Dive Brief:
- PwC forecasts that the U.S. lodging sector will experience muted growth in 2025, driven by moderate ADR increases and stable occupancy levels, according to the firm’s latest U.S. Hospitality Directions report published last week.
- In the report, PwC predicted that occupancy will stand at 62.9% in 2025, while ADR will increase 1.3% year over year. This will result in “stable” year-over-year RevPAR growth of 1.5% in 2025, according to PwC.
- The continued strength of upper-tier chain scales will drive the expected ADR growth in 2025, PwC detailed in the report. Hospitality firm STR similarly forecasted earlier this month that higher-end chain scales will continue to drive industry performance for the remainder of 2024 and potentially beyond.
Dive Insight:
In 2025, ADR growth driven by higher-priced chain scales will “offer a redeeming trend” for the hotel industry, which is set to see muted supply and demand growth, according to PwC.
The firm predicts that while favorable shifts in the overall financing landscape due to recent federal interest rate cuts will drive increased construction starts throughout 2025, decelerating consumer spending and GDP growth will suppress demand and occupancy growth in 2025.
“Despite the continuing growth in business travel, particularly meetings and group business, and the potential resurgence of inbound international travelers to pre-COVID levels, economic challenges are expected to continue to impact leisure travel,” according to PwC.
Higher-end hotels will be the least impacted by suppressed demand, with the upper upscale segment set to see the highest RevPAR growth in 2025, while the economy chain will see the lowest, according to PwC’s latest forecast.
In a forecast published earlier this month, STR President Amanda Hite similarly projected that upper-tier segments would drive industry performance through 2024. She previously noted in a midyear report that midscale and economy hotels were feeling “the effect of fewer lower-income travelers,” while high-income households continued to travel.
In the forecast, STR predicted that occupancy will be 63% in 2025, and ADR will grow 1.6% year over year, resulting in 1.8% year-over-year RevPAR growth in 2025.
Both STR and PwC noted that the changing presidential administration, though, could alter their 2025 projections, with Hite saying STR’s outlook is “somewhat in flux.”
PwC’s 2025 forecast, meanwhile, “may shift as the current landscape of political and economic uncertainty becomes clearer in the coming months after the recent election, including the potential impact of immigration policies, evolving travel patterns and restrictions, as well as tariffs, among others,” according to the firm.
Other “significant risks” to PwC’s outlook include the pace of changes in the macroeconomic environment, the pace of rate cuts and evolution of monetary policy.
