Rod Clough: 2026 Hotel Market Outlook, RevPAR, and AI in Valuation

Every so often an interview is also a reunion. Before he led the Boston University School of Hospitality Real Estate Program, Kaushik Vardharajan spent fifteen years at HVS, the global consulting firm focused exclusively on the hospitality industry. For this interview, Kaushik sits down with Rod Clough, who is now running it across the Americas. This episode of the Distinguished Podcast was recorded on the road at the NYU International Hospitality Investment Forum in New York City.  

Rod Clough, President of the Americas for HVS, built his career over more than three decades. With some of the deepest data in the industry behind him, Rod shares: 

• Why this year's performance has surprised almost everyone 
• Where the opportunities lie well beyond the headlines 
• How to leverage AI while maintaining expert judgment at the heart of a valuation 

The “Distinguished” podcast is produced by Boston University School of Hospitality Administration. 

Host: Arun Upneja, Dean
Producer: Mara Littman, Executive Director of Strategic Operations and Corporate Relations
Research and Content Creation: Lan Lu
Marketing: Anne Dawson
Editing: Isabella Laikin and James Leon

Music: “Airport Lounge" Kevin MacLeod (incompetech.com)
Licensed under Creative Commons: By Attribution 4.0 License
http://creativecommons.org/licenses/by/4.0

Transcript

SPEAKER_00 0:05

Every so often, an interview is also a reunion. Before he led a real estate program, Kashik Vordharajan spent 15 years at HVS, the global consulting firm focused exclusively on the hospitality industry. For this interview, Kashik sits down with the man now running it across the Americas. This is the distinguished podcast from the Boston University School of Hospitality Administration, recorded on the road at the NYU International Hospitality Investment Forum in New York City. Our guest is Rod Glowe, president of the Americas for HVS, who has built his career there over more than three decades. With some of the deepest data in the industry behind him, Rod explains why this year's performance has surprised almost everyone, where he sees opportunities well beyond the headline markets. What brokers and clients are really feeling, and how HVS is leading into AI without giving up the human judgment at the heart of evaluation. Here is the conversation.

SPEAKER_01 1:13

So we are again on the sidelines of the NYU IHIF conference in New York, and I'm so delighted to welcome my next guest, uh Rod Clough, president of the Americas for HVS. Rod, such a pleasure to have you. Thank you for joining us. Thank you for having me. Pleasure to be here. And Rod, you've spent 31 years at HVS. I personally have known you for 26. So we go way back. And uh it's it's incredible what you've done at HVS over those 31 years. Thank you. And I still remember how much I enjoyed working with you and working for you. So this is even more of a pleasure to have you on this podcast with us.

SPEAKER_02 1:51

Thank you. Thank you.

SPEAKER_01 1:53

So, Rod, we'll dive right into it. Perfect. As you're having a busy, busy conference. So, you know, we've always discussed that how current investors and potential investors act and react to the market depends on a combination of data and sentiment. Yeah. So let's start with the data side of things. Given the massive volumes of data that HPS has access to, what are you seeing at a macro level in the US markets?

SPEAKER_02 2:22

So what's what is interesting right now is how surprising, I believe, um the performance of our sector is. Why is this happening versus what we all thought would happen? And uh, and we so we've been talking, as as you know, we have offices across the country, and so we're consulting always everywhere, and to really kind of dig into what's happening, why is this happening? And and it's been it's been fascinating, really people wanting to get back out and travel. Uh, people hesitated last year, um, people getting back to business, realizing that all of the uncertainty that was that was uh brought up last year with all of the changes in the administration and whatnot. Um they I think people realize that perhaps this is this is obviously a new normal that we're gonna have to get used to for the next few years. So let's just get back to business and let's get back to traveling and let's get back to um enjoying the industry. Yeah, that's great.

SPEAKER_01 4:26

So I joined your HPS Live Insider briefing call last week, and you know, you spotlit three big markets. You spoke about New York, you spoke about Miami, and you spoke about San Francisco. Yeah. Um you also referenced uh Oahu. Uh so now you know everybody's been talking about these markets for the obvious reasons. And uh now I wanted to ask you, are there markets that are you're most excited about that are not on this list that people are maybe not talking about as much?

