Urban Hotel Markets Expected to Sustain Growth into 2025, CBRE Hotels Forecasts

• The urban hotel sector is expected to witness steady growth in revenue per available room (RevPAR) in 2025, with a predicted increase of 2.0% due to improved group and business travel and the ongoing recovery of inbound international travel.
• Despite existing cost pressures, the U.S. hotel market fundamentals remain robust, potentially fueling a resurgence in investment activity in the latter half of 2025.

CBRE Hotels predicts that revenue per available room (RevPAR) will experience steady growth in 2025, with urban locations outperforming owing to improved group and business travel and the continued recovery of inbound international travel. A 2.0% increase in RevPAR growth is forecasted for 2025, indicating a continued recovery of the lodging industry. Compared to pre-pandemic levels in 2019, RevPAR is expected to be 16.6% higher in 2025.

CBRE’s baseline forecast for 2025 includes a 2.4% GDP growth rate and an average inflation of 2.5%. Due to the strong correlation typically observed between GDP and RevPAR growth, the relative strength of the economy will directly influence the lodging industry’s performance.

Rachael Rothman, CBRE’s Head of Hotel Research & Data Analytics, stated that the U.S. hotel market is set for steady growth in 2025, primarily due to the continued outperformance of the urban segment. The resilience of the sector and the sustained demand for higher-priced hotels are promising for the upcoming year.

CBRE projects RevPAR growth within the 1.5% to 3.5% range over the next several years, barring a recession. This projection is supported by numerous planned events, such as the 2026 FIFA World Cup, the 2028 Summer Olympics in Los Angeles, and the United States’ 250th anniversary in 2026, along with the ongoing appeal of national parks, global gateway cities, and U.S. leisure destinations.

Despite existing cost pressures, the robust fundamentals of the U.S. hotel market are anticipated to trigger a resurgence in investment activity in the latter half of 2025. Bill Grice, President of CBRE Hotels in the Americas, expressed expectations of narrowing buyer and seller expectations, which could fuel increased transaction activity.

CBRE anticipates restrained supply growth due to high financing and construction costs, averaging less than 1% over the next three years. Factors such as potential additional tariffs, labor shortages, or the Fed pulling back on further interest rate reduction could further temper supply growth, enhancing pricing leverage and escalating replacement costs for existing assets.