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The hidden signs of a hotel losing relevance

By Mark Knott and Joe Winters

The scene is reassuringly familiar. The lobby is busy. A line has formed at the coffee bar. Suitcases collect beside the front desk, and the restaurant is preparing for another full Saturday night. 

The hotel is operating. It may be meeting budget. 

But beneath that activity, the business may already be moving in the wrong direction. Revenue per available room (RevPAR) is growing, but the competitive set is growing faster. Occupancy is holding, but only after rate has been surrendered. Group pace appears stable, but the mix has shifted toward lower-rated business. A brand-mandated Property Improvement Plan (PIP) is advancing while the hotel’s competitive premise goes unexamined. 

Nothing looks broken. Not yet. 

But by the time the decline reaches trailing earnings before interest, taxes, depreciation, and amortization (EBITDA), the owner may have fewer choices. Financing is harder. Competitive share has migrated. The brand deadline is closer. The scope is larger, and the business plan must recover more value with less room for error. 

Reactive repositioning isn’t the threat. It’s the consequence. 

The numbers can look right while the strategy goes wrong

Demand isn’t moving evenly. CBRE’s midyear 2026 outlook forecasts 5.2% RevPAR growth for luxury hotels, compared with 0.7% for midscale properties and a 0.6% decline for economy hotels. (CBRE) 

But those figures describe the market, and not the asset. 

A hotel producing 3% RevPAR growth in a competitive set growing 8% isn’t holding steady. It is ceding share behind a rising market. The same drift can hide elsewhere: average daily rate (ADR) index softens while occupancy is bought back, food-and-beverage revenue grows while departmental profit contracts, or meeting-space utilization holds while the rate mix deteriorates. 

The earliest evidence of obsolescence is often relative, not absolute. 

Run the relevance audit before setting the scope

Too many capital programs begin with brand standards, a property condition assessment, preliminary scope, budget, and design. That sequence assumes the existing positioning is worth preserving. 

A PIP can protect brand compliance. It can’t determine whether the brand, product, service model, space allocation, and target demand remain right for the asset. 

Before scope hardens, owners should conduct a four-part relevance audit. 

1. Locate the loss of economic share. Review 24 to 36 months of RevPAR, ADR, and occupancy index performance by segment and day of week. Examine booking pace, length of stay, channel cost, group displacement, amenity capture, and lost-business reports. An occupancy problem, rate problem, and mix problem may produce similar topline results but demand different capital responses.
2. Remap the demand architecture. Compare the demand generators behind the last investment thesis with those expected to support the next one. Corporate relocations, convention activity, residential growth, new attractions, and competing hotels can change the value of guestrooms, meeting space, food and beverage, wellness, and public areas before annual occupancy reflects the shift.
3. Test the economics of each major space. Look beyond utilization. Measure contribution, labor intensity, capture, and the extent to which each space supports rate or loyalty. A busy restaurant may still destroy value. An underused ballroom may hold redevelopment potential. A condition assessment can reveal what needs repair; it can’t determine whether the current allocation of space still makes commercial sense.
4. Underwrite the alternatives, including restraint. Compare required PIP work, targeted improvements, full repositioning, brand conversion, redevelopment, and disposition. Account for capital cost, revenue displacement, operating disruption, financing, stabilization, contingency, and exit value. Then identify the source of the return: rate, occupancy, ancillary revenue, operating efficiency, market-share growth, or some combination.

Doing nothing has a cost. So does doing the wrong thing. 

Make capital prove the thesis

Before design begins, ownership should be able to state the investment thesis on one page: the future demand segments, the source of pricing power or share gain, the competitive set, the required product and operational changes, and the return thresholds that could invalidate the plan. 

If the thesis rests on “elevating the experience” or “responding to changing preferences,” it isn’t finished. 

Evidence suggests that disciplined transformational capital can pay off. Host Hotels & Resorts reports that 21 stabilized transformational renovations across its portfolio generated an average nine-point increase in RevPAR share index. Its process includes underwriting the incremental rate opportunity and testing the proposed product against competitors before committing capital. (CoStar) 

At the Royal Palm South Beach Miami, Park Hotels & Resorts invested more than $100 million across guestrooms, food and beverage, public areas, meeting space, and resort amenities. Park expects the project to nearly double the hotel’s EBITDA upon stabilization. That is a company projection, not a realized result, but it ties a defined investment to a defined operating outcome. (Park Hotels & Resorts) 

Not every hotel warrants a transformation. Some need disciplined renewal. Some need a new position. Some should not receive another dollar. 

The advantage belongs to owners who decide which one they have while the lobby is still busy and every option remains on the table. 

Once the decline becomes obvious, strategy has already become rescue.

Mark Knott is a vice president and national hospitality leader at Project Management Advisors (PMA), a B&D company. With more than 25 years of experience, he helps hotel owners, developers, and investors navigate complex development, renovation, and repositioning decisions across North America, Central America, and the Caribbean.

Joe Winters is a senior vice president at Brailsford & Dunlavey. Drawing on a background in market analysis, finance, brokerage, and development, he advises public- and private-sector owners on how to evaluate opportunities, shape the right investment strategy, and deliver complex real estate projects.