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

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

Europe short-term outlook:

Short- and medium-term RevPAR projections for STR’s 31 European forecast markets have been downgraded. For 2025, RevPAR is expected to grow 0.7% for the 31 markets in aggregate, while 2026 RevPAR is projected for similar growth of 0.8%.

Pipeline delays, abandonments on the rise

Supply growth for 2025-26 has been downgraded across 23 of 31 European markets, with long-term supply levels reduced in 15 markets. A decline in late-phase pipeline rooms and an increase in abandoned rooms have driven the downgrade.

Active pipeline rooms for the forecast markets have increased 2.4% since July 2024. However, that growth comes solely from the Planning phase, and most of those rooms won’t open until 2027 at the earliest. Late-phase rooms in the Final Planning and In Construction phases have declined 3% year over year. At the same time, abandoned projects have increased significantly relative to 2024, and newly opened rooms through July 2025 are pacing 19% below their long-term average.

Year to date, project delays and deferrals have climbed, with nearly half the active pipeline reporting delays in completion date and 9% growth in deferred rooms relative to the May 2025 pipeline used for our previous forecast.

Higher interest rates and increased construction costs are among the biggest factors causing the contraction in pipeline. Strong growth in rooms in Planning (+14% year over year in the 31 markets) does suggest that the slowdown is temporary, as developers hold rooms in earlier phases while waiting out the unfavorable financial conditions.

German market struggles to continue

While German GDP is no longer declining year over year, the economic outlook remains bleak, with real GDP growth forecasted to remain less than 1% through Q2 2026. Sluggish domestic demand caused by both a weak economic backdrop and poor sentiment have driven a widespread downgrade in RevPAR growth expectations for 2025 and 2026.

With domestic demand growth limited, German hotels must focus on international inbound travel, particularly during trade fairs or other events, to drive RevPAR growth. Events continue to be the one bright spot for ADR, and expectations are high for the K Trade Fair (Düsseldorf: Oct 2025), Anuga (Cologne: Oct 2025), Interpack (Düsseldorf: May 2026), and InnoTrans (Berlin: Sep 2026).

Outside of event periods, most markets’ reliance on business travel will see ADR comps that are flat at best and most likely declining. Offsets from the UEFA Euros in 2024 led to poor summer rate comps, with many markets fortunate to reach 2023 ADR levels. While Euro comparisons are in the past, trade fair offsets will cause significant ADR declines in 2026, most notably in Munich (Bau, Jan 2025; Bauma, Apr 2025; Champions League Final, May 2025).

Source markets present key concern

International arrivals from the U.S. remain a top talking point both through year-end 2025 and for 2026. U.S. travelers tend to be concentrated in multinational brands and Luxury and Upper Upscale hotels, which typically helps drive ADR growth in a market.

U.S. arrivals to Europe are expected to continue growing both this year and next, although the pace of growth has decelerated to 2.6% in 2025 and 2.9% in 2026, compared to nearly 10% in 2024.

From July 2025, the booking window for trips booked prior to the current U.S. administration taking office has ended. The U.S. dollar depreciation, economic slowdown, and renewed inflationary threat increase the risk of a continued and even strengthening slowdown from U.S. travelers.

At the same time, travel from the Asia Pacific region continues to pick up, although economic challenges in China continue to limit outbound travel from that market.

Geopolitical concerns have played a role as well, and both Budapest and Prague face modest RevPAR downgrades in 2025 as the Russia-Ukraine conflict deters some travelers. These impacts are likely to be short-term, and the 2026 outlook for both markets has improved modestly.

With longer-haul source markets more likely to produce limited European trips over the next 12-18 months, intra-regional and domestic travel are increasingly important demand drivers to regional hotel performance. However, even short-haul travel is at risk.

Group travel is under pressure due to budget constraints and reduced corporate spending. Performance during key group travel periods is being impacted by shorter stays and fewer delegates attending conferences and meetings. With the U.S.’s ongoing tariff war increasing global uncertainty and threatening trade and price levels, corporate spending is likely to remain conservative through H1 2026.

Asia Pacific short-term outlook:

STR’s 16 Asia Pacific forecast markets are forecasted to increase RevPAR 0.2% in 2025 and 2.6% in 2026, a significant downgrade driven by economic challenges in China and a more widespread regional slowdown in demand.

Mainland China outlook softens again

Stronger-than-expected supply growth and increasing corporate travel restrictions have further reduced RevPAR growth expectations for 2025-2026 in five of six Mainland markets. Beijing, Shanghai, Chengdu, Guangzhou, and Hangzhou are all forecasted to lose RevPAR in 2025, with both occupancy and ADR falling across most markets. While growth is set to return in 2026, the pace is lower relative than our May forecast revision.

Mainland China has nearly perfected the art of rapid hotel builds, which has allowed supply to flourish well beyond what the pipeline might suggest. An increase in the number of available rooms, coupled with an economic slowdown that’s drastically limiting both leisure and corporate travel, has made for a challenging environment for hoteliers. While at the start of the year occupancy held even as pricing power faltered, the former is now at risk due to the influx of new rooms.

Expectations for stalled performance hold through the first half of 2026, with growth expected to accelerate as the year progresses. Beijing and Shanghai, with their higher mix of international inbound travel relative to the other Mainland forecast markets, have the brightest outlooks, though the short-term will remain challenging for all markets.

Domestic demand softens

After 33 consecutive months of double-digit ADR growth, Tokyo’s hotel industry reported its first ‘normal’ growth month in June 2025 as well as its first post-pandemic ADR decline in July 2025. While July was unduly influenced by unfounded but persistent rumors of a typhoon, the overall slowdown in both occupancy and ADR growth is expected to continue through 2026.

In the short-term, Expo 2025 Osaka has started to pull demand away from Tokyo, as increased flight connections allow visitors to fly directly into Osaka and bypass Tokyo.

Long-haul travel into Tokyo has peaked as well, and while year-over-year growth will continue from European and North American source markets, the growth rate is expected to be much more sedated moving forward, which will limit pricing power for higher-end hotels.

Finally, the higher price points have finally fed through and impacted domestic demand, with both business and leisure travel into the market faltering. For the latter, Tokyo’s high price point has reduced its competitiveness relative to international destinations. While rates aren’t expected to decline, the high levels will limit domestic travel into Japan’s capital in the short- and medium-term, further limiting rate growth.

International inbound has significant impact on forecast

The first half of 2025 has been challenging for Bangkok, as the Asia Pacific market with the biggest RevPAR decline of 2025 (-6.0%) is now projected for both occupancy and ADR to fall this year before slowly rebounding in 2026.

Poor activity among international travelers remains the primary cause to 2025’s poor performance, with the Thailand Tourism and Sports Ministry reporting a 7% decline in foreign tourist arrivals year-to-date through 17 August.

Occupancy and ADR declines are expected to persist through year-end, before beginning a slow rebound in February 2026 with the Lunar New Year.

Conversely, international inbound demand has helped Jakarta hotels maintain ADR growth even as occupancy has started to decline. Changes in government travel and spending policies have limited domestic corporate demand into Indonesia’s capital market. While rate growth has remained strong, averaging 10% through the first half of the year, growth will decelerate significantly as occupancy continues to decline through year-end. Both demand and ADR growth are expected to normalize in 2026, with 2026 RevPAR growth driven by occupancy.

Middle East short-term outlook:

Our four Middle East forecast markets continue to outperform expectations, despite a challenging pipeline. RevPAR growth for 2025 has been upgraded once more, with RevPAR expected to rise 6.9% this year before declining 0.6% in 2026. Market performance varies significantly by country, however, as UAE markets drive the 2025 improvements and the Saudi Arabian markets influence the 2026 downgrade.

Strong demand, rising prominence drive UAE market RevPAR

More sedate pipelines and rising international prominence have lifted RevPAR growth expectations for both Abu Dhabi and Dubai in 2025. Expectations for 2026 are largely unchanged, with new supply in the second half of the year limiting occupancy growth in Dubai, though RevPAR will still rise 1.0% relative to 2025. Summer months will remain the market’s greatest challenge, especially now that Abu Dhabi typically matches or exceeds Dubai in summer ADR and has done well to market toward families.

After a stellar 2025, RevPAR growth in Abu Dhabi is expected to decline -0.1% due to ADR declines in January and February. The January decline (-4.7%) is an offset to the Coldplay concert in 2025; upside potential exists if another major event is announced for 2026.

The February decline (-22.4%) is a combination of an offset to the biennial IDEX trade fair and the Ramadan calendar shift into February. Rates are expected to rise through all other months of the year, despite a limited occupancy growth profile. For Abu Dhabi, already very high occupancy levels make driving significant growth a challenge.

Shifts in pipeline, corporate travel influence Saudi Arabia expectations

Riyadh and Jeddah supply is forecasted to rise 5.4% in 2025 and 11% in 2026. While that does represent a modest downgrade from the May forecast, the influx of new rooms will remain a limiting factor to RevPAR growth in the short- and medium-term.

Long-term supply expectations for both markets remain unchanged, with a nearly 50% increase in supply, or about 8% compound annual growth rate, between 2024-2029.

While Saudi Arabia’s ambitious Vision 2030 plans are expected to assist in supply absorption, that level of new development will significantly inhibit short- and long-term RevPAR growth for both markets.

In the short- to medium-term, corporate demand will remain a challenge as many Vision 2030 projects shift from early planning phases requiring significant consultancy travel into later-stage development phases. This will naturally lead to some attrition in international inbound corporate travel. Additionally, visa restrictions around the Hajj period, hailed as a success in 2025, will further limit religious travel from affected countries for up to three months of the year.

In the longer term, international inbound leisure travel is expected to continue to grow as the Kingdom continues to push forward with its giga-projects and visionary plans.

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 2027-29. Four markets are projected for an annual RevPAR decline in 2027, with high supply growth a commonality across all markets.

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 and Japan 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 18 months, several large brands based in Mainland China have started to submit historic performance data backdated to 2023. Due to the size and scale of this submission, data loading has been ongoing since Q4 2023 and is expected to continue through the remainder of 2025.

As of Q1 2025, major brands in Japan have likewise started to submit historic performance data, with data loading expected to continue through 2025.

In the short term, actualized ADR and RevPAR may be affected as data is loaded on a rolling basis. As a result, the six Mainland China forecast markets and Tokyo will likely report significant revisions to both historic and forecast performance each quarter.

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.