STR parent company CoStar and Tourism Economics have downgraded growth projections for 2025-'26 in their newly revised U.S. hotel forecast. The softer outlook was presented at this week's NYU International Hospitality Investment Forum.
While the changes from the previous forecast were not dramatic, projected growth was lowered across all primary metrics for 2025, including supply (-0.1 percentage points from the previous forecast), demand (-0.6 percentage points), average daily rate (-0.3 percentage points) and revenue per available room (-0.8 percentage points). Underperformance in the first quarter, along with macroeconomic uncertainty and concerns, drove the revised outlook.
Looking ahead to 2026, similar reductions were made to supply (-0.5 percentage points), demand (-0.3 percentage points), ADR (-0.7 percentage points)and RevPAR (-0.6 percentage points).
Occupancy, and ADR and RevPAR growth, are expected to be lower in 2025 than in 2024, with occupancy rising to 2024 levels in 2026.
Hotels might prioritize group business
While growth still is occurring across the metrics, the weaker rate of growth will be most evident in the leisure market. "Until consumer confidence improves, demand is going to remain softer — especially in the middle and lower-price tiers," said STR president Amanda Hite. "Rate is pushing the top line in the group segment, and business transient should continue to recover in a lot of industries, but leisure gains are going to be more isolated."
Booking windows have shortened, Hite added, which is adding to hotelier challenges.
The macroeconomic challenges that have caused market turbulence thus far in 2025 might have lasting effects for hoteliers for the remainder of the year. "We’re looking ahead to a second half of the year with consumers facing higher prices and a weaker labor market, businesses tapping the brakes on investment, and soft international visitor volumes," said Aran Ryan, director of industry studies at Tourism Economics. "While recession risks have eased, the economy — and the travel sector — will walk on a tightrope through this period."
