Optimism Is Back, But the Rules of Growth Are Changing

As the hospitality industry looks toward 2027, hotel conversions, artificial intelligence, and the value of third-party management are reshaping investment strategies

A noticeable sense of optimism filled Phoenix this month. After several years of navigating rising costs, financing challenges, and economic uncertainty, conversations at The Lodging Conference 2026 reflected an industry increasingly confident in its ability to grow. But that confidence comes with a few qualifications. 

Hotel owners, investors, lenders, and operators generally feel positive about business levels heading into 2027. Enthusiasm for conversions and repositioning is back, but appetite for ground-up development remains low because construction costs, financing requirements, and project feasibility still pose obstacles. 

What struck me most was that the industry no longer necessarily waits for perfect conditions. Instead, owners and operators are looking for smarter ways to grow within today’s market realities. Increasingly, that means maximizing existing assets, embracing emerging technologies, and finding operating partners who can turn opportunities into measurable results. 

One of the clearest messages from Phoenix was that conversions (particularly those involving soft brands) are driving much of the industry’s current growth and will likely continue to do so in 2027.

Developing a hotel from the ground up remains expensive. Between land acquisition, construction costs, financing, and the time required to bring a project to market, the economics simply don’t work for many developments. 

Conversions offer a different path. Owners can reposition an existing asset within a brand family, potentially gaining access to stronger distribution, loyalty programs, and marketing resources without assuming all the risks associated with new construction. Soft brands are particularly attractive because they allow properties to maintain their individuality while benefiting from the reach of a larger brand organization. 

Not every conversion makes financial sense. Owners still need to evaluate renovation requirements, market positioning, and return on investment. But the message was clear: Growth in 2027 may have less to do with building something new and more to do with unlocking the potential of what already exists. 

AI Is Changing How Travelers Choose Hotels

Not surprisingly, artificial intelligence dominated many conversations throughout the conference. What I found particularly interesting was how that discussion is evolving. 

For the past few years, much of the focus has been on using AI to improve operations, automate tasks, and create efficiencies. Those opportunities remain important, and robotics is another emerging area worth watching. 

But a bigger question is taking shape: How will consumers choose and book hotels in an AI-driven world? 

As travelers increasingly rely on AI-powered tools to research destinations, compare accommodations, and plan trips, traditional methods of hotel discovery could change significantly. That raises important questions about property visibility, distribution costs, and how AI-generated recommendations will influence booking decisions. 

There also was considerable discussion about the industry’s reliance on major hotel brands to help navigate this changing environment. Owners and operators will look to their brand partners for guidance on emerging distribution channels and strategies to protect their competitive positions. Meanwhile, management companies must evaluate where AI and robotics can deliver measurable operational value rather than simply adding another technology expense. 

Third-Party Management Is More Valuable Than Ever

Another recurring theme was the value experienced third-party management companies can bring to hotel ownership, particularly smaller owners who lack the resources of larger investment groups. Today’s operating environment is increasingly complex. Revenue management, digital marketing, labor optimization, technology integration, and financial reporting require specialized expertise. For owners with limited portfolios, building that infrastructure internally can be difficult and expensive. 

It is the responsibility of third-party management groups to help owners identify opportunities to increase revenue, control expenses, protect their assets, and make informed investment decisions. For those considering conversions, repositioning, or acquisitions, an experienced operating partner can provide valuable perspective before major financial commitments are made. 

The conversations in Phoenix reinforced something I’ve believed for years: Owners aren’t simply looking for someone to run their hotels. They want partners who can help them make better business decisions and create long-term value. 

Perhaps my biggest takeaway from The Lodging Conference is that our industry needs to be prepared to act when opportunities present themselves. We’ve spent several years discussing uncertainty, and those concerns haven’t disappeared. But there is strength in the broader economy and reason to be optimistic. We cannot allow caution to prevent us from pursuing growth when the data supports it. 

For owners and operators, that means identifying assets with untapped potential, evaluating conversions and acquisitions, and investing in technologies that improve performance. It also means recognizing that growth doesn’t always require adding another property. Sometimes the greatest opportunity lies in improving the profitability of the hotels we already manage. 

The mood in Phoenix was encouraging, but optimism alone doesn’t produce results. As we head into 2027, the most successful companies will balance financial discipline with a willingness to act. 

The industry has spent enough time talking about uncertainty. Now it’s time to recognize where opportunities exist and have the confidence to pursue them.

About the Author

Wayne West III is president of Newport Hospitality Group. He has spent more than four decades in hospitality and believes success never happens by accident. At Newport, he is the steady voice who’s tough when needed, loyal to his teams, and relentless about keeping performance on course. He grew up on the water and still finds his rhythm there, most often behind the wheel of a boat. Inside the company, he’s just as recognizable. The rock everyone leans on and the one famous for firing off early-morning texts that prove he’s already thinking three steps ahead.