SPEAKER_02 5:02

Yeah, I think right now occupancy in a lot of our urban centers just haven't come back to the levels that were were there pre-COVID. And so many of those office buildings in in middle America cities and and just the urban worlds that we live in are still lightly occupied, and that travel hasn't come back in a robust way. And so, in this new reality, this new post-COVID reality, folks are even if they're in a hybrid work situation, that that leisure travel factor is still so it's it's just a new strengthening part of the fabric of how we travel. And and that's where I think the greatest opportunities lie is is more so in that resort side of things. And it and I'm not necessarily talking about the big 300, 500 room resort, but the the smaller boutique hotel that might exist in a beach market that is a one or two hour drive away from a major metro area or a mountain market, similarly close to a major metro area where somebody can go into the, let's say they have a hybrid work situation, they're going into work Tuesday through Thursday, and then Friday morning or Thursday night, they're out. And they want to go to they want to go to their favorite little resort in a city that is close by, but not too far away. So um, so that's where those opportunities lie in those towns that are close, that maybe don't have the up upper upscale or luxury hotel yet. But there's just a market chomping at the bit, wanting that kind of accommodation. And so we just saw a hotel open, for example, in Oi, downtown OHI, um, at a level, at a product level that we we that town had never seen. But the visionary developer there found a small pocket of a town that's not too far from LA and pounced on the opportunity. And so that's where I think we need to be looking next. Palm Springs is another great city to be looking for opportunities in. Um, any kind of a city where you're outside of a metro area, a couple of hours that's has a resort quality to it, but maybe you haven't had a new hotel open for 10 or 20 years and it's ripe for something new and different that the traveling public can kind of latch on to is where we should be looking.

SPEAKER_01 7:44

Okay. That sounds great. Uh now, also during that call last week, you know, you polled your audience on their sentiment about where the markets are. And so I think the results then were that about half of your audience on the call thought the markets are stable, 40% of them thought they're growing, and 10% thought they're declining. Is that what you're seeing amongst your larger base of clients?

SPEAKER_02 8:08

Or I think so. I think again, it's it's about where you are in the country. And there are many submarkets and markets where things are moving up, but they're not necessarily moving up in a big way. Maybe occupancy is up a point or down a point, and rates steady, or rates going up a dollar or two, but not really enough to make a difference, and maybe not even enough to really counterbalance your increase of in expenses. So you could have like a three or four dollar rate increase, but your expenses are going up by four or five dollars. So it's it ends up being a wash. And so for them, the sentiment is stable, or for them, the sentiment might be declining because maybe even though RevPAR's up, it's not enough to balance out what they're having to deal with on an expense side. And then you have other people that are in these up and coming markets or in a resort market or in a metro area that's really coming back strong, like maybe they're in the Bay Area. Um, so they're gonna really feel the rise and they're gonna see things really improving. Um, so I think if we broke out that survey by geography, it would tell a story of where people are located and and just what they're feeling in the moment in those cities.

SPEAKER_01 9:26

Okay. Now let's talk about kind of sentiment amongst another group of stakeholders. So I think was it fall 2025, you did a broker survey? Yep. And I think at in that survey, about two-thirds of them expected that the first half of 2026 would improve. Yeah. They're almost at the end of the first half. Yeah. Is has that proven to be true? It hasn't.

SPEAKER_02 9:50

Uh so we had I I th I think at that point um that we did the survey, um, and we even we did an updated survey six months later, and ultimately it goes out to brokers. And brokers are an optimistic bunch and they have deals in the hopper, they want to be doing more deals, so they're always looking at brighter skies ahead. True. Um, so that that plays into it. But uh I think we had been through 2025 and and the years prior, um, ever since the interest rates really went back to normal, so to speak, um, and the deal flow really declined a significant amount, we've been waiting for that return. When are we going to get back to business? When are hotels gonna start trading again? And um, there was an anticipation that with interest rate cuts and with 2025 being behind us, maybe that bid ask spread between a buyer and a seller would start to narrow enough to really bring some deals together. But that hasn't happened yet. We still need a couple more rate cuts. We still need ADR. Well, now ADR is on that upper trajectory, which is great. Um, we need to keep keep that going. And that will, with those two things in play, I think you'll start to see a lot more deals come together because that spread is going to start to narrow. Buyers are gonna be able to put together a performa that makes better sense to a seller. Um, what the sellers have to continue appreciating is the challenges that buyers are dealing with in terms of increased expenses and with uh renovation costs. And so most of the a lot of the deals that we're seeing get across the finish line are newer hotels. They don't have big pips that they're having to deal with, um, or sellers that have really created a good story for their property, high cash flow, well good quality physical plant, and a strong market. Um, expenses in line. If you have all your ducks in a row, it makes your deal come together a lot better than deals that you know might not otherwise right now.

SPEAKER_01 12:08

We'll say yeah, I think this seems to tie into what you shared at Alice where you said uh that there's plenty of capital out there. Yeah. It's just not as many deals that make sense and that that have the right stories behind them.

