HENDERSONVILLE, Tenn. — According to the latest forecast by CoStar Group and Tourism Economics, U.S. RevPAR is expected to grow marginally by 1.8 per cent in 2025. The forecast also predicts a 1.6-per-cent growth in the Average Daily Rate, with an occupancy level of 63.1 per cent.
The growth trend has shifted from the latter half of the year to the first half, primarily driven by the demand generated by disaster-stricken markets in the previous year. The forecast suggests that the luxury RevPAR is expected to grow by 2.9 per cent in 2025, an increase of 25 basis points over the last prediction. This projection is formed because two-thirds of luxury hotels experienced a surge in demand in 2024, a trend expected to progress into 2025.
Furthermore, the upper-upscale, upscale and upper-midscale segments are anticipated to maintain their solid performance. The midscale segment, however, may face a 0.7-per-cent decrease in RevPAR due to supply growth in the first half of the year and difficult comparisons in the latter half.
One significant cost that hoteliers must consider is customer acquisition. Cindy Estis-Green, CEO and co-founder of Kalibri Labs, revealed that hotels are spending 15 to 25 per cent on acquisition costs, with the average running about 18 per cent. With brand.com booking channels holding 25 per cent of share and property direct down to 30 per cent, the hotel booking process has majorly shifted towards online channels.
Despite the challenges, the forecast for 2025 suggests a slight increase in general operating profit per available room. However, when adjusted for inflation, the U.S. hotel industry is predicted to end 2025 one-per-cent below real GOP compared to 2019.
In terms of demand segments, corporate transient demand at U.S. hotels is expected to face headwinds in 2025, largely influenced by the stock market and corporate profits. Yet, return-to-office rates have been rising, which may result in more frequent business travel.
The forecast for foreign inbound leisure is positive, but exchange rates and travel expenses largely drive it to and from the U.S. compared to other countries. The domestic leisure outlook is also positive, largely due to soft comps from 2024, which will likely lead to better performance in 2025 for the hotel industry.
In conclusion, the hotel industry is expected to witness steady growth in 2025 despite the challenges of rising expenses and the shift towards online booking channels.
