LOS ANGELES — With as much uncertainty as there is going into any new year, hoteliers welcome insight from industry data analysts.
During the "The Numbers — What to Expect in 2025 and Beyond" panel at the Americas Lodging Investment Summit, executives from the hotel industry's data analysis companies shared the latest information they have about performance and other trends expected to play out this year.
2025 hotel performance forecast
The latest forecast from CoStar Group and Tourism Economics set revenue per available room growth in 2025 to 1.8%, unchanged from its last forecast, said Amanda Hite, president of STR, a CoStar Group company. The change factored into the forecast is that the growth has shifted from the second half of the year to the first half, driven by the demand generated by disaster responses in markets affected by hurricanes last year.
“We’ve seen better-than-expected demand from those, and that is carrying into the first quarter, and we’ll continue to see that through the second quarter,” she said.
As for average daily rate, the forecast calls for 1.6% growth in 2025 with an occupancy level of 63.1%.
The new forecast includes a slight change to the chain scales as well, Hite said. Luxury RevPAR is forecast to grow by 2.9% in 2025, an increase of 25 basis points over the last forecast. In 2024, two-thirds of luxury hotels saw demand increases, and that trend is expected to continue into 2025.
The upper-upscale, upscale and upper-midscale segments have been solid, consistent performers, she said. Upper-upscale should continue to benefit from group business while upscale and upper-midscale will run into some supply headwinds as supply growth is projected at 2% for those segments. The midscale segment faces a similar situation with supply growth in the first half of the year and difficult comparisons in the second half, resulting in 0.7% decrease in RevPAR.
The talk about the economy hotel segment over the past two years is that it’s RevPAR has been declining, Hite said. Now, however, there should be RevPAR growth for economy hotels this year, helped by negative supply growth and stronger-than-expected demand coming out of the fourth quarter of 2024 from markets affected by disasters.
The forecast calls for general operating profit per available room to increase slightly in 2025, Hite said. Expenses will grow but stabilize.
“It’s very challenging depending on where you are, which markets, what type of asset,” she said.
On a nominal basis, GOP is above 2019 levels, but when adjusted for inflation, the U.S. hotel industry will end 2025 1% below real GOP compared to 2019, she said.
Channel distribution
Among the costs hoteliers have to consider, customer acquisition is a major one, said Cindy Estis-Green, CEO and co-founder of Kalibri Labs. Hotels are paying 15% to 25% on the cost of acquisition, with the average running about 18%. It’s second only to the cost of labor.
The brand.com booking channel continues to be strong with 25% of share, she said. Property direct, which for most hotels in the U.S. ran between 50% and 75%, is now down to 30% because everything has moved to online channels.
“We have a horse race between [online travel agencies] and brand.com,” she said. “Brand.com has held their own, but OTAs are growing pretty strongly. Companies like Expedia and Booking.com spending $7 billion to $8 billion a year on marketing, that’s pretty tough to compete with.”
All of the other hotel booking channels are flat or declining, Estis-Green said.
Group business, from economy to luxury, runs in the teens and is relatively flat, she said. Convention center business is showing growth in some of the bigger markets, but across the U.S. is showing modest growth. With corporate business, global distribution system is dropping off because most commercial business has moved to brand.com, online travel agencies or other channels.
“This is where the costs are coming from, but the good news is the direct channels that are more cost-effective and higher profit margins are doing better,” she said.
Before the pandemic, commercial had a slight edge over other demand segments, but since then, leisure is what’s driving hotel business, she said. That’s expected to continue through 2025 while commercial has regained its position back over 2019 levels.
“It just isn’t growing that much, and leisure is still what we’re going to be depending on,” she said.
Demand segments
Corporate transient demand at U.S. hotels is feeling the impact of the stock market and corporate profits, said Ryan Meliker, president and co-founder of Lodging Analytics Research & Consulting.
It came out recently that the stock market was up close to 30% last year and 40% the year before, but the bond markets have now eroded. The idea that there will be growth in the stock market is less likely.
Those factors will probably create headwinds for corporate transient demand in 2025, he said. However, office use plays another part, as people are more likely to travel for business if employees are working more frequently in the office. Currently, business travelers are traveling less often or booking shorter stays.
Return-to-office rates have been increasing, Meliker said. Data from the Flex Index shows that the average number of days in office was 2.49 per week at the start of 2024 and grew to 2.73 by the end.
“We expect to continue to see that, which will help make corporate transient demand not great, not terrible,” he said.
LARC tracks the 30 largest convention centers across the U.S. So far, Meliker said convention centers are pacing up 5% in 2025, a positive sign for group demand at hotels.
The forecast for foreign inbound leisure is positive, but it’s driven by exchange rates and how expensive travel to and from the U.S. is compared to other countries, he said. Over the past couple of years, the idea was the value of the dollar would decline. That would require the Federal Reserve to lower interest rates at a greater pace than other countries’ central banks have been.
“While that was the expectation three months ago, six months ago, it’s starting to shift, and we may not see that type of lift,” Meliker said.
The domestic leisure outlook is positive based on a number of factors, he said. The soft comps from 2024 will translate into better performance in 2025 for the hotel industry given what consumer spending indices have shown.