US hotel forecast downgraded amid economic risks
The downgrade reflects underperformance in early 2025 and growing concerns around the broader economic outlook.
The revised hotel industry forecast shows weaker anticipated growth across all key performance indicators. Demand is now expected to grow 0.6 percentage points less than previously projected in 2025, with a further 0.3-point reduction forecast for 2026.
Average daily rate (ADR) growth is also set to slow, dropping 0.3 points in 2025 and 0.7 points the following year. Revenue per available room (RevPAR), a widely used metric for hotel performance, is forecast to rise at a reduced pace—down 0.8 points in 2025 and 0.6 points in 2026.
While overall performance indicators remain positive, the pace of growth is slowing. Amanda Hite, president of STR (a division of CoStar), said demand is expected to remain subdued in the lower and mid-range hotel segments due to weaker consumer confidence.
Booking windows have shortened, making it harder for hoteliers to plan ahead, and leisure travel growth is becoming more isolated across markets.
Tourism Economics noted that economic headwinds are weighing on business and international travel recovery.
Aran Ryan, director of industry studies at the group, cited pressures from rising prices, a softening labour market, and cautious business investment.
Although the risk of a full recession has diminished, Ryan said the economy—and the travel industry with it—faces a delicate balancing act in the months ahead.
The business travel sector has shown signs of gradual improvement, particularly among group and transient bookings in certain industries.
However, recovery remains uneven and dependent on broader financial conditions.
In addition to reduced projections for RevPAR and ADR, the forecast also includes a downgrade to the expected gross operating profit per available room (GOPPAR).
The 2025 estimate has been lowered by $3, reflecting higher operating costs and less contribution from ancillary revenue streams.
Hite said that while GOP is still growing, the increase is modest when adjusted for inflation.
Rising departmental costs and limited margin expansion are expected to weigh on profit levels through at least 2026.
The updated outlook points to ongoing challenges for the US hospitality sector as it navigates slower economic growth, shifting travel patterns, and tighter consumer budgets.
"US hotel forecast downgraded amid economic risks" was originally created and published by Hotel Management Network, a GlobalData owned brand.
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