Dive Brief:
- CoStar and Tourism Economics made minimal adjustments to their growth projections for U.S. hotel RevPAR, ADR and occupancy in 2025, according to their first outlook of the year released at the Americas Lodging Investment Summit in Los Angeles this week.
- The companies project that ADR and RevPAR will remain unchanged from their previous November forecast, growing 1.6% and 1.8%, respectively, year over year in 2025. Occupancy for the year, meanwhile, is forecast to rise 0.1 percentage points to 63.1%.
- Boding well for hotel growth this year are economic conditions that “provide a favorable backdrop for travel activity,” according to Aran Ryan, director of industry studies at Tourism Economics. This most recent forecast, though, does not factor in the impact of the new Trump administration, which could present downward risks, Ryan noted.
Dive Insight:
Economic conditions benefiting travel activity in 2025 include low unemployment, slowing inflation and strong consumer spending, particularly by higher-income households, according to Ryan. Additionally, business investment activity is “solid,” he said. And business optimism is on the rise, STR president Amanda Hite said in the latest outlook.
However, Hite noted the impact of the new Trump administration has not been factored into CoStar and TE’s latest forecast, since “significant policy changes have yet to be implemented, and any projected effect of those changes remains unclear.”
According to Ryan, the trade and immigration policy priorities of the Trump administration present downside risks, particularly to inbound travel because of potential trade war responses, visa impediments, charged rhetoric and general border and policy uncertainty.
At this time, CoStar and TE expect higher-end hotels will continue to drive industry performance in 2025, in line with past projections.
Additionally, labor costs are forecasted to stabilize in 2025 “as hotels have adjusted operations to current labor trends,” and these lower labor margins “will allow for slightly better GOP margins,” Hite said.
She added that with continued growth in group and business travel, hotels’ food and beverage departments are expected to report some of the highest growth rates this year.
Looking further ahead, CoStar and TE predict RevPAR and ADR will increase 2.1% and 2% year over year, respectively, in 2026, while occupancy will remain unchanged.
