Hotel returns shift from occupancy to room rates across five markets

Five eFinancialModels Hospitality Market Studies on the United States, France, Italy, Japan and the United Arab Emirates say hotel growth is now being driven by room rates rather than room volume. The reports point to different forces in each market, from regulation and taxes to currency and event demand, which is reshaping revenue forecasts and exit assumptions.

Why it matters: - Hotel underwriting is getting more market-specific as room-rate growth, not occupancy, drives returns in five major markets. - The studies say investors cannot use one global exit cap rate or one revenue assumption across the United States, France, Italy, Japan and the United Arab Emirates. - The reports also tie rate growth to different constraints in each market, which changes occupancy paths, labor costs and expected exits.

What happened: - eFinancialModels released five Hospitality Market Studies covering the United States, France, Italy, Japan and the United Arab Emirates. - The studies say hotel growth has shifted from filling rooms to pricing them. - In the United States, 2025 brought the first occupancy and RevPAR decline since 2020. - The U.S. market posted about 62.3% occupancy, ADR near $160.54 and RevPAR near $100.02. - U.S. labor cost per occupied room rose about 12.8%. - The USA Hospitality Market Study forecasts 2026 RevPAR growth of roughly 0.6% to 0.9%, led by rate rather than occupancy. - In Paris, Milan, Tokyo and Dubai, the studies say the same mechanism is playing out at record levels.

The details: - In France, the Loi Le Meur short-term-rental law constrains the rental substitute, while planning and energy rules limit new supply. - Paris luxury RevPAR rose about 6% in the first half of 2025. - State-certified Palace properties in France increased from 16 in 2015 to 33 in 2026. - The France study treats new supply as a policy variable rather than a construction variable. - In Italy, Milan is posting record rates ahead of the Milano-Cortina 2026 Olympics. - Rome RevPAR sits near 183 euros, which ranks fourth in Europe. - Italy's neo-resident flat tax rises to 300,000 euros for 2026, which is drawing relocating wealth. - Italy's CIN registration regime constrains short-term rentals. - In Japan, Tokyo rates have risen more than 20% for 19 straight months. - Weak yen conditions and a 60 million visitor target for 2030 are supporting Tokyo pricing. - Kyoto's tenfold accommodation-tax increase and tighter minpaku rules raise costs and reduce the home-sharing substitute. - Prime Tokyo hotel yields sit near 3.0% to 3.5%, the tightest among the five markets. - In the UAE, Dubai ran about 80.7% occupancy in 2025. - Dubai full-year ADR was near AED 730, while December ADR reached near AED 1,042. - The Dubai pricing pattern reflects resort assets that follow a steep winter-peak curve. - Dubai supply is still growing about 5.6% a year. - Luxury properties make up about 61% of new 2026 supply in Dubai. - The UAE study uses seasonal ADR and occupancy paths rather than annual averages. - In the United States, the extended-stay segment protects margin through lower labor intensity rather than higher rate. - Extended-stay hotels run about 1.30 labor hours per occupied room, versus 1.80 for full-service properties. - Extended-stay gross operating margin is about 46%, compared with 28% for full-service hotels. - The U.S. extended-stay segment now has more than 611,000 rooms and accounts for about 40% of the construction pipeline by project count.

Between the lines: - The studies show that