Hotel Data Experts Predict Stabilized Growth for 2025 Amid Rising Expenses

• Hotel data experts forecast a steady 2025 with a minor growth in revenue per available room and average daily rate.
• The costs of customer acquisition and the shift towards online booking channels are critical factors to consider in the hotel industry for 2025.

Understanding future trends is crucial for strategic planning and decision-making in the ever-evolving hotel industry. According to the latest forecast by CoStar Group and Tourism Economics, revenue per available room (RevPAR) is expected to grow marginally by 1.8% in 2025. The forecast also predicts a 1.6% growth in the average daily rate, with an occupancy level of 63.1%.

The growth trend has shifted from the latter half of the year to the first half, primarily driven by the demand generated by disaster-stricken markets in the previous year. The forecast suggests that the luxury RevPAR is expected to grow by 2.9% in 2025, an increase of 25 basis points over the last prediction. This projection is formed because two-thirds of luxury hotels experienced a surge in demand in 2024, a trend expected to progress into 2025.

Furthermore, the upper-upscale, upscale and upper-midscale segments are anticipated to maintain their solid performance. The midscale segment, however, may face a 0.7% decrease in RevPAR due to supply growth in the first half of the year and difficult comparisons in the latter half.

One significant cost that hoteliers must consider is customer acquisition. Cindy Estis-Green, CEO and co-founder of Kalibri Labs, revealed that hotels are spending 15% to 25% on acquisition costs, with the average running about 18%. With brand.com booking channels holding 25% of share and property direct down to 30%, the hotel booking process has majorly shifted towards online channels.

Despite the challenges, the forecast for 2025 suggests a slight increase in general operating profit per available room. However, when adjusted for inflation, the U.S. hotel industry is predicted to end 2025 1% below real GOP compared to 2019.

In terms of demand segments, corporate transient demand at U.S. hotels is expected to face headwinds in 2025, largely influenced by the stock market and corporate profits. Yet, return-to-office rates have been rising, which may result in more frequent business travel.

The forecast for foreign inbound leisure is positive, but exchange rates and travel expenses largely drive it to and from the U.S. compared to other countries. The domestic leisure outlook is also positive, largely due to soft comps from 2024, which will likely lead to better performance in 2025 for the hotel industry.

In conclusion, the hotel industry is expected to witness steady growth in 2025 despite the challenges of rising expenses and the shift towards online booking channels.

Discover more at CoStar.