According to STR and Tourism Economics, Hotel Forecast Sees Rate Growth Replacing Occupancy As Main RevPAR Driver :: Hospitality Trends

STR and Tourism Economics currently produce forecasts for 59 markets across Europe, the Middle East, Africa and Asia Pacific region. The analysis below summarizes the latest forecast revisions. 

Europe short-term outlook: 
Short-term RevPAR projections for STR’s 31 European forecast markets remain largely unchanged from the prior forecast. RevPAR for 2026 is forecasted to grow 1.2% year over year, with growth driven predominantly by ADR (+0.8%). RevPAR projections for 2027 have been modestly downgraded from +0.2% in the May edition to -0.1% as of August. The change comes from a reduction in occupancy growth expectations, with aggregated occupancy forecasted to remain flat in 2027.

Occupancy growth is increasingly difficult to achieve
Occupancy levels are set to decline across 14 European forecast markets in 2027. Twelve of the remaining 17 markets are forecasted to increase occupancy by less than 1%. The sluggish growth comes from two sources: supply growth and baseline occupancy levels.

Supply growth across forecast markets is expected to reach +2.3% in 2027, the highest average growth rate since 2022 (+2.4%). Supply growth varies by market, from just above 0.0% (Barcelona) to +8.1% (Dublin), but 15 markets expect supply to rise more than 2%. In turn, 10 of those 15 markets also anticipate occupancy declines. A few markets, notably Stuttgart, Frankfurt, London, and Lisbon, project supply growth above average yet continued occupancy gains. 

For the German markets, stronger trade fair calendars next year will drive demand. For London, increased international inbound travel from both the U.S. and Middle East will bolster demand. Lisbon remains a unique case, as a +4% supply increase expected next year represents a slowdown from the +6% growth forecasted for 2026.  

Baseline occupancy levels represent another headwind to growth. Aggregated occupancy across all 31 forecast markets is expected to remain at 76% next year, with the lowest in Frankfurt (62.8%) and highest in Gatwick (86.7%). These already elevated occupancy levels make growth increasingly challenging, as hotels tend to be relatively full across most months of the year. In Prague, for example, occupancy is expected to decline a modest 0.2% next year, but occupancy will run 80%+ for eight months. Minor occupancy declines across months or even years are common and unconcerning for markets that frequently report monthly occupancy greater than 80%.

ADR growth drives RevPAR growth
With space for occupancy growth increasingly limited, ADR growth remains the key driver to RevPAR growth in the both the short- and longer-term. Rate growth is expected to outpace occupancy growth across the aggregated forecast markets in 2026 and then again from 2028-30. Excluding Milan, which hosted the Milano Cortina Olympic Games in February 2026, the same is true of 2027. 

Twenty of 31 markets expect ADR growth to pace ahead of occupancy next year. High occupancy levels across these key European markets support stronger rate growth and allow pricing power in high-occupancy markets like Heathrow, where occupancy is expected to reach 84.5% next year, allowing for 1.6% ADR growth. 

Event-driven rate growth will remain another top driver of ADR gains, with four German markets expecting strong annual ADR growth as biennial and triennial trade fairs return. Cologne’s +6.9% ADR growth forecast, the highest among the 31 markets, is driven by Anuga in October 2027 (+40.1%) and IDS in March 2027 (+18.3%). Frankfurt’s +2% projected ADR growth is supported by CPhl Worldwide in November 2027 (+18.4%) and ACHEMA in June 2027 (+14.3%). 

Pricing power among high-end hotels likewise remains a bright spot in 2027. London Luxury class (+1.2%) and Paris’s Luxury & Upper Upscale classes (+1.9) both expect moderate rate gains next year despite recent or forecasted high supply growth, respectively.

Asia Pacific short-term outlook:
The short-term outlook for STR’s 16 Asia Pacific markets has been modestly downgraded, from +4.4% in the prior forecast to +3.9%. The downgrade comes entirely from occupancy (+0.7%), as ADR growth (+3.2%) has been marginally upgraded from the prior forecast. Reduced occupancy growth expectations across the six Mainland China forecast markets are the primary cause, as nine of the 16 forecast markets have improved 2026 RevPAR expectations from last quarter. The 2027 outlook has improved, with RevPAR growth of 2.7% forecasted and upgrades to both occupancy (+1.3%) and ADR (+1.4%). 

An upside and downside to domestic demand Domestic demand underpins the performance of most Asia Pacific markets this year, albeit impacts vary widely. Sluggish demand over the summer holidays, as well as underwhelming public holiday impact, has led to downgrades across Mainland China markets. Beijing now anticipates a decline in occupancy this year despite muted supply growth, as demand over the summer holidays fell significantly. Chinese consumers remain budget conscious as well, leading to significant competition among hotels and limiting rate growth. The outlook for 2027 is brighter, with RevPAR across the six Mainland China markets expected to grow 2.7% in aggregate, with RevPAR growth forecasted to rise more than 2% across each individual market, driven by an improved economic outlook and continued appetite for travel.

