Execs describe how disruptions hit hotels unevenly throughout 2025

After a seemingly bright start to the year, U.S.-based hotel companies ran into a number of unexpected challenges through 2025.

Natural disasters, economic uncertainty, new government policies and geopolitical strife were among the many disruptions to travel demand and business processes during the year.

Read below to see what executives at publicly traded hotel brand companies and real estate investment trusts had to say about the obstacles and how they affected hotel performance.

“In the U.S. and Canada, fourth quarter [revenue per available room] was around flat. Luxury again saw solid growth, which was offset by declines in the select-service tier. Leisure transient RevPAR rose 2% in the quarter, while group RevPAR increased 1%. These gains were offset by a 3% decline in business transient RevPAR largely due to a meaningful decline in government RevPAR in the quarter. Government RevPAR was down over 30% during the 43-day U.S. government shutdown, though it has since moderated to down around 15%.”

"Turning to results for the fourth quarter. System-wide RevPAR increased 50 basis points year-over-year as strong international performance and solid group demand were offset by softer U.S. government demand and weaker international inbound into the U.S.

"In the quarter, leisure transient RevPAR was up 2.3%, driven by international strength, especially in [Europe, the Middle East and Africa]. Business transient RevPAR was down 2.1%, driven primarily by headwinds from the U.S. government shutdown. Group RevPAR was up 2.6%, driven by strong international group growth and company meeting demand. System-wide RevPAR for the quarter was strongest in December, up 1.7%, with strength in leisure and group and a meaningful pickup in business transient. Positive trends continued into early 2026 with group leading, including strong in-month group bookings, solid leisure demand and continued business-transient improvement."

“Our global RevPAR declined 4.6% year over year in the fourth quarter on a currency neutral basis, as discussed on the prior call. This was driven by the tougher hurricane comparison in the U.S. Southeast from the prior year.

“Our fourth-quarter results were also affected by the government shutdown and continued softness in international inbound travel. Despite these pressures, we achieved occupancy share index gains versus our competitors on a full-year basis, excluding hurricane-related distortions.”

"We still view that $1.2 trillion infrastructure spend as a real multiyear tailwind for us. And additionally, it will get back to driving that 150 basis points of additional RevPAR growth that it did for us in the [fourth quarter] of '24 pre-DOGE and pre-government shutdown, which slowed us down this year. And we're also very encouraged about hotels, and there are so many private investment projects, infrastructure projects, especially data centers and semiconductor fabs, which, as we talked about, continue to outperform from a RevPAR and our [retail price index] standpoint. Excluding the government and the Fed rooms, which were obviously down, as I mentioned, infrastructure demand, it kept pace. It helped drive, we believe, our weekday economy occupancy improvement that we saw each month of [the fourth quarter]."

“Government policies that created economic uncertainty or downright negative impacts like the freeze on government travel got in the way, along with the government shutdown later in the year. This is very evident in the STR industry numbers. Industry demand started out the year well but began to weaken in February following a deterioration in our relations with Canada. Then it turned negative in April, coinciding with Liberation Day and heightened policy uncertainty then worsened in October and November with the government shutdown, cutback on airlift and fears about flight safety.

“Fortunately, once the shutdown ended, travel began to recover with strong leisure trends arriving with Thanksgiving and continuing all the way through the Christmas and New Year's holidays.

“The industry also faced a worsening international trade imbalance all year with international outbound travel from the U.S. continuing to grow in 2025, while international inbound travel to the U.S. declined. International outbound travel now sits well above 2019 levels and inbound sits well below 2019 levels. Government travel was also lower than 2024 throughout the year as was government-related travel and government-impacted travel, such as travel associated with healthcare, universities, research and defense.

“The so-called K-shaped economy developed during the year with the upper half of the socioeconomic spectrum seeing their financials improve and therefore, spend more and the bottom half pulled back and focused more on necessities instead of discretionary purchases like travel. This created a clear bifurcation of performance in the hotel industry, with the upper half performing significantly better than the bottom half. Our portfolio, which almost entirely consists of upper-upscale and luxury properties, performed better as a result.

“But the true underlying performance of our portfolio was obscured by the nine-month impact of the L.A. fires and our then-nine properties in that market and by the negative government-related impact on travel to D.C. and San Diego.”

"You've got geopolitical and, obviously, we look at what's happening in the Middle East and Iran in the U.S. right now. Inflationary pressures are still there. International travel really hasn't rebounded yet. We're seeing some green shoots, but we're certainly still down pre-pandemic. And the consumer is cautious. And we've got a K-shaped economy right now.

