NASHVILLE, Tennessee — Hoteliers entered 2025 with a certain level of optimism that hotel performance would not just improve over last year but be strong. Although it started that way in the first few months, the trend quickly shifted down and pessimism set in.
"Come out the gate in January, great January. Great February. Go to do the forecast for March, it was like, 'Oh, that's not good,'" Mark George, senior vice president of commercial strategy at Island Hospitality Management said during a revenue management roundtable discussion hosted by CoStar News Hotels at the recent 2025 Hotel Data Conference. "It's just kind of continued since then. Every month, we open it up and prepare it and go to send it off to the owners, and there's a caveat every time."
Leah McFarland, senior vice president of revenue strategy at Crestline Hotels & Resorts, said they're continuing to have conversations with owners and brands about the current trends, but the positive momentum heading into the year has faded.
"In my experience, everybody's concerned, like, literally everybody's concerned," she said. "We are continuing to talk about the necessity of driving [average daily rate] ... . And then we're continuing to talk about how ADR is not there because demand is not there."
Below expectations
One of the initial red flags was spring break travel performing well-under expectations in leisure markets, Kristen Weaver, vice president of revenue and ecommerce at GF Hotels & Resorts, said. She said they also aren't seeing the number of guests from other countries that they usually receive.
Another warning sign was the pullback in government travel related to mass layoffs of federal employees. George said a $200,000 group in Springfield, Virginia, canceled a booking and that was "when the floodgates opened for us."
McFarland, said there are segments of group travel that are performing well, but the lack of government travel — and travel from nonprofits funded by the government — is putting the segment at a deficit.
The same goes for international inbound travel, which is well-below numbers in year's past, she said.
"There's an entire segment of our group business that is gone. Just poof, in the night, gone. And the same with international tour," she said. "Certain segments of group are doing fine, but they are not doing fine enough to make up for the government loss."
The effect of the government travel pullback varies from market to market, McFarland said. In Washington, D.C., for example, it's had more of an impact — an "utter implosion."
George said on average government travel makes up 7% to 10% of Island Hospitality's demand base. He singled out San Diego as another market heavily impacted by the lack of this travel.
"San Diego ... is event-driven and there's conventions, there's all kinds of stuff," he said. "We rely on that extended-stay government so that we don't have those craters after these events. When it's not in, you have those three days where there was a convention ... the days around it are bad because you don't have that government base that you relied on for years."
Instead of that group travel, revenue managers have had to shift their attention toward one-night stays at a discounted rate, McFarland said.
Business travel remains below 2019 levels, but there's a question of whether getting back to those levels should even be the expectation. George said his company has a large presence in the Bay Area, and business travel isn't anywhere close to what it was back then.
"I can tell you right now, it's not back, not by a long shot. It probably never will be," he said. "I think your expectation needs to be 80% of what it was in 2019 and that's your number."
Paul Wood, regional vice president of revenue management at Pyramid Hotel Group, said businesses such as medical travel is still strong, but when it comes to technology or sales travel, not so much.
"We're not seeing as long of stay, or it's not as frequent," he said.
Leisure travel is also starting to take a different shape this year. Wood said airlift to major cities in his portfolio has declined, most likely due to rising costs with all elements of travel — whether that be airfare, hotel rates or food costs. This is leading to shorter lengths of stay.
"Now today, it's harder to get there, it's more expensive to get there, stay there and everything else price-wise is going on," he said.