U.S. hotel performance in early June shows a decline in demand, with significant regional variations and potential risks in average daily rates.
Current Performance Trends
The U.S. hotel industry experienced a decline in performance during the week of June 8-14, marking the third consecutive week of reduced demand. This downturn comes at a time when the early-summer travel season was anticipated to boost hotel occupancy rates. However, the national averages do not tell the whole story, as regional disparities are evident.
Regional Disparities
The Mountain and West South Central regions have seen the steepest declines in demand. Las Vegas, a major market within the Mountain region, has been particularly affected by a drop in international arrivals since May. Similarly, Texas, part of the West South Central region, faces challenging year-over-year comparisons due to last May’s derecho, impacting cities like Houston. Houston and Las Vegas accounted for 32% of the total room demand decline among markets reporting losses.
Conversely, 61 out of 172 U.S. markets have reported month-to-date (MTD) demand gains in June. Notable growth has been observed in Chicago, Nashville, the Oklahoma Area, Orlando, and Saint Louis, which collectively contributed to 32% of the growth in markets with increased demand.
Average Daily Rate and Booking Trends
The growth in average daily rate (ADR) has shown signs of softening, particularly in select-service segments. This trend poses a downside risk to forecasts made in early June. Monthly data through May indicates that ADR growth is aligning closely with demand, particularly in the Upscale and Upper Midscale segments, while Midscale and Economy segments are experiencing declines.
Despite the overall decline in demand, forward booking data in the Top 25 Markets remains positive for June. Shorter booking windows are becoming more common, with occupancy levels improving as stay dates approach. However, discrepancies between booked and actualized occupancy rates have been noted in markets such as Las Vegas, Houston, Philadelphia, and Orlando. These gaps may be attributed to Group room blocks not meeting expectations, especially concerning international travelers.
Travel and Supply Indicators
International travel remains a critical factor, with inbound travel showing declines earlier this year, leading to downgraded projections from Tourism Economics. International arrivals, which make up an estimated 4-7% of U.S. hotel demand, were down 3.1% over the first five months of 2025. Meanwhile, domestic travel has seen a slight increase, with TSA screenings showing a 0.1% year-over-year rise for the week ending June 21.
Supply growth has not significantly pressured hotel performance, with a month-to-date supply growth of +0.8% in early June, the highest since July 2022. Markets like Nashville, New York City, Orlando, San Diego, and Washington, DC, have seen the most significant additions in new rooms.
Outlook
Looking ahead, the industry faces uncertainty, with travelers booking closer to their travel dates. Leisure travel, particularly around major events, is expected to play a crucial role in shifting demand and ADR trends positively. Consumer confidence remains a critical factor, as recent forecast downgrades have highlighted. While ADR growth has been a key driver of top-line performance, it also presents a potential downside risk if demand does not recover as expected.
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