With economic headwinds continuing to weigh on travel demand, CoStar and Tourism Economics again revised their 2025 forecast for U.S. hotels, projecting zero revenue growth.
CoStar and Tourism Economics now forecast a 0.1% decline in revenue per available room (RevPAR) for 2025; demand is also expected to drop 0.1%. Hotel occupancy is forecast to fall to 62.5%, down from 63.0% in 2024, while the average daily rate (ADR) is projected to grow just 0.8% versus last year's 1.8% increase.
The latest revision follows a previous downgrade in June, when RevPAR growth projections for 2025 were reduced from 1.8% to 1%.
"Unrelenting uncertainty and inflation, coupled with tough calendar comps and changing travel patterns, have caused lower demand," said Amanda Hite, president of hotel data analytics firm STR (a CoStar company).
For 2026, CoStar and Tourism Economics are forecasting a modestly improved performance, with slight growth in RevPAR (0.8%) and demand (0.6%.) Hotel occupancy is projected to slightly decline to 62.3.
Consumer sentiment drops
The downwardly revised forecast aligns with falling consumer sentiment.
A survey in late July from investment bank TD Cowen found that traveler sentiment about future hotel stays dropped to its lowest level since the final Covid scare in December 2022. \
TD Cowen asked 1,000 U.S. residents who had recently traveled about their expectation for hotel stays over the next year; net positive sentiment dropped to plus-28%, a decline from plus-32% in June and from plus-34% in July 2024.
According to TD Cowen, the dip was primarily driven by middle- and higher-income households, while lower-income travelers showed a slight uptick from historically low levels.