot faster than a ground-up build.”

Brands are not passive participants in this shift. Conversion-friendly platforms, soft brands, and curated collections have become central to growth strategies. They allow brands to expand keys, refresh product, and deploy distribution systems quickly—without waiting for construction financing to normalize.

This is particularly evident in urban cores and mature leisure markets, where adaptive reuse offers a faster and often more economical path to growth. Large civic or convention-center hotels still move forward, but they stand out precisely because they are exceptions rather than the prevailing model.

Why this matters for 2026

The implication for 2026 is subtle but significant: some markets will feel oversupplied even when traditional pipeline data suggests discipline.

Owners who rely solely on construction metrics may underestimate competitive intensity. Revenue managers may encounter pricing resistance sooner than expected. Investors may be surprised when stabilized assets face new competition without visible development nearby.

In effect, the industry is adding supply through identity change rather than physical expansion.

This dynamic also reinforces the barbell effect. Assets capable of successful repositioning gain renewed relevance. Assets that cannot—due to layout, location, or capital constraints—risk falling behind more quickly than anticipated.

Bellwether three: control of distribution is being repriced as a core asset

The third bellwether has little to do with bricks and mortar at all.

Over the past several months, brand behavior has reflected a growing recognition that distribution, loyalty, and control over the guest relationship are fundamental drivers of value, not secondary considerations.

This shift appears in multiple forms.

Brands have become more selective about partnerships. Relationships that once promised rapid expansion or alternative accommodation exposure are being reassessed or unwound. While often framed as isolated strategic decisions, these moves point to a broader recalibration around operational risk, experience consistency, and reputational control.

At the same time, investment in loyalty ecosystems continues to deepen. Earnings commentary consistently highlights the stabilizing influence of loyalty members, the durability of system contribution, and the growing importance of non-room revenue streams tied to brand platforms.

“Demand volatility changes the math,” one senior brand executive noted recently. “If you don’t control the customer relationship, you don’t control your downside.”

Brands are also leaning more heavily into curated collections and lifestyle portfolios. These structures allow flexibility while preserving standards, data ownership, and distribution economics. Growth is no longer just about adding keys; it is about strengthening the ecosystem.

The common thread is control.

In a higher-cost, more volatile operating environment, the ability to reliably generate demand and manage the guest relationship has become central to valuation. Distribution is no longer merely a marketing function. It is an asset in its own right.

Why this matters for 2026

For owners, affiliation decisions in 2026 will carry greater strategic weight. The question will not simply be “Which brand?” but “Which platform?” Owners will need to evaluate distribution effectiveness, loyalty economics, fee structures, and long-term flexibility.

For independent operators and hybrid models, the environment becomes more challenging. Those with clear differentiation or strong niche demand can thrive. Those operating in the gray space between independence and brand affiliation may find the ground shifting beneath them as brands tighten ecosystems and guests gravitate toward trusted platforms.

What these bellwethers suggest as the industry looks ahead

Viewed individually, none of these signals is dramatic. Viewed together, they suggest an industry entering a more disciplined, more polarized, and more platform-driven phase.

In 2026:

• Differentiation will matter more than timing.
• Repositioning will matter more than expansion.
• Platform strength will matter more than flag recognition alone.

Transaction activity may increase, but outcomes will diverge. Supply may appear constrained, yet competition will intensify. Demand may stabilize, but margin pressure will persist. The winners will be those who understand where they sit within this emerging structure—and act accordingly.

As the year draws to a close, the headlines may blur together. But the signals beneath them are sharpening. Those signals suggest that the next phase of the lodging cycle will reward clarity, discipline, and strategic intent more than optimism alone.

For those who spend their time listening carefully across markets, capital sources, and operating platforms, the message is already clear: the industry is moving. The question is whether decisions made in the coming year will reflect where it is going, or where it has already been.

By Bryan Younge
Managing Partner, Horwath HTL US