Photograph generated with AI by Marina Shvedak for Adobe Stock
The first hotel forecast update of the year from STR parent company CoStar and Tourism Economics is predicting a 1.6 percent rise in average daily rate for 2025, accompanied by 1.8 percent growth in revenue per available room. The update, released yesterday at Northstar's Americas Lodging Investment Summit, is essentially the same as the previous forecast, released in late 2024. Rate and RevPAR figures haven't changed, while projected 2025 occupancy was raised by 0.1 percentage points to 63.1 percent.
Photo Credit: CoStar Group"While business optimism is on the rise, economic data has not changed significantly from our previous forecast," explained Amanda Hite, STR president. Fourth-quarter performance was robust in 2024, added Hite, but that was driven more by holiday travel and weather rather than any overarching trends.
"Additionally, the impact of the new administration has not been factored into the forecast," Hite added, "as significant policy changes have yet to be implemented, and any projected effect of those changes remains unclear."
Potential government-policy effects
Thus far, President Trump's orders have directly caused the cancellation of health-science meetings such as those from the National Institutes of Health, as well as higher-education conferences related to diversity. Events cancelled at both Rutgers University and Michigan State University, for instance, were intended to be virtual; any long-term impact of these policies on in-person events and hotel performance is yet to be determined.
International travel effects also remain a question mark. "Trump administration trade and immigration policy priorities present downside risks, particularly to inbound travel," said Aran Ryan, director of industry studies at Tourism Economics, citing examples like "trade war responses, visa impediments, charged rhetoric, and general border and policy uncertainty."
Still, the outlook for travel overall remains optimistic. "Economic conditions in 2025 are expected to provide a favorable backdrop for travel activity," Ryan explained. "Unemployment is low, inflation is slowing, consumers are spending — particularly those in higher-income households — and business-investment activity is solid."
Business and group outlook is strong
Higher-end hotels are expected to continue to drive the industry's performance, noted Hite, driven by both luxury and business travelers, as well as group activity. "With continued growth in groups and business travel, F&B departments are expected to report some of the highest growth rates this year," she added.
Hotel profits should improve overall, according to the report, as labor costs continue to stabilize.