RLJ Lodging Trust: Is 2026 the Year of a Defiant REIT Comeback?

In the shadow of a struggling hotel REIT sector, RLJ Lodging Trust (NYSE: RLJ) has emerged as a polarizing name for contrarian investors. With a 5.1% year-over-year decline in revenue per available room (REVPAR) in Q3 2025-driven by a 3.1% drop in occupancy and a 2.1% fall in average daily rates-the company's near-term struggles are undeniable according to Q3 2025 earnings. Yet, beneath the surface, a compelling case is forming for a 2026 turnaround. This analysis explores whether RLJ's strategic resilience, undervaluation, and alignment with macroeconomic catalysts could transform it from a cautionary tale into a defiant comeback story.

A Struggling REIT, But Not a Doomed One

RLJ's Q3 2025 results painted a mixed picture. While the company reported a net loss per share of $0.07, its Adjusted FFO per diluted common share stood at $0.27, reflecting disciplined balance sheet management. The REIT maintained $1.0 billion in total liquidity, including $375 million in unrestricted cash, and executed a $1.3 million share repurchase program, signaling confidence in its intrinsic value. These actions underscore a management team focused on preserving liquidity and shareholder returns, even amid a challenging operating environment.

The company's capital recycling strategy further highlights its proactive approach. With $80–$100 million allocated for renovations in 2025, RLJ is prioritizing asset upgrades to enhance long-term value. For instance, transformative renovations at key properties aim to differentiate its portfolio in a market where 94 hotels and 21,000 rooms are concentrated in high-demand urban and suburban hubs. This focus on premium brands like Courtyard by Marriott and Hilton Garden Inn also provides a competitive edge, as these properties are better positioned to capture demand from business travelers and tourists.

Undervaluation and Analyst Optimism

RLJ's current valuation appears disconnected from its fundamentals. Trading at a price-to-sales ratio of 0.8x-well below the peer average of 1.4x and the industry average of 3.8x- the REIT is arguably undervalued. A discounted cash flow model estimates its fair value at $11.97 per share, implying a 36.6% discount to its current price. Analysts, while divided, have assigned an average twelve-month price target of $9.40, representing a 27.98% potential upside. This optimism is rooted in RLJ's strategic positioning: its urban-centric portfolio is uniquely poised to benefit from events like the 2026 FIFA World Cup and the 250th anniversary of American Independence, both of which are expected to drive surges in travel demand.

2026 Catalysts: A Perfect Storm for Recovery

The most compelling argument for a 2026 turnaround lies in the convergence of macroeconomic and operational catalysts. The FIFA World Cup, scheduled for 2026 and hosted in the U.S., Canada, and Mexico, is projected to generate unprecedented travel activity. RLJ's urban portfolio, particularly in cities like Austin where a convention center closure for expansion has temporarily hurt performance, stands to regain momentum as large-scale events resume. Similarly, the 250th anniversary of American Independence in 2026 could spark a surge in domestic tourism, further boosting occupancy rates.

Moreover, RLJ's focus on high-barrier markets-where dense saturation and elevated real estate values limit new supply- positions it to outperform peers in a recovery scenario. While the company's 2025 REVPAR decline is concerning, its strategic investments in renovations and capital recycling are designed to mitigate long-term risks and enhance asset performance.

Risks and Realities

No contrarian bet is without risks. RLJ's modest net income of $7.2 million on $1.35 billion in revenue highlights its vulnerability to prolonged industry headwinds. Additionally, the 3.1% occupancy decline in Q3 2025 suggests that demand-side challenges persist, particularly in markets where competition is intensifying. However, these risks are arguably priced into the stock, given its current undervaluation and the forward-looking nature of its 2026 catalysts.

Conclusion: A Contrarian's Playbook

For investors willing to look beyond short-term volatility, RLJ Lodging Trust offers a compelling case. Its disciplined capital management, strategic asset upgrades, and alignment with 2026's high-impact events create a foundation for a meaningful rebound. While the path to recovery is not without hurdles, the combination of undervaluation, operational resilience, and macroeconomic tailwinds makes a strong case for 2026 as the year of a defiant REIT comeback.