WASHINGTON—CoStar and Tourism Economics made minimal adjustments to growth projections in the first U.S. hotel forecast of 2025 released at the Americas Lodging Investment Summit (ALIS).
For 2025, projected gains in average daily rate (ADR) and revenue per available room (RevPAR) were unchanged from the previous forecast, +1.6 percent and +1.8 percent, respectively. Occupancy for the year was raised 0.1 percentage points to 63.1 percent.
“While business optimism is on the rise, economic data has not changed significantly from our previous forecast,” said Amanda Hite, STR president. “The stronger performance seen in Q4 was driven by one-time factors, including holiday travel compression and weather-related events, and does not constitute a change in trend. Additionally, the impact of the new administration has not been factored into the forecast, as significant policy changes have yet to be implemented, and any projected effect of those changes remains unclear. Thus, our forecast is relatively unchanged overall with minor tweaks among the chain scales. Based on current economic conditions, we expect higher-end hotels to continue to drive industry performance.”
“Economic conditions in 2025 are expected to provide a favorable backdrop for travel activity. Unemployment is low, inflation is slowing, consumers are spending—particularly those in higher income households, and business investment activity is solid,” said Aran Ryan, director of industry studies at Tourism Economics. “Trump Administration trade and immigration policy priorities present downside risks, particularly to inbound travel (e.g., through trade war responses, visa impediments, charged rhetoric, and general border and policy uncertainty).”
“Normalized expense growth and a slight increase in TRevPAR is expected to help drive profits in 2025,” said Hite. “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. With continued growth in groups and business travel, F&B departments are expected to report some of the highest growth rates this year. Rooms and undistributed operating expense growth will moderate, though utilities departments will almost certainly see increases.”
