Hotel returns shift from occupancy to rate across five markets

eFinancialModels says hotel performance in the U.S., France, Italy, Japan and the UAE is being driven by room rates rather than room volume, but for different reasons in each market. The studies point to tighter supply, policy changes, currency moves and event demand as the key variables investors need to model market by market.

Why it matters: - Hotel investors can no longer rely on one global pricing assumption for the sector. - The five market studies show that room-rate growth now drives returns in different ways across the U.S., France, Italy, Japan and the UAE. - The spread in occupancy paths, labor costs and exit cap rates changes how hotels should be valued.

What happened: - eFinancialModels released five hospitality market studies covering the United States, France, Italy, Japan and the United Arab Emirates. - The studies say each market’s headline hotel segment is growing on rate, not on occupancy. - The U.S. is showing rate-led growth after 2025 posted the first occupancy and RevPAR decline since 2020. - Paris, Milan, Tokyo and Dubai are also relying on rate growth, but at record levels.

The details: - In the U.S., 2025 occupancy was about 62.3%, ADR was near $160.54 and RevPAR was 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. - In France, the Loi Le Meur short-term-rental law constrains substitute supply, while planning and energy rules limit new hotel development. - 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. - 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. - The CIN registration regime is constraining short-term rentals in Italy. - In Japan, Tokyo rates have risen more than 20% for 19 straight months. - The move is being pushed by a weak yen and Japan’s 60 million visitor target for 2030. - Kyoto’s tenfold accommodation-tax increase and tighter minpaku rules are adding cost and removing the home-sharing substitute. - Prime Tokyo hotel yields sit near 3.0% to 3.5%, the tightest of the five markets. - In the UAE, Dubai ran about 80.7% occupancy in 2025. - Dubai’s full-year ADR was near AED 730, and December ADR was near AED 1,042. - Resort assets in Dubai price on a steep winter-peak curve. - Dubai supply still grows about 5.6% a year. - Luxury assets 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 U.S. extended-stay segment, labor use runs about 1.30 hours per occupied room versus 1.80 for full-service hotels. - Extended-stay gross operating margin is about 46%, compared with 28% for full-service hotels. - The U.S. extended-stay segment now holds more than 611,000 rooms and about 40% of the construction pipeline by project count. - Four of the five studies price their markets against sovereign benchmarks. - Prime yields run near 3.0% to 3.5% in Tokyo against Japanese government bonds. - Prime yields run about 3.8% net in Milan and 4.3% net in Rome against Italian BTPs. - Prime yields run roughly 4.75% to 5.25% in Paris against French OATs. - U.S. hotel cap rates sit near 10% against a 10-year Treasury near 4%. - The UAE study sets prime resort assets at an indicative gross 4% to 5% against an investor target near 8% to 9%.

Between the lines: - The studies suggest hotel pricing power is increasingly driven by local constraints and demand drivers rather than a single global cycle. - France and Italy lean more on regulation and event demand. - Japan’s case is tied to currency and tourism goals. - Dubai’s model is more seasonal, with resort mix and winter pricing doing the work. - The U.S. looks more exposed to flat volume and rising labor costs, which makes rate growth harder to generate.

What's next: - eFinancialModels says all five hospitality studies can be downloaded free of charge. - The company says the assumptions can be applied directly in its hotel financial model templates. - The series also covers Spain, Thailand and the Maldives. - Forward-looking figures for 2026 to 2031 are Base Case projections in each study.

The bottom line: - Hotel investors need market-specific assumptions, not a single sector-wide model, because rate-led growth now depends on different local forces in each market.