STR/TE Market Forecast Assumptions – February 2025 (U.S.)

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

U.S. 

The top-line U.S. RevPAR forecast is unchanged from our previous revision, with 1.8% growth forecasted for 2025. While top-line growth remains the same, increases have been rebalanced across segments.  

Both demand and ADR growth have been shifted from the second half to the first half of 2025 because of recent natural disasters. Impacts related to Hurricanes Helene and Milton continue to lift demand in Q1 2025, and offsets to the hurricanes will limit demand growth in Q4 2025.  

There are important takeaways in the adjustments made since our November 2024 forecast. 

Demand bifurcation continues. We expect the upper-end scales to perform better relative to the lower tier as guests in the higher priced segments are less affected by economic conditions.  

Positive sentiment surrounding group demand continues as discussions with analysts and clients broadly display for 2025, although shorter booking windows are likely to increase volatility in group rates.  

Recent natural disasters have contributed to above average group demand in both affected and adjacent markets.  
STR continues to track the increasing influence of both experiential travel and large-scale events on hotel performance. Travelers’ growing appetite for out-of-the-way locations continues to strengthen, in part due to the prevalence of social media. This should help improve demand in non-Top 25 Markets, though the Top 25 Markets’ popularity with both business and leisure travelers should help drive moderate rate growth across the largest markets. Further, events continue to command significant pricing power across both the leisure and corporate segments. Oasis and Coldplay stadium tours are on the 2025 must-see list and demonstrate the influence that legacy acts have on travel. 

Finally, the U.S. forecast was initially released on 28 January 2025 and does not account for proposed or enacted policy changes of the Trump administration. STR and Tourism Economics will continue to assess the impact of ongoing policy shifts on hotel performance and address these changes in the next edition of the forecast. 

U.S. chain scales 

Luxury RevPAR growth has been moderately upgraded from +1.8 to +2.9% for 2025. Demand is forecasted at +4.6% for the full year, with the bulk of growth occurring in H1 2025. Even following an incredible 2024, Luxury demand is expected to continue rising faster than its long-term average due to the decreased economic anxiety of its consumers as well as continued travel desire. Rate growth will likewise continue after steady improvement throughout 2024.  

Upper Upscale is expected to grow RevPAR at 3% for 2025, composed of nearly equal demand and ADR growth rates (+2.0% and +1.9%, respectively). Supply is expected to moderately grow over the next few years compared to most other chain scales, and this scale will benefit from expected group demand increases through 2025 and 2026. 

Upscale has been slightly upgraded to 1.7% RevPAR growth. This scale is projected to have consistent growth over the long-term, in part due to its healthy mix of both leisure and group travelers. Traveler mix assists this segment in weathering economic shifts, allowing for a more optimistic short- and longer-term demand outlook than most other chain scales. Upscale chains’ popularity with travelers has not gone unnoticed, and developer interest in the segment remains high. New supply will limit occupancy growth even as  demand expectations remain high.  

The Upper Midscale outlook is similar to Upscale, as both developer and traveler interest in the segment remains strong. The 2025 RevPAR outlook is more muted than Upscale chains, with RevPAR forecasted to grow at 1.1% through 2025. This segment is also capturing the benefits of a more equal leisure and corporate demand mix. Natural disasters lifted Q4 2024 demand, but performance impacts are expected to be short-term, and Q4 2025 demand has been downgraded as recovery demand is expected to end by midyear.  

Midscale properties have likewise been impacted by adverse weather events in the South and, on a smaller level, the recent Los Angeles wildfires. Disaster-related demand is projected to continue through Q1 2025 and taper in Q2 2025. RevPAR is projected to decline 0.7% in 2025, as high supply growth will limit RevPAR growth in the first half of the year. Supply increases will ease in the second half of the year, but offsets from the natural disaster-induced demand will make for a challenging H2 2025.  

Economy scale RevPAR has been upgraded, with growth expected to reach +0.4% in 2025. This change is driven by a significant overperformance in Q4 2024 due to weather-related events, which are projected to scale back heavily in Q2 and Q3 2025. Q4 2025 RevPAR has been downgraded to -2.3% because of the demand boosts from last year. Supply will continue to decline year over year in 2025 due to closing of aging buildings as properties are traded down and eventually removed from supply altogether.  That reduced supply, combined with higher disaster demand in H1 2025, will more than offset a slower second half of the year, as we anticipate RevPAR growth in the Economy segment for the first time since 2022.  

International Inbound and Outbound 

International outbound demand will continue rising at a moderate pace in 2025-26.  Minor depreciation in the U.S. Dollar will be offset by increased flight connections to European countries, as well as rate declines in top European destinations. International inbound demand is more at risk in 2025, as the ongoing tariff situation and threat of a global trade war may limit interest in U.S. destinations.  

The World Cup in 2026 should be the biggest driver of international demand over the next few years. This could have a delaying effect on 2025 performance as some travel is deferred to the following year.  
Long-Term Outlook 

RevPAR growth for 2026-2029 remains just above 2% each year, a deceleration from the long-term compound annual growth rate (CAGR) of 3.1%. ADR will still be the primary driver of RevPAR increases, but annual average growth of 1.9% will run below the projected rate of inflation and the long-term CAGR.  
Pricing power remains limited both due to the lingering economic impacts of the past few years’ high inflation and increasing competition in the accommodations space. While long-term demand continues to rise in line with long-term annual averages, and supply growth remains muted, the increased popularity of short-term rentals and the cruise industry will pressure rate growth, especially in lower chain scales. 

Group demand, including for large-scale sporting events like the 2026 World Cup and 2028 Summer Olympics, will help high-end segments maintain pricing power in the longer term.