The US hotel industry faces a challenging year ahead, with forecasts indicating zero revenue growth for 2025.
Analysts from CoStar and Tourism Economics have revised their projections, now expecting a slight 0.1% decline in revenue per available room (RevPAR) for the year.
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This adjustment reflects a convergence of economic pressures and shifting travel behaviours.
Economic pressures Impacting hotel performance
Several economic factors are contributing to the subdued outlook for the hotel industry. The U.S. economy is projected to grow at a modest rate of 1.5% in 2025, down from previous forecasts of 1.9%.
This slowdown is attributed to persistent inflationary pressures, with the Consumer Price Index (CPI) expected to rise by 2.9% in 2025, impacting consumer spending and travel budgets.
High interest rates continue to affect both consumer and business spending.
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By GlobalDataWhile the Federal Reserve’s recent rate cuts may provide some relief, the cumulative effect of elevated borrowing costs over the past year has dampened investment and discretionary spending, including travel.
Shifts in travel demand and consumer behaviour
The hotel industry is witnessing a shift in travel demand, with luxury and upscale properties outperforming their midscale counterparts.
High-income travellers are maintaining their travel habits, opting for premium accommodations, while midscale hotels are experiencing declining demand and narrower profit margins.
Corporate travel, a significant revenue stream for hotels, remains below pre-pandemic levels. The rise of remote work and virtual meetings has reduced the need for business travel, impacting occupancy rates and group bookings.
In Washington, D.C., for instance, the deployment of National Guard troops in August 2025 led to a noticeable decline in tourist activity, including hotel occupancy, as visitors perceived the city as less safe.
Outlook for 2026 and beyond
Looking ahead, the hotel industry anticipates a modest recovery in 2026, with projections indicating a 0.8% increase in RevPAR. This optimism is based on expectations of improved economic conditions, including stronger GDP growth and a stabilisation of inflation rates.
However, the pace of recovery remains uncertain, influenced by factors such as geopolitical events, changes in consumer confidence, and the evolving landscape of travel preferences.
Hotels will need to adapt to these dynamics, focusing on enhancing guest experiences and operational efficiencies to navigate the challenges ahead.
Ultimately, while the U.S. hotel industry faces a challenging 2025 with zero revenue growth projections, strategic adaptations and a focus on high-end market segments may provide avenues for resilience and future growth.
