- CoStar and Tourism Economics project gains in average daily rate (ADR) and revenue per available room (RevPAR) to be +1.6% and +1.8% respectively in 2025, with occupancy raised to 63.1%.
- Economic conditions in 2025 are expected to be favorable for travel activity, with higher-end hotels predicted to drive industry performance.
CoStar and Tourism Economics recently released the first U.S. hotel forecast for 2025 at the Americas Lodging Investment Summit (ALIS). The forecast included minimal adjustments to growth projections. For 2025, the projected gains in average daily rate (ADR) and revenue per available room (RevPAR) were unchanged from the previous forecast, at +1.6% and +1.8%, respectively. Occupancy for the year slightly rose to 63.1%.
STR president Amanda Hite noted that despite a rise in business optimism, economic data has not significantly changed from their previous forecast. She added that the stronger performance in Q4 was influenced by one-off factors like holiday travel compression and weather-related events and does not represent a trend shift. The new administration’s impact has not been factored into the forecast due to the uncertainty of significant policy changes. Based on current economic conditions, higher-end hotels will continue driving industry performance.
Aran Ryan, director of industry studies at Tourism Economics, stated that the economic conditions in 2025 are expected to be conducive to travel activity. This is due to low unemployment, slowing inflation, solid business investment activity, and consumer spending, particularly among higher-income households. However, he cautioned that the Trump administration’s trade and immigration policy priorities could present potential risks, especially to inbound travel.
Hite also mentioned that normalized expense growth and a slight increase in total revenue per available room (TRevPAR) are expected to boost profits in 2025. Labor costs are predicted to stabilize as hotels have adjusted to current labor trends, and these lower labor margins will allow for slightly better gross operating profit (GOP) margins. High growth rates are expected in food and beverage departments due to continued growth in groups and business travel. While rooms and undistributed operating expense growth will moderate, utility departments are likely to see increases.