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U.S. Hotel Industry Battles Economic Storm: Forecast Takes a Downward Turn – Image Credit Unsplash+
- Occupancy and Revenue Projections Lowered: CoStar and Tourism Economics have downgraded U.S. hotel performance forecasts for 2025 and 2026, citing economic pressures.
- Future Outlook Indicates Moderate Improvement: Despite current challenges, experts predict a moderate recovery in the U.S. travel economy heading into 2026, driven by growth in household income and international events such as the World Cup.
The U.S. hotel industry is bracing for a challenging period as CoStar and Tourism Economics have revised their forecasts, lowering expectations for occupancy and revenue in 2025 and 2026. The latest projections indicate a slight decline in occupancy to 62.3% for 2025, accompanied by a 0.4% decrease in revenue per available room (RevPAR). These adjustments mark the first total-year RevPAR declines since the economic downturns of 2020 and 2009.
Amanda Hite, president of STR, highlighted the impact of rising unemployment and inflation on the industry’s outlook. “ADR is growing well below the rate of inflation, which in turn will put more pressure on margins,” she noted, emphasizing the challenges ahead for hotel operators.
Looking towards 2026, the forecast remains cautious but slightly more optimistic. Aran Ryan, Director of Industry Studies at Tourism Economics, anticipates a moderate strengthening of the U.S. travel economy. Factors such as household income growth, tax cut benefits, and increased interest in international travel, particularly due to the World Cup, are expected to contribute to this recovery.
However, the industry’s profitability is under pressure, with GOPPAR projections lowered due to rising expenses in food and beverage, marketing, and utilities. Labor costs are also expected to increase, particularly in labor-intensive departments.
As the industry navigates these economic challenges, the focus will be on adapting to changing market conditions while preparing for potential growth opportunities in the years to come.
