Key Hospitality Trends and Challenges for 2026

1. Continued Trade and Tariff Uncertainty

US tariffs at multidecade highs are reshaping the hospitality industry, raising input costs, complicating cross-border supply chains, and softening select hotel segments. Despite these headwinds, operators, owners, developers, and brands are adapting and innovating, proving resilient. For more on the effect of tariffs in 2025 and our detailed outlook for 2026, see our team’s alert here.

2. Branded Residences

Despite trade headwinds, luxury homes tied to hotel or lifestyle brands that offer hotel-like services, known as branded residences, represent one of the fastest-growing segments in hospitality real estate. The sector has grown over 160% in the past decade, with supply expected to double by 2030. Branded residences command significant price premiums over comparable unbranded properties — averaging 33% globally, and pre-sales by developers often reach 70% before completion. While Miami remains the leading US market, demand is expanding into secondary cities like Charlotte, Atlanta, and Nashville as population migrates southward. A notable trend is the shift toward standalone residences and conversions of hotel floors into residential units as some urban hotel markets reach saturation. Successful projects require alignment between brand promise and service delivery, experienced local development partners, and careful navigation of financing and regulatory challenges. As more non-hotel brands (automotive, fashion) enter the space, partnerships with hospitality operators will become increasingly important to ensure service quality matches buyer expectations.

3. Antitrust Scrutiny of AI, Revenue Management, and Benchmarking Services

Numerous rulings are anticipated in antitrust lawsuits challenging the use of revenue management software and benchmarking services throughout the hospitality industry. The Third Circuit is expected to decide on an appeal in one case, and motions to dismiss will likely be decided in others. Those rulings come after settlements were reached in the RealPage antitrust litigation in the fall of 2025. See the US Department of Justice’s announcement. In addition, California passed amendments to the Cartwright Act (via AB 325), which apply to algorithmic software applications. Hospitality companies should continue to monitor these developments for impact on any ongoing use of these and similar technologies and services. For more about the firm’s work on artificial intelligence (AI) issues, see here, and meet our antitrust team here.

4. Human Trafficking

Human trafficking is not a new issue for the hospitality industry, but challenges associated with it continue to evolve. Claims by private plaintiffs under the Trafficking Victims Protection Reauthorization Act (TVPRA) remain active, with more cases reaching federal appellate courts in 2026. State and local governments are increasingly active as well. In New York City, the Safe Hotels Act went into effect on May 3, 2025. The Act requires, among other licensing and safety requirements, hotel owners and operators to train their employees to identify and combat human trafficking. See our alert on the Safe Hotels Act here.

State legislatures in Massachusetts and Pennsylvania, and Suffolk County, New York, passed similar bills mandating training and awareness requirements for hospitality workers. The Illinois state legislature passed a bill empowering local municipalities to enforce and issue fines to local businesses for failing to comply with the state’s existing human trafficking training laws. 

5. Focus on Online Travel Agency, Guest, and Loyalty Terms and Conditions

Throughout 2025, state and federal courts continued to vigorously enforce mandatory forum selection clauses and arbitration clauses according to their terms. Those clauses can play an outsized role in minimizing risk when litigation arises. For example, the Fourth Circuit in Maldini v. Marriott International, Inc., following a clear trend seen in the district courts, held that a class action waiver in an agreement between customers and a franchise system must be enforced, even if that waiver is not connected to an arbitration clause. That said, challenges to the enforceability of such provisions will continue, and so review of those agreements is needed to ensure companies can take advantage of their negotiated terms.

6. An Uncertain Future for the American Franchise Act

The American Franchise Act (AFA) was introduced in the US House of Representatives on September 10, 2025. The AFA would amend the National Labor Relations Act (NLRA), 29 U.S.C. 151 et seq., to more specifically outline the circumstances under which a franchisor could be found to be a joint employer under the NLRA. It is unclear whether the AFA is likely to make progress in this US Congress, though we will continue to monitor developments.

7. State and Local Employment Requirements

2025 was a busy year for employment law updates. The One Big Beautiful Bill Act eliminated federal taxes on tips and certain overtime, and new state laws created tip notice requirements. State laws mandating paid leave for workers were enacted nationwide, and workers are now entitled to such leave in states like Illinois, California, New York, New Jersey, Colorado, Maine, Nevada, and others, as well as in localities like Chicago, New York City, and Los Angeles. These laws require employers to provide paid sick leave, paid leave for reasons such as domestic violence or bereavement, or paid leave for any reason at all (such as Illinois’ Paid Leave for All Workers Act) — often with little to no notice and minimal or no documentation required. 

Major cities including Chicago, New York City, Los Angeles, and San Francisco, and some states, have also enacted predictive scheduling laws. And laws relating to pay and benefits, training, and safety provided to temporary workers have been enacted in states like Illinois and New Jersey, requiring employers leasing employees through staffing agencies to provide certain pay, benefits, and safety-related information to the staffing firm or to the workers themselves. More information on recent employment developments is available here.

8. New Privacy Laws and State Enforcement

New state privacy laws took effect on January 1 in Indiana, Kentucky, and Rhode Island, and cure periods for state privacy laws in Connecticut, Delaware, Kentucky, Minnesota, and Montana sunset throughout the year. New California Consumer Privacy Act rules requiring businesses to display to consumers that their uniform opt-out mechanisms have been honored, to start engaging in risk assessments, and to comply with new rules applicable to automated decision-making technologies also took effect on January 1. 

Cybersecurity audits will be required beginning in 2027, and with detailed requirements in the new regulations, the time to start planning for them is now. In addition, Congress is expected to reveal a new privacy bill sometime in the first quarter, and with Republicans currently controlling the House, Senate, and White House, there is a short window before Labor Day to potentially push through federal privacy law. Preemption and private rights of action are on the table.

In the meantime, the states have signaled that enforcement activity will pick up in 2026. Eleven state regulators have formed a privacy consortium to share information and resources, and several of them have already initiated coordinated enforcement sweeps. This is reminiscent of the multi-state work on data breaches in the 2010s. Key areas of inquiry will be opt-out compliance, children’s data, other sensitive data, privacy notices, risk assessments, and service provider and contractor agreements. Expect fines to continue to keep rising. Key regulators to watch are the Attorneys General of California, Colorado, Connecticut, New Jersey, Oregon, and Texas, as well as CalPrivacy (formerly the California Privacy Protection Agency).

9. State Action on Noncompete Clauses

The enforceability of employee noncompete agreements continues to evolve, with action very likely to be concentrated at the state level in 2026. As we projected in last year’s Hospitality Trends, the current Administration has not continued the Federal Trade Commission’s (FTC) attempts under the prior Administration to ban noncompete covenants nationwide, and instead has effectively let stand district court decisions that found the FTC’s nationwide ban unenforceable. 

2025 was an active year for state legislatures with respect to noncompetes, with some states (such as Wyoming) reducing enforceability, and others (such as Kansas and Florida) enacting statutes that endorse the enforceability of noncompete agreements. While much of the state legislative action is focused on noncompetition agreements between employers and employees, some states, e.g., Colorado, are taking aim at limiting duration in the sale-of-a-business context. In short, noncompetes and other restrictive covenants continue to require careful attention and active monitoring of legislative and judicial developments.

10. When One Door Closes…

While this may not be a legal trend, we could not help but notice the number of door-related hospitality issues popping up in 2025. From resolution of a vicarious liability case involving a sizable jury verdict after a door fell on a guest to press reports regarding hotels saving money by eliminating doors, it seems we all should be keeping our eye on the literal and proverbial doors around us in the hospitality space.