U.S. Hotel Growth: CoStar and Tourism Economics Predict Chilly Forecasts

A Clouded Horizon for U.S. Hotels

The 17th Annual Hotel Data Conference witnessed CoStar and Tourism Economics presenting a decidedly grim outlook for the U.S. hotel industry. The revised forecasts for 2025-26 painted a picture of diminished growth, highlighting elevated economic concerns and underperformance as key factors.

The Revised Metrics

Across major indicators such as demand, Average Daily Rate (ADR), and Revenue Per Available Room (RevPAR), all projections have been adjusted downward. For 2025, demand expectations were dropped by 0.6 percentage points, while ADR saw a reduction of 0.5 percentage points and RevPAR fell by 1.1 percentage points. Similar reductions were forecasted for 2026.

Challenges and Hopes Ahead

According to Hospitality Net, amidst relentless uncertainty, inflation, and shifting travel patterns, hotel demand has notably sagged. Yet, there lies a glimmer of hope as trade talks conclusion and the positive impacts from a forthcoming budget reconciliation bill are anticipated to steer performance towards recovery. Amanda Hite, STR president, remains cautious yet hopeful for improved conditions beyond the immediate hurdles.

Economic Pressures and Strategic Adaptations

Drawing insights from Aran Ryan of Tourism Economics, the U.S. economy is expected to absorb challenges without veering into recession territory. The current economic climate, marked by reduced business spending and waning international travel, may see moderate boosts from tax cuts and reduced policy uncertainty as we transition to 2026.

Margins Under Scrutiny

While Gross Operating Profit Per Available Room (GOPPAR) projections remain unchanged, the gross operating profit margins face pressure with predicted increases in certain costs. This forecast has caused a reassessment, leading to a revision downwards of margins by 0.3 percentage points for 2025 and 2.3 percentage points for 2026.

The Bigger Picture

CoStar Group remains a pivotal entity, providing critical data and analytics for informed decision-making within the real estate and hospitality markets. As global leaders, CoStar’s insights into the industry’s metrics are integral to navigating these economically uncertain times.

As the sector braces for a potentially turbulent journey, industry stakeholders are compelled to innovate and strategize with caution and optimism, aiming to withstand and eventually thrive through the challenges ahead.