Lodging Industry Overview
Since room sales generate lodging tax revenues, an overview of hotel market trends provides insight into the industry’s current and future fiscal impacts. As documented in our 2024 HVS Lodging Tax Study, the national lodging market has experienced recent growth in average daily room rates and revenue per available room. However, occupancy levels have remained relatively flat. The Average Daily Room Rate (“ADR”) represents the average revenue earned for each room rented in a hotel. Revenue per available room (“RevPAR”), the product of ADR and occupancy rate, is a standard industry metric that combines the effects of occupancy and room rates on overall revenue performance. ADR and RevPAR increased in 2024 but has seen slower growth through the first eight months of 2025 compared to the same period in 2024. The figure below compares year-over-year growth in the national lodging market from 2023 through August 2025.
— Source: STR Global
Occupancy levels have declined in early 2025 compared to the same period in 2024, with ADR growth also slowing due to reduced leisure travel and greater consumer price sensitivity. Preliminary 2025 data through August suggests minimal RevPAR growth, reflecting weaker travel sentiment across many markets, particularly among international travelers, despite modest gains in ADR. The figure below illustrates year-over-year RevPAR trends for the top 25 major U.S. markets.
The strength of RevPAR growth varies widely across major U.S. markets. Since 2023, most markets have experienced gains, although Las Vegas and Houston saw notable declines in early 2025 compared to the same period in 2024. In contrast, San Francisco, Orlando, and Tampa recorded some of the strongest growth in early 2025, driven by warm-weather demand and a steady calendar of large-scale events. Markets such as Washington, D.C., New York, and Chicago—each supported by strong convention business and diverse visitation drivers—posted some of the most robust growth in 2024. Convention and group demand have remained resilient, with many destinations reporting solid attendance and healthy booking activity through 2025. Overall, however, year-to-date data indicate that national RevPAR growth is slowing significantly and may stagnate in 2025.
Higher operating costs and unfavorable credit market conditions continue to slow the development of new lodging supply. With lower RevPAR growth and limited new supply, lodging tax revenue growth is likely to slow in most lodging markets in 2025 and 2026.
Economic Uncertainty
This report was prepared during a period of significant uncertainty, marked by multiple changes in U.S. policies that have impacted both the domestic. and global economies. Any subsequent change to these perspectives or information could affect the future growth of lodging tax revenues. In March and April 2025, the U.S. markets exhibited a notable degree of volatility, primarily due to the policies of the current U.S. administration. Since May, markets have recovered and moved to new highs, primarily driven by investments in AI and related technology infrastructure. Renewed announcements surrounding tariffs and litigation over the legality of the tariffs have created widespread uncertainty surrounding how the U.S. and global economies may respond. Areas of concern include additional or new supply-chain issues, which, combined with inflation, would further increase the cost of doing business and continue to impact the pipeline for new development. The federal government shutdown (which is ongoing as of this writing), federal government layoffs, and the potential for private-sector cutbacks could also affect domestic travel, including both transient and group activity. Moreover, the implementation of the U.S. government’s immigration and visa policies may result in a shortage of hospitality workers.
Geopolitical concerns have influenced global travel to the US. Tourism Economics has forecast an 8.2% decline in international overnight arrivals to the US in 2025. Cities with heavy reliance on Canadian travel are most affected, as inbound travel from Canada has declined by 25% as of July 2025. [1]
Until more clarity emerges, the near-term outlook remains uncertain due to the factors mentioned above. The possibility of increased inflation, rising unemployment, and a recession remains a topic of concern. Slower growth and lower levels of new job creation are considered the most likely outcomes. Over the long term, the hospitality industry has proven to be extraordinarily resilient following past “shock” events and downturns such as 9/11, the Great Recession, and the COVID-19 pandemic. Despite temporary declines, the industry’s performance has consistently recovered and continued to grow. Thus, we are confident the industry will prove to be similarly resilient following the current period of uncertainty.
Labor Force
Employment in the hospitality and leisure sector has steadily expanded in recent years, reaching stable unemployment levels by 2023 and continuing through 2025. The graph below compares the number of employees in hospitality with the unemployment rate.
Employment in the hospitality and leisure sector has shown steady growth in recent years, and unemployment has remained below 6% through 2025. However, the total number of employees in the sector has begun to stagnate.