SPEAKER_02 12:21

That's right.

SPEAKER_01 12:21

That's right. Now, I remember working with you when we valued the Hilton portfolio for Blackstone. I worked with you on the extended Stay America portfolio valuations. Do you think this is a time when we get to see another mega deal like that that kickstarts everything?

SPEAKER_02 12:38

Well, what's interesting is that those mega deals, those buyers of those big, huge portfolios have done a very good job at selling off their non-key assets or breaking them up or make finding value in those portfolios by doing the right thing. And so so many of those portfolios, they just don't exist anymore. They're all owned by individual owners or they're owned by sub-portfolio owners. Um, so I think we're gonna see certainly a lot of portfolios sell, but they'll be more of those mid-size, mid-size deals. Um, mega deals might come along if it's a if it's a group of like 10 or 12 resorts, um, that might qualify as a mega deal. Uh, but the hundreds of hotels trading at once, that that might not come around for a while.

SPEAKER_01 13:31

Okay. Got it. So, okay, I'm gonna switch focus and talk about AI. Sure. Because everybody's talking about AI. Yeah. So HVS now has over 300 people working around the world. You work on thousands of valuations globally. Uh and AI is impacting kind of the valuation business just like it is others. So I remember working with Spider when it came out, and I thought it was the most advanced business intelligence tool I had ever seen. Yeah. How have things changed at HPS? Are you using AI at this point of time? And how do you decide what you're gonna let AI do and what you're gonna have a consultant oversee?

SPEAKER_02 14:13

Those are great questions. So, AI, how we use AI is somewhat being dictated by our clients. Uh, major banks are now starting to come out with AI guidance and expectations where you have to be very careful not to um overuse AI. Uh, and our banks and our clients still very much want the human element driving the analysis, driving the findings, driving the message. And so we're not we're very carefully navigating that. We are creating our own internal closed loop AI writing assistant so that our associates can give it strong, appropriate inputs. And we still do the analysis with our with our minds and our programs, but then our AI writing assistant will take all of those inputs and help write parts of the report from our own internal closed loop system. That's what banks are very uh concerned about. They don't want, they certainly don't want any confidential information being shared, but they also don't want us to go out to to the work to the AI world, external world, and pick up wrong information and or wrong findings or wrong analysis or wrong anything. Um so it's a very tenuous time right now. Like we have to be very careful. Um, and we're being careful, but we're also not um we're not turning away from it. We are leaning in and we're wanting to really use it uh to the to the fullest extent that we can, but still maintain our integrity and maintain the value of what we do. And then there are other aspects of AI that we're really starting to look at on like our administrative tasks. What are some things that that we really shouldn't be doing that it can do for us, not to reduce staff, but to better better use staff, use use staff in a smarter way. Okay.

SPEAKER_01 16:13

Makes sense. Maybe you could have an AI system that has travel expenses. Yes, exactly. So my last question for you You wake up tomorrow, you find you won the Powerball, and you have $100 million after taxes. And you were, if you had to invest that in the hospitality industry, do you have where would you what segments, what parts of the country would you invest in?

SPEAKER_02 16:36

For me, it would be just because of my analyst background and I've been appraising for so long and looking at deals for so long, it it does come down to location and and your demand drivers. Are you can you can you find a deal or create a deal in a location that has this, has a an unbeatable location where I and also where you're not gonna have a lot of new and new competition come in is key. Um I I I'm I key into like those profitable GOP levels for a hotel and where exactly you should be at. And are you gonna be able to generate those levels of GOP for those assets? I would love to take that money and just go after like the that gem of a hotel that could be still be an opportunity. Get it for maybe 60 cents on the dollar, but because of its location, just really help it have a turnaround story um through renovation, through proper branding, through proper marketing. I would that would just be a lot of fun. Okay. I would enjoy that.

SPEAKER_01 17:46

Great, Rod, thank you so much again for joining us. Thank you for having me. Uh, very excited to have you on the podcast. You're also very excited that three of our students are coming to work for you. Yes, I'm excited about that too. So thank you for always being a mentor to me, and thank you for being a mentor to to our students. You're welcome. Have a great conference, Rod. Thank you.

SPEAKER_00 18:05

That brings this episode to a close. Thanks for joining us on the road at the NYU International Hospitality Investment Forum, and our thanks to our guests for sharing their time and insight. The distinguished podcast is produced by the Boston University School of Hospitality Administration. If you enjoyed this conversation, follow or subscribe wherever you listen and share it with a colleague or a student who would find it valuable. To learn more about our programs and the work coming out of the school, visit bu.edu slash hospitality. We will see you next time.