"So look, we think it was prudent to be conservative and cautious for all the reasons that [Executive Vice President, Chief Operating Officer and Chief Financial Officer] Sean [Dell'Orto] outlined, particularly as you went quarter-by-quarter, and obviously, as I give you sort of macro, we should think about the tailwinds, but there are some headwinds out there.

"And if you think about what's happened in the last few years in the sector, first quarter came out to be pretty good. And then for many of us, if not all of us, we saw somewhat of a downward trend. So, we think right now makes sense to just be a little more measured, a little more cautious coming out of the box."

“We were pleased with our solid fourth-quarter results, which came in ahead of our expectations despite a choppy operating environment that was further constrained by the protracted government shutdown.

“Government business demand was further impacted during the quarter by the shutdown, primarily affecting our D.C. and Southern California markets. Relative to group, our revenues were down 3% as in the quarter. For the quarter, demand was artificially impacted by the shutdown in October and November. However, group dynamics remain strong, as evidenced by the growth in our group ADR of 4%.”

"Early last year, we were engaged in active discussions around the potential disposition of several DiamondRock properties, largely driven by inbound interest. The uncertainty introduced by Liberation Day understandably paused many of those conversations.

"Over the past six months, however, most of those discussions have resumed. To be clear, we do not expect every asset under review will be sold nor do we feel any pressure to sell. The breadth of interest has been wide, spanning both smaller and larger assets across urban and resort markets."

“During the year, leisure travel remained strong across our hotel portfolio, while policy uncertainty and a pullback in government travel impacted midweek demand, temporarily disrupting the steady improvement in midweek occupancy that characterized much of 2024.

“Our asset management and hotel teams adjusted strategy to optimize the mix of business at our hotels as demand trends shifted in many cases, layering on additional group business, to bolster market share and strengthen overall portfolio performance. Through the successful navigation of changes in government-dependent demand, combined with continued strength in leisure travel, we achieved comparable hotel RevPAR of $118 for the full-year 2025, down 1.6% to the prior year.”

“I think as we've progressed through the year, and reported on government being pulled back and related business, whether it be government-adjacent that we can identify or general BT-related to some uncertainty, we've been clear, it's hard to quantify completely.

"If you look at room nights for government on a same-store basis for the full year, they were down about 12% and negotiated was down 5% to 6% which really that trend did not start until [Department of Government Efficiency] and certainly ebbed and flowed throughout the year, ending the year down a little bit more with the government shutdown.

"So I'd say if you think about it from that perspective, and you assume a good portion of that could come back. The total of those could be about 1 point in occupancy. But some of that from a DOGE perspective may not return.

"And so that's why the team worked really, really hard to optimize the mix of business and replace some of that with group business throughout the year."

"We expect full-year 2026 RevPAR to range from flat to up 3%, driven predominantly by gains in average daily rates. While our outlook for the full year is constructive, we expect the first quarter to be the most difficult of the year with RevPAR trending in line with our fourth-quarter 2025 results. January RevPAR declined approximately 3% despite a strong start to the month as Winter Storm Fern created significant disruption across our portfolio.

"We also faced difficult comparisons in the quarter as our first quarter last year benefited from incremental demand created by natural disasters in Florida and California; and Super Bowl 59 being hosted in New Orleans, where we have six hotels. February represents our most difficult comparison of the quarter as portfolio RevPAR increased over 7% last year."

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"The pressure we saw on RevPAR, particularly in the second and third quarter of the year was so much driven by the pullback in government and international inbound demand. And part of the knock-on effects of that was it forced us to remix our business. And part of that remixing was into lower-rated channels, particularly lower-rated leisure travels, more [online travel agency] exposure, more advanced-purchase exposure. We definitely tried to create a layer of group and advanced-purchase demand. I think we are successful doing that.

"I think what's given us some encouragement is while we were still down in the fourth quarter — and we expect the first quarter to still have these government-driven headwinds — we've been forced to do less remixing. And we are seeing a little bit more stability and growth in some of these other segments. And obviously, we're going to get to a point where we lap the very difficult government comparisons.

"So again, what we've tried to emphasize is that outside of those demand segments, the performance of other segments of our business has held up reasonably well. I wouldn't say we've seen any significant widening of the booking window at this point. I will say that, again, we feel like there is more and more incremental demand that's helping offset some of the falloff from the government segment in particular."

"As we shared with you on prior calls, performance last year in Washington, D.C., was less robust than initially anticipated and was impacted by government spending cuts, changes in policies and the government shutdown. Similarly, our results in San Diego were hampered by softer transient demand and a less constructive backdrop for international travel."

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"At the same time, our focused portfolio will experience headwinds from softer transient demand in San Diego and continued uncertainty in D.C., two of our larger markets, which will offset some growth. That said, both hotels had better-than-anticipated transient demand in January and February, which, if current trends continue, could result in a better-than-anticipated year."

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