With travel plans in limbo, U.S. hotels brace for slower growth

Travel Weekly

2 days ago

NEW YORK -- With many travelers currently in wait-and-see mode, CoStar and Tourism Economics downgraded their U.S. hotel forecast during the NYU International Hospitality Investment Forum here on Monday.
They are now forecasting a 1% increase in 2025 revenue per available room (RevPAR), down from 1.8%. For 2026, U.S. RevPAR is now projected to increase 1.5%, down from a previously forecasted 2.1%.
Average daily rate is expected to grow 1.3% in 2025; zero growth is expected for hotel occupancy at 62.8%.
Tariff concern is a factor, said Amanda Hite, president of hotel data specialist STR, a CoStar subsidiary.
"The real problem here is the tariff situation," Hite said. "We've got less capital expenditures from business this year than what we had anticipated, which directly means less travel. Businesses are just waiting to see what's going to happen with the economy."
Hotel industry bifurcation has intensified, with luxury hotels expected to achieve 3.4% RevPAR growth and upper-upscale hotels a 1.8% bump, fueled in part by slight occupancy increases.
Upscale hotels are projected for 0.5% RevPAR growth, while midscale and economy hotels are expected to record 0.8% and 0.7% decreases, respectively. Consumers are more price-sensitive and business travel has stalled, Hite said.
She added that shortened booking windows are creating significant challenges. July and August occupancy on the books is "very far behind" last year she said, adding that the trend likely reflects consumers' wait-and-see outlook amid economic uncertainty.
"Until consumer confidence improves, demand is going to remain softer -- especially in the middle and lower price tiers," Hite said.
The consumer has withstood a lot
Still, Deutsche Bank chief U.S. economist Matthew Luzzetti believes the U.S. will avoid a recession.
Luzzetti addressed the conference audience on Monday, saying consumers have weathered "a number of historic shocks" over the past three years. He cited the Federal Reserve's largest tightening cycle in 40 years to fight inflation, the 2023 banking crisis and, most recