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

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U.S. Topline

The U.S. RevPAR forecast for 2025 has been further downgraded 110 basis points to -0.1%. The downgrade is driven by continuing uncertainty around economic policy implementation—both foreign and domestic—as well as the residual effects of large- scale federal job losses and the sustained softness of international inbound travel.

For the first time this year, demand for 2025 is expected to produce a negative percentage change (-0.1%), and ADR has been downgraded another 50 basis points to +0.8%.

The demand revision follows continuing downward trends combined with the expected summer travel bump failing to materialize. Additionally, growth headwinds from the 2024 hurricane demand lift will come into view for Q4.

The pullback on rates comes as performance broadly softens through the select- service segments. ADR will continue to be the primary driver of RevPAR, but rate declines are a worrying sign for the industry’s rebound in the near term.

For 2026, RevPAR has been downgraded by 70 basis points to +0.8%, with increases still expected in both demand (+0.6%) and ADR (+1.0%). The year will be comprised of an unequal, moderate recovery from the declines observed in 2025.

Industry performance will be skewed toward the top end of the market with the bifurcation trend continuing. Rate recovery is projected in the first half of the year, while demand recovery is expected to be stronger in the second half of the year. Additionally, Q1 will show the impact of weather-event reversions (i.e. California wildfire comp in 2025), and the summer will see a boost from the World Cup in June and July.

U.S. Chain scales

RevPAR was revised downward for all chain scales but Luxury in 2025, with the largest revisions focused in the middle-tier segments (Upscale and Upper Midscale). High-end properties continue to cater to a consumer base that has been stable through economic uncertainty so far this year with minor changes in both demand and rates.

Stark downward shifts were made to Upscale and Upper Midscale, with the latter contributing heavily to the RevPAR downgrade for the total U.S. Typically, stability in these chain scales exists due to strong group and leisure composition, but demand comps for both have been negative for multiple months as the downward rate pressure strengthens.

Moderate but stable Midscale demand has been overshadowed by broad industry woes, but we expect growth to turn negative in November given the hurricane demand comp from 2024. This same assumption exists with Economy, which has been declining since the start of the year at an accelerating pace. While their demand performance has been different, both lower-tier scales have seen poor rate performance continue.

A warning sign for the industry in the short-term is that positive performance from the top-end chain scales was able to counter the declines in the low end, but the math is simply not there for this hedge to be useful when the typically stable middle segments go from flat to negative in several performance KPIs.

We’re looking at 2026 with cautious optimism, but performance will be unequal for the chain scales. Bifurcation amongst consumer bases has been the norm in recent years, and we expect that theme to broadly apply in 2026. Both the “Big Beautiful Bill” and tariff impacts are expected to produce some positive, short-term impacts for GDP growth next year, which will contribute to a rebound in hotel performance.

Luxury and Upper Upscale are forecasted to be the strongest chain scales for 2026 with demand and ADR growth in both halves of the year. Select-service properties will continue to struggle in Q1 and into Q2 then strengthen going into the summer months. Lower-end performance declines will continue for the majority of 2026 as Midscale is projected to show weather-reversion declines in the first half of the year before a slight rebound in the second half. Economy is expected to show continued negative RevPAR comps through all four quarters of 2026.

U.S. Markets

Year to date, demand growth has been strongest (+3.4%) in the markets affected by hurricanes late in 2024. However, over the past three months, the demand effects have leveled off with most affected markets now experiencing demand slightly below pre-hurricane trends. The dissipation of the hurricane effect was expected, and currently, Q4 is projected for negative demand comps in nearly all the 13 affected markets.

Demand comps for the Top 25 Markets have been considerably weaker compared with all other markets, but a handful of exceptionally weak markets have greatly influenced the T25 average. Houston, Las Vegas, and New Orleans have each contributed double-digit declines in demand as well as comparable ADR decreases. In a scenario where these markets were removed from the data set, there would be a 30-40 basis-point increase in total demand performance for the total U.S. ADR is performing slightly better in the T25 Markets, but growth has been between 0% and +1% for the past three months for both T25 and all others.

