STR/TE Market Forecast Assumptions – February 2025 (Global)

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 forecast markets is projected at 2.4% for 2025, a modest improvement from 2.0% in November 2024. Despite the top-line change, expectations for most markets are functionally unchanged from last quarter. The RevPAR upgrade comes from changes in a few key markets. 

A much-welcome reduction in 2025 supply growth expectations as well as new event announcements improved the RevPAR outlook for Dublin. While RevPAR is still forecasted to fall in 2025, a modest 0.2% decline year over year would be much improved from the -2.1% forecasted in November 2024. Downside risk remains in the supply-side forecast, as new Midscale and Economy rooms are less likely to drive strong growth in average daily rate (ADR).

Expectations for German markets largely align with the November 2024 forecast, with Frankfurt standing out as the market shifting from a year-over-year decline in RevPAR to a 1.7% increase in 2025. This improvement was due to an exceptional February during the Ambiente and Christmasworld trade fairs as well as confirmed dates for key conferences later in the year. Munich and Düsseldorf have also seen upward revisions in expectations, thanks to a strong start to 2025, which has lifted Q1 ADR growth and positively impacted the annual forecast.

ADR expectations for Madrid have likewise improved for 2025, with an increase of 180 basis points from November 2024 driving year-on-year RevPAR growth projections to +4.7%. This upgrade is attributable in part to the ongoing rise in high-end leisure travel, fueled by the growing number of long-haul flight destinations, particularly from the Americas.

The impact of the U.S.’s administration change on travel will continue to be monitored. Some clients have reported a sense of hesitancy among American travellers in booking, though there has yet to be any impact on European market demand. In the short term, the stronger U.S. dollar could continue to benefit American travelers visiting Europe.

Asia Pacific short-term outlook:

STR’s 16 Asia Pacific forecast markets closed 2024 with 4.8% RevPAR growth, and a similar 4.7% increase is forecasted for 2025. The 2025 forecast, a 120-basis point increase from the RevPAR growth projected in November 2024, remains driven by ADR growth of 3.1%.

Market results vary widely beyond the strong topline forecast. High supply growth is a contributing factor to 2025 RevPAR expectations – and downgrades – in Auckland and Brisbane. For the former, an economic downturn coupled with an influx of new rooms led to double-digit RevPAR decline in 2024. While 2025 supply growth will decelerate relative to 2024, the 600-plus keys expected to open this year will limit occupancy growth and lead to a second consecutive year of ADR decline. The development curve is slowing, however, and easing supply growth coupled with economic improvement as well as the long-waited opening of the New Zealand International Convention Centre should allow for a much stronger 2026.

Supply growth expectations are the driver behind Brisbane’s 2025 performance as well. The market is one of only two Asia Pacific markets forecasted to lose RevPAR in 2025, as more than 1,000 keys equating to nearly 10% supply growth year-over-year are expected to open.

Exchange rates continue to play an important role in RevPAR forecasts for Asia Pacific markets, with both top-growing and most upgraded markets experiencing currency depreciation. The Japanese Yen is trading at well below the historic average, making Tokyo increasingly attractive to international inbound travelers. Tokyo hoteliers most especially benefited from Western travelers in 2024, with the Japan National Tourism Organization reporting North American visitor arrivals up 59.2% relative to 2019 level as well as visitor arrivals from the big four European countries (U.K., France, Germany, and Italy) running 18.8% ahead of pre-pandemic level. Oxford Economics projects additional depreciation in 2025 and the macroeconomic outlook, alongside 23% ADR growth in Q4 2024, has generated a 480-basis point upgrade in 2025 ADR growth for Tokyo. Japan’s capital leads Asia Pacific in 2025 RevPAR growth projections, with a 12.2% improvement forecasted for the year. Modest downside risk exists as the Bank of Japan’s increasingly aggressive moves to limit inflation could lead the yen to appreciate, but long-haul travel driven by Expo 2025 Osaka should help maintain demand.

After significant downgrades last quarter caused by lackluster economic growth and a dearth of pricing power, RevPAR expectations for the six Mainland China forecast markets and Hong Kong SAR remain anchored, with aggregated Mainland market RevPAR expected to increase 2.1% in 2025, driven by 1.3% occupancy growth. Hong Kong has a more modest outlook, with RevPAR forecasted to rise 3.9% on a more equal balance of occupancy and ADR growth. Hong Kong’s stronger growth is offset by KPI levels well below historic averages, with 2025-26 RevPAR still approximately 12% below the 2018 comparable.

Middle East short-term outlook:

Pipeline fluctuations remain the primary driver behind the Middle East market forecast. In 2025, RevPAR for Dubai, Abu Dhabi, Riyadh, and Jeddah is forecasted to grow an average of 2.8%, a 180-basis point increase from the November edition of the forecast. ADR (+2.5%) remains the primary driver of RevPAR, although a reduction in supply expectations drove a 50-point upgrade in occupancy.

Medium-term supply remains anchored, with 3.7% growth forecasted for 2026. Both short- and medium-term supply is concentrated in Saudi Arabia, with Jeddah anticipating double-digit supply growth for the next two years, and Riyadh averaging just shy of 10% average annual growth.

For Riyadh, ongoing shifts in market makeup have influenced both short- and longer-term forecasts. Nearly 12% growth in Luxury supply and an 8% reduction in Midscale and Economy rooms propelled 2024 ADR growth (+13.3%) despite a modest occupancy decline. The Luxury renaissance is only beginning, though, as 61% of the more than 29,000 rooms in development are classified as Luxury. The shift to higher-rated rooms alongside Riyadh’s increasing importance as a regional business hub and prominent place in the Vision 2030 plan will help ADR continue growing even as supply growth accelerates over the coming years.

As Riyadh approaches the height of its development craze, Dubai has finally started to find some relief from decades of transformative supply growth. Modest, sub-2% growth in 2024 will help drive 2.6% RevPAR growth in the UAE’s biggest market this year. Ramadan’s slow shift into the high season will be the greatest challenge for hoteliers in 2025 and 2026. While Ramadan won’t significantly impact international inbound leisure demand from Western nations, it will continue to restrict corporate travel and lead to increased corporate and group activity in the shoulder months to the Holy Month.

Long-term outlook: Long-term expectations are largely unchanged, with regional demand and RevPAR expected to rise annually across the world from 2027 through 2029 as well as minimal adjustment to year-over-year growth from 2026-28. Six markets are projected for an annual RevPAR decline in 2027, with high supply growth a commonality across all markets. By 2028, only Riyadh (11.7% supply growth) is forecasted for a RevPAR decline, and all markets anticipate RevPAR growth in 2029.

The further out the forecast, the greater the role macroeconomic forecasts and supply growth play. As event calendars take shape and the global outlook shifts, these forecasts will be adjusted.

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-plus, 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.