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The upsides and downsides to the revised US hotel forecast

Tell Me More podcast hosts talk different scenarios

NEW YORK — As demand for hotel rooms in the U.S. cools amid big-picture uncertainties, forecasts for how hotel performance will play out the rest of this year follow.

CoStar and Tourism Economics downgraded its U.S. hotel forecast this week to call for 1% revenue per available room growth in 2025, down from 1.8%. But how forecasts actually play out is subject to change.

The hosts of the "Tell Me More: A Hospitality Data Podcast" recorded a bonus episode unpacking the U.S. hotel forecast and what might propel better-than-expected hotel performance this year, along with what might stir up more headwinds.

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Natalie Harms
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The downside

Jan Freitag, CoStar's national director of hospitality analytics, said the risk factors for the remainder of the year are supply, demand and revenue.

“What could happen? Supply could pick up, if we see labor cost and construction costs come down,” he said. “We could see interest rates finally cut, and people jumping in and building more hotels. Demand could be lower … the American leisure consumer may not travel as much, international inbound could be much weaker than expected and corporate transient demand could be weaker.”

And if demand drops off sharper than expected, Freitag said that would affect room rate growth, making the projected 1.3% average daily rate growth “actually too aggressive,” he said.

Isaac Collazo, STR's senior director of analytics, said he’s watching for price discounting and drops in consumer confidence.

“To me, demand will be impacted most when our population starts losing jobs, and when that gets to the professional segment, if big corporations lay off ... people that travel, that’s when you could really see a change in demand,” he said.

But for now, Collazo reminded listeners the employment picture looks good and layoffs are below long-term trends.

The upside

The insatiable appetite among Americans for travel is what keeps Collazo optimistic, he said.

“We’ve seen it already in the [strong] Memorial Day holiday results,” he said. “We sold more [hotel] rooms this Memorial Day weekend than a year ago, and it was the third-highest in history.”

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As long as consumers have income security, Collazo said he thinks a lot of people “shrug off the noise” of uncertainty and go ahead with travel, which could result in a strong summer season.

Freitag agreed, noting that hoteliers learned during the pandemic years to not underestimate the power of domestic travel.

“If things are uncertain, Americans may just stay home and not go far afield to Venice or Tokyo, and they may just go back to the Great Smoky Mountains or the Colorado Rockies or San Diego,” he said.

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