US Hotel Outlook Darkens: 2025, 2026 Set for Slower Growth

CoStar and Tourism Economics have further lowered their forecasts for US hotel performance in both 2025 and 2026.

The key update is that revenue per available room (RevPAR) is now expected to decline by 0.4 percent in 2025, marking the first annual drop since 2020.

Occupancy rates are also projected to fall slightly by 0.2 points to 62.3 percent, while the average daily rate (ADR) is forecasted to grow modestly by 0.8 percent. Overall demand is also expected to shrink by 0.4 percent.

For 2026, all four key metrics have been forecasted lower as well, with RevPAR and demand anticipated to grow only by 0.5 percent, while ADR is projected to rise slightly by 0.9 percent. Occupancy is expected to further drop to 62 percent.

These downgrades reflect the challenges posed by inflation and economic uncertainty, which continue to weigh on consumer demand for hotel stays.

Amanda Hite, president of CoStar’s STR division, pointed out that while ADR growth continues, it is lagging behind inflation, further tightening profitability and putting additional pressure on margins.

Corporate travel may start to recover somewhat, but leisure travel growth looks limited due to weaker consumer confidence.

CoStar and Tourism Economics suggest that performance improvements will depend on broader economic stability and a rebound in international arrivals, which could provide some uplift to US hotels in 2026.

"Heading into 2026, we expect the US travel economy to firm up moderately," said Aran Ryan, director of industry studies with Tourism Economics. "Household income growth will continue, accompanied by tax cut benefits, resumed hiring, and less policy instability. Expanding global long-haul travel and World Cup interest will bring improved international visitation."

To learn details on hospitality trends from the third quarter, refer to reports from major groups like Hyatt, Scandic Hotels, IHG, Choice Hotels, Marriott, Hilton, and Wyndham.

Photo by Hector Falcon on Unsplash