Event impact assumptions from last quarter remain true. Only “peak” events, such as top-level sporting events, a handful of six-figure attendee conferences, and major conventions are moving the needle for tangible performance increases. Additionally, demand benefits have been more muted than typical, with ADR being often the only KPI with tangible event-impact increases.

Economic uncertainty has made a considerable dent in consumer willingness to spend money on event experiences, and multiple surveys have supported that observation. The top of the top, such as the Super Bowl, will continue to have an outsized positive impact on host markets, and we expect the World Cup to be amongst this group. There are 12 U.S. markets hosting games in the summer of 2026, with multiple adjacent markets set to benefit as well. Zooming out, there are enough games in both June and July to have a measurable impact on total U.S. ADR for both months in 2026.

Segmentation

Our last forecast release noted the diminishing corporate optimism that began at the start of 2025. That sentiment has moderated slightly but continues to be entirely pervasive. Group demand, and specifically government demand, continues to be an anchor on industry growth. Mentioned earlier is the softening of both demand and ADR in the Upscale and Upper Midscale chain scales (Upper Upscale included, but more limited). Demand declines for these scales has been primarily focused in five months, but decreases are accelerating. Rates are primarily being pulled down by transient.

One of the few bright spots of industry performance so far this year has been group rates. We've seen group rates continue to hold steady between +3% and +4%, while transient rates hover around +1% with more weakness developing. Remember, group rates are negotiated roughly 12 months prior to events, and group growth is expected to soften starting at the end of Q1 2026 and into Q2.

Adjusted job figures show a bleaker employment environment, which poses potential downside risk as businesses continue to cut costs. We also have to factor the pause in interest rate cuts, which could have a downward pressure on business travel, but there is an increasing indication of rate cuts going forward.

We do not see evidence of increasing business event cancellations, but speaking to both clients and analysts, the question of event renewal will lead to a softer event calendar in 2026. Finally, the group booking window remains atypically shortened, and there is little evidence to show lengthening. We expect booking windows to remain at this level for the foreseeable future until the macroeconomic environment stabilizes.

International Inbound and Outbound

International inbound demand has continued to decrease with May and June demand combined at -3%, which was an improvement from double-digit declines back in March. Perception of the United States has remained broadly soured due global tariff implementation and aggressive political posturing, which has contributed to the decline in international inbound travelers. On the opposite side, the last few months have showed a moderate trend of improving U.S. outbound travel as upper income travelers show an increased willingness to spend on international trips.

Our partners at Tourism Economics expect the impact of diminishing international inbound travel to result in a -0.6% total demand hit for 2025.

In 2026, we expect international inbound in the United States to rise 3.6%, but levels will still remain below 2019 comparables. U.S. outbound improvements are contributing to 4.8% growth in 2025, and we expect that to slow next year to +3.8%.

With STR expecting international inbound demand to moderately recover in 2026, a major focus is on sporting events like the FIFA World Cup and Olympics (2028). We believe that due to the unique stature of these events, they will be popular amongst international visitors, but increasingly aggressive U.S. immigration enforcement has potential risk dampen inbound demand.

Long-Term Outlook

RevPAR growth has been shifted downward to +0.8% in 2026 and +1.5% in 2027 but remains above +2% for 2028-29. ADR will remain the primary driver of performance with rates remaining under inflation. Bifurcation amongst consumer income bands will continue but moderate. GDP growth is projected at +2.1% and +2.5%, respectively, for those years and will contribute to the performance recovery.

Much has changed since the new administration took office, and the uncertainty and instability since has been the primary driver of the hotel industry shift from start-of- year optimism to now. The BBB passing and tariff policy implementation will have a benefit to near-term revenue and fiscal stimulus, but metrics like unemployment and inflation are beginning to show cracks, which directly impacts consumer travel and accommodations. These two realities are forecasted to coexist simultaneously, and the uncertainty seems to be sticking around as we end the year and head into 2026.