Hospitality Economic Outlook According to STR, CoStar & Industry Analytics

Forecasts have been revised downward

Below are key observations on the current and forward U.S. hotel outlook, including upside drivers and risk factors. I’ve also cited sources so anyone can dive deeper. I hope you find this useful

Key Observations: US Hotel / Lodging Performance YTD

1. Luxury vs Economy Split

   
   

   Luxury hotels are outperforming midscale and economy segments.

   • Through April 2025, luxury RevPAR (Revenue per Available Room) rose ~7.1%, while economy only saw ~0.9% growth year-over-year. PwC

   • The gap is growing: high-end segments benefit more from strong group, business, and international travel; budget/economy is under pressure. Hotel Dive+2CoStar+2

2. Flattening Occupancy and Modest Rate Growth

   • Occupancy is expected to dip slightly in 2025. CoStar / Tourism Economics project it around 62.5%–62.8%, down from ~63.0% in 2024. Colliers+3Business Travel News+3Hotel Dive+3

   • Rate (ADR) growth is modest (hovering ~1-2%). RevPAR growth is expected to be small and sometimes flat in many markets. Colliers+4Hotel Law Blog+4Hotel Dive+4

3. Soft Macro & Demand Headwinds

   • Inflation remains “sticky,” input costs (labor, utilities, insurance) are rising. Hospitality Net+3CBRE+3AHLA+3

   • Consumer sentiment is cautious; discretionary spend is under pressure. Some pullback in international inbound travel is hurting recovery in certain markets. CBRE+2CoStar+2

   • Comparison to strong numbers from previous years (especially QoQ comps) makes growth harder. Hotel Dive+1

4. Segment Strength: Extended-Stay / Select-Service

   • These segments are showing durability and strength. Demand and RevPAR for select-service and extended-stay hotels are at or above pre-pandemic levels in many cases. Extended Stay Lodging Association

   • Their leaner models, fewer operational complexities, and alignment with evolving traveler preferences (longer stays, more remote / flexible work, “bleisure”) make them especially attractive. Extended Stay Lodging Association

5. Outlook Moderated, Optimism for H2 2025 & 2026

   • Forecasts have been revised downward somewhat. Flat to modest RevPAR growth for 2025 is now the norm for many analysts. PwC+3Hotel Dive+3Business Travel News+3

   • But many expect momentum toward the end of 2025, particularly Q4, with easier comps, recovering international travel, improvement in demand from corporates & groups. CoStar+1

Broader Climate: Risks, Costs & Trends

• Rising Costs: Labor, utilities, insurance are increasing. Midscale & economy properties especially feel margin pressure. AHLA+2PwC+2

• Financing & Development Constraints: High interest rates / credit spreads and elevated capital costs are slowing new development. In many markets, owners are turning toward “conversions” (repurposing existing buildings) rather than ground‐up builds. Paramount Property Tax Appeal+2Colliers+2

• Supply Growth Moderated: While there is still growth in supply, it’s not accelerating sharply; hotel pipelines are large but many projects are in planning rather than under construction. AHLA+2Extended Stay Lodging Association+2

• Shifts in Demand Patterns: More demand for flexibility, blended travel (leisure + business), remote work / “bleisure” travel. Some markets hurt more than others depending on reliance on international travel, convention business, or social & group events. CoStar+2Hospitality Net+2

Forward Look / Opportunities

1. Recovery in Q4 2025

   
   

   Many expect RevPAR growth to tick up toward the year end, aided by easier comps (previous holiday / election timing differences), more stable macro conditions. CoStar+2PwC+2

2. Selective Strength in High-End, Select-Service, and Extended-Stay

   
   

   These segments are likely to continue outperforming. Owners with assets in these brackets, or who can convert or reposition their assets, may be better placed. Extended Stay Lodging Association+1

3. Cost Efficiency & Operational Innovation Will Be Key

   
   

   Tools, remote work, flexible staffing models, strong sales support (especially in uncovered segments), tighter cost control — all will provide competitive edges.

4. Importance of Loyalty, Distribution, & Brand Alignment

   
   

   Given pressure on rates and occupancy, leveraging brand distribution, loyalty programs, and efficient marketing / sales channels will matter more.

5. Geographic & Market Segmentation Matters

   
   

   Markets heavily dependent on inbound international travel, government business, or convention & group events may lag until travel patterns fully recover. Domestic travel, drive-to destinations, secondary & tertiary markets may see steadier, more resilient demand.

6. Risk Factors to Monitor

   • Inflation or cost shocks

   • Further weakening in international travel (visa policies, geopolitical climate)

   • Consumer spending softness if wages don’t keep up

   • Elevated supply in some local markets leading to price competition