On the opposite side of the spectrum, strengthening domestic demand has led to an increase in pricing power in markets like Mumbai, which is forecasted to increase ADR 4.0% in 2026 and 2.0% in 2027. The Navi Mumbai International Airport, which opened in December 2025, has ramped up and improved connectivity into Mumbai. Additionally, improved highway enhancements have cut the drive to Mumbai in half from Pune, a market with no international airport, making Mumbai a much more popular transit hub than in the past. 

Middle East short-term outlook: The uncertainty surrounding the Iran War remains a significant headwind to Middle East hotel performance. Both demand and ADR, however, remain resilient despite the continued conflict, with summer performance across all four markets much stronger than initially forecasted. Despite the ongoing tensions and lack of peaceful resolution, slow recovery has started across key markets. In deference to the ongoing conflict, forecasts have not been upgraded for Q4 2026 despite the better-than-expected Q2 and Q3 performance. Given the region’s exceptional resilience, upgrades have been penned in starting in Q1 2027, with the expectation that international carriers resume routes by January.

Dubai and Abu Dhabi
International inbound demand remains depressed, and the lack of peaceful resolution coupled with the reduction in flights to the region will likely limit travel in Q4 2026. Corporate events remain on the calendar, most notably several in the hospitality space. However, international artists’ concerts have been cancelled. Domestic and intra-regional demand, however, has remained a bright spot over summer, and regional corporate travel will continue through year-end, helping bolster demand.

Occupancy recovery has been modestly upgraded next year, with Abu Dhabi (75.4%) now expected to end 2027 with occupancy six points below its prior 2025 high, and Dubai (72.4%) eight points below 2025 levels.

ADR remains the true standout among the UAE markets, though. Abu Dhabi expects to end 2027 with rate just AED 4.2 ($1.14) below 2025 levels and Dubai not far behind at -AED 19.8 (-$5.39) behind 2025. The strength in ADR has come largely from higher-end hotels, which have reported lesser declines than other classes year-to-date.

Relatively strong domestic and intraregional demand, along with government support and marketing efforts, has helped hotels maintain rates better than initially expected. Q4 2026 is still likely to remain a challenge, as the market faces a much slower than normal high season and increasingly early Ramadan.

The back half of 2027, however, is forecasted to be especially strong as international demand returns amid full flight schedules and increased marketing. Events like the IDEX biennial conference in Abu Dhabi next January will help as well.

Abu Dhabi growth rates and recovery expectations do remain modestly swifter than Dubai. As the UAE capital, the market commands more official government business than does Dubai and remains a popular family holiday destination due to its various attractions and parks.

Jeddah and Riyadh
Saudi Arabia’s geographic size, along with its reliance on domestic demand, has helped it remain the least affected GCC market throughout the conflict.

With a RevPAR change of -4.9% in 2026, Jeddah’s occupancy and ADR declines are driven more by high supply growth (+7.2% in the second half of the year) than by the conflict. As a popular summer holiday destination and transit throughway for Hajj and Umrah pilgrimages, Jeddah enjoyed relatively strong demand in Q1 and the first half of Q2 from both foreign and domestic travelers. Demand has slowed post-Hajj, however, and coupled with an increase in supply growth has led to modest downgrades in 2026. Supply will remain the market’s greatest headwind next year, with more than 2,300 new rooms expected to open, leading to another year of RevPAR decline.

Riyadh, conversely, has performed stronger than initially forecasted. Demand throughout the first half of the year declined 14%, compared to the -17% forecasted in May. Consultancy demand is a key factor for the market, and corporate demand returns to ‘normal’ during periods of ceasefire. Stability, however, is necessary for demand to fully and consistently return. As with Jeddah, supply growth represents the market’s greatest headwind next year, although unlike Jeddah, RevPAR is forecasted to rise 18.6%.

The return of corporate and consultant demand next year will outpace the new rooms entering the market, and RevPAR growth is expected for the next four years as Saudi’s capital ramps up in business and leisure activity as part of Vision 2030.

Long-term outlook: Long-term demand is expected to rise annually across all markets from 2028-30, and most markets can expect RevPAR growth across those three years as well. High supply growth in Edinburgh, Mumbai, and Sanya will lead to modest RevPAR declines in 2028. Cologne RevPAR will decline the same year due to biennial and triennial trade fair offsets from 2027.

RevPAR growth in Dubai and Abu Dhabi will remain above the long-term average from 2028-29 as both markets rebound from the war impact. Recovery to 2025 levels is now expected for both markets in 2028, with both occupancy and ADR pacing ahead of prior highs that year. RevPAR is still expected to decline in 2030 due to two Ramadans in the same calendar year, running from early-January to early-February 2030 and again in December 2030.

China data restatement: Between 28 August and 1 September, CoStar executed a historical data restatement for a provider in China affecting data from January 2019 through August 2026. The restatement reflects the removal of value-added tax (VAT) from reported revenue figures. Historic and forecasted ADR and RevPAR levels across the seven China markets do not reflect this change. Instead, the restated data will be included in the next forecast iteration, due late November. While revenue, ADR, and RevPAR levels will change next quarter, forecasted revenue, ADR, and RevPAR percent changes are not affected by the restatement. We recommend utilizing year-over-year percent changes when using China market forecasts.