STR/TE Market Forecast Assumptions – November 2024

Market Forecasts, produced by STR and Tourism Economics, provide you with the insights needed to anticipate future performance. 

Europe short-term outlook:

Aggregated growth in revenue per available room (RevPAR) for STR’s 31 European markets is forecasted at 4.6% for 2024, a downgrade from the 5.7% projected in August 2024. The downgrade is primarily due to lower gains in average daily rate (ADR), now forecasted to rise 3.0% for the year. Although leisure events and strong summer demand helped push room rates in the first three quarters of the year, a gradual increase in traveler price sensitivity, combined with continued slow improvement in corporate demand, has increasingly limited pricing power since Q4 2024.

Price sensitivity is expected to carry through in 2025, with the balance of RevPAR growth shifting. Occupancy (+1.2%) will drive an expected 2.0% improvement in RevPAR. ADR will continue to rise at a subdued pace as the impact of persistent, high inflation over the course of two years, alongside subsequent, heightened interest rates, work their way through the economy and limit consumer spending.

At the market level, ADR is forecasted to decline in eight European markets next year, while only four markets are projected for an occupancy decline. German markets feature heavily in the occupancy decline list, because of tougher-to-match comparables from the UEFA Euros and major trade fair offsets. However, that same reliance on trade fairs has led to significant improvement in the ADR outlook for many German markets in 2026, as the calendar continues to fill out and biennial/triennial events return.

Asia Pacific short-term outlook:

Performance trends across Asia Pacific markets continues to diverge. RevPAR for STR’s 16 forecast markets is projected to rise 4.8%, a notable downgrade from the 6.9% forecasted in August. The change comes primarily from significant adjustments in occupancy and ADR in five Mainland China markets. While Chinese markets experienced an exceptional RevPAR rebound in 2023, this year has proved to be more challenging. Decelerating economic growth through the year has had an outsized impact on hotel performance, most notably ADR.

Poor consumer sentiment has limited leisure demand, while tightened budgets have reduced corporate travel. As such, RevPAR is forecasted to decline in four of six Mainland markets for 2024. Performance should strengthen in 2025, although price sensitivity remains in full effect, with occupancy growth driving RevPAR in five of six markets.

Across the Asia Pacific region at large, ADR remains the primary driver of RevPAR growth in 2024 and 2025. Four markets – Tokyo, Bangkok, Jakarta, and Mumbai –are showing above average rate growth this year, and three of those four markets will carry that growth through 2025. Offsets to the spectacular Ambani wedding in July, along with rising supply, will lead to a modest decline in 2025 ADR for Mumbai.

The Asia Pacific demand outlook for 2025 remains strong as well, with all markets projected for occupancy improvements except Brisbane, where supply is set to increase 5.8%.

Middle East short-term outlook:

The Middle East market RevPAR forecast is stable at 3.9% for 2024, although the 2025 outlook, has been reduced to 1.0% from the 1.9% projected in August. The region’s substantial pipeline and the fluctuations therein are the primary reasons for shifts in the 2025 outlook.

Abu Dhabi’s incredibly successful 2024 – RevPAR is forecasted to rise 20% this year – has led not only to difficult comparisons in 2025, but to an increase in developer interest. With supply now forecasted to increase 1.8% next year, and growth expected to accelerate each year thereafter, ADR growth has been tempered from 4.0% to 2.1% in 2025.

Changes in Jeddah’s pipeline have shifted some opening dates further afield into 2026, but even a modest reduction to supply expectations – growth is still expected to reach 11.9% next year – won’t offset permanent changes in government structure that have limited pricing power this year. Jeddah’s challenges are further compounded by new leisure destinations rising in prominence across the Kingdom as Saudi Arabia continues to build toward Vision 2030. Consequently, ADR is now forecasted to decline in both 2025 and 2026.

Long-term outlook:

Long-term expectations are largely unchanged, with regional demand and RevPAR expected to rise annually across the world from 2024 through 2028 as well as minimal adjustment to year-over-year growth from 2026-28. Long-term ADR growth should likewise remain stable, with the expectation that any long-term changes to the metric are caused by economic factors, new supply, or events and their offsets.

RevPAR growth for 2026-28 remains pegged at a long-term annual average of roughly 2% across European, Middle East, and Asia Pacific markets. RevPAR growth will revert to its historic, rate-driven trend across all regions by 2026 as well. Occupancy and ADR growth will be near-equal in Asia Pacific and European markets through 2027, while the influx of new, often higher-end rooms will push rates at nearly twice the rate of occupancy in the Middle East.

Mainland China sample change:

STR continues to grow hotel participation to provide clients around the world with the best and most representative performance data. Over the past year, several large brands based in Mainland China have started to submit historic performance data backdated to 2019. Due to the size and scale of this submission, data loading has been ongoing since Q4 2023 and is expected to run through the rest of this year.

In the short term, actualized ADR and RevPAR may be affected as data is loaded on a rolling basis.

Once the full historic range of performance is added, however, these figures will begin to stabilize. We will continue to update our forecasts on a quarterly cadence with the historic data available at time of forecast.

Supply methodology:

Historic and forecast data utilizes STR’s standard methodology, which considers supply for all open hotels in a market and does not include temporarily closed properties.

Global travel and tourism trends:

Global inbound arrivals are projected to recover this year, surpassing 2019 levels by 0.1%, marking a year-on-year increase of 12.4% compared to 2023. This positive trend persists despite weaker-than-expected tourism data during the summer months and a slower-than-anticipated rebound in China’s long-haul outbound travel. Consumer optimism remains high, with many maintaining a favorable view of the current economic climate and prioritizing discretionary spending on travel.

The Middle East continues to lead in growth among global regions, with inbound arrivals expected to reach 21% above 2019 levels this year. This impressive performance is set to continue despite slower-than-expected growth in Saudi Arabia and the UAE, as well as heightened geopolitical tensions in the region, including concerns about the Israel-Gaza Lebanon conflict potentially escalating. Looking ahead, Saudi Arabia’s robust growth is expected to persist due to ongoing infrastructure developments over the medium term.

Europe maintained strong performance over the summer, with international arrivals surpassing 2019 levels. Western Europe remains the standout sub-region, despite challenges such as anti-tourism sentiment, unfavorable weather, and air-traffic control disruptions. Meanwhile, Eastern Europe continues to recover, with year-on-year growth evident in destinations like Albania and Malta, although overall performance still lags behind the West.

In the Americas, inbound travel remains below 2019 levels but continues to edge closer to full recovery, with a 9% year-on-year growth forecast for 2024. Central America and the Caribbean, however, have already returned to peak levels, building on strong momentum in 2023. This quicker recovery is partly attributed to a strong dollar boosting outbound travel from the U.S., as well as the regions’ rich natural, cultural, and culinary appeal. Conversely, the U.S. itself remains 8% below 2019 levels in terms of inbound visitor arrivals in 2024.

The Asia Pacific region remains behind in the global recovery, primarily due to the delayed resurgence of outbound travel from Chinese tourists. However, this has been partially offset by growth elsewhere in the region, such as Japan, where a weak Yen has attracted visitors, and Vietnam, which leads recovery efforts in Southeast Asia.

For sustained growth in international tourism, particularly in Asia-Pacific, the revival of Chinese outbound travel is crucial. The gradual restoration of air routes and capacity, as well as efforts to address staffing challenges and meet rising demand for visa and passport services, are essential for reconnecting China with the global market.

Despite these encouraging trends, global travel confidence faces significant risks from continued geopolitical tensions. High-stakes conflicts, including the Israel-Gaza-Lebanon situation and the ongoing Ukraine-Russia war, could dampen recovery in the coming months.

In the U.S., the potential impact of Donald Trump’s return to the presidency in January 2025 remains uncertain. Changes to visa policies could deter inbound tourism, while shifts in international perceptions of the U.S. and possible economic fluctuations due to trade policies might influence global travel patterns and affordability. Beside this, interest rate cuts at the beginning of November are anticipated to reduce the strength of the USD, boosting inbound arrivals while limiting outbound travel from the US.

Global macroeconomic trends:

World GDP growth is projected at 3.1% for 2024, slightly below the 2023 figure. The announcement that Donald Trump will become the next U.S. president, coupled with the likelihood of Republican control of Congress, has significant implications for the global economy. Expectations of increased fiscal stimulus in the U.S., alongside recent commitments from China to enhance fiscal support, suggest marginally stronger global growth in the coming years. However, as the benefits of looser policies on economic activity diminish, the negative effects of gradually rising U.S. import tariffs are expected to intensify.

In the U.S., GDP growth is forecast at 2.8% for 2024. With Trump’s inauguration scheduled for 2025, the GDP outlook for that year remains relatively unchanged at 2.6%, as the economic impact of policy changes in fiscal, trade, and immigration areas will take time to materialize. Our updated projections suggest real GDP growth in 2026 could be 0.3 percentage points higher than it would have been under the prior political landscape.

For China, we maintain our 2025 GDP growth forecast at 4.4%, reflecting recent economic trends and policy directions. However, the assumed imposition of 30% U.S. tariffs on Chinese goods in 2026 could reduce China’s annual average GDP growth to 3.7% between 2026 and 2029, compared to an October baseline of 3.8%. Positive signs in the domestic economy, driven by earlier policy measures focused on boosting consumption and stabilizing the housing market, have started to emerge.

Our Eurozone GDP growth forecast for 2025 remains at 1.2%, while the 2026 forecast has been slightly raised to 1.6%. A gradual increase in economic momentum is expected next year, supported by solid growth in real disposable income and lower interest rates. Additionally, industrial output is forecast to improve from its current low base.

As anticipated, Eurozone inflation increased to 2.0% in October, up from 1.7% in September due to base effects, while core inflation held steady at 2.7%. Forward-looking labor market and wage growth indicators align with our 2025 inflation forecast. We predict inflation will undershoot next year, reaching 1.6%, which supports expectations of a sequence of rate cuts.

In the U.K., we have revised our 2025 GDP growth forecast down by 0.1 percentage points to 1.4% but raised the 2026 forecast by 0.1 percentage points to 1.7%. The slight downgrade for 2025 reflects weaker-than-expected data for late 2024, while the 2026 upgrade is linked to policy changes announced in the Budget. UK growth is now expected to depend more heavily on government consumption, as projections for consumer spending and business investment have been slightly reduced.