CoStar and Tourism Economics Downgrade U.S. Hotel Growth Forecasts Amid Economic Uncertainty

What's Happening?

CoStar and Tourism Economics have revised their forecasts for the U.S. hotel industry, predicting slower growth for 2025-26. This announcement was made at the 17th Annual Hotel Data Conference, highlighting economic uncertainties and subdued performance as key reasons for the downgrade. The forecast adjustments include a reduction in key metrics such as demand, Average Daily Rate (ADR), and Revenue Per Available Room (RevPAR). Specifically, demand is expected to decrease by 0.6 percentage points in 2025 and 0.5 in 2026. Amanda Hite, president of STR, pointed out that persistent inflation, challenging calendar comparisons, and changing travel patterns are contributing to the reduced demand. Despite these challenges, there is cautious optimism for improvement in hotel performance following the resolution of trade talks and the impact of the budget reconciliation bill.

Why It's Important?

The revised forecasts for the U.S. hotel industry have significant implications for various stakeholders, including hotel operators, investors, and the broader travel and tourism sector. A slowdown in growth could affect profitability and investment decisions, as well as employment within the industry. The anticipated decrease in demand and potential increase in expenses, particularly in food and beverage, could pressure profit margins. However, the expectation that the U.S. economy will avoid a recession despite tariff impacts provides some reassurance. The stabilization of the economic environment, aided by tax cuts and reduced policy uncertainty, could help mitigate some of the negative effects on the hotel industry.

What's Next?

Looking ahead, the U.S. hotel industry will need to navigate ongoing economic challenges while adapting to evolving travel patterns. Stakeholders may focus on cost management and operational efficiency to maintain profitability. The resolution of trade talks and the budget reconciliation bill could provide a more stable economic backdrop, potentially boosting consumer and business spending. Additionally, the industry may explore strategies to attract international visitors and capitalize on domestic travel trends to offset the anticipated decline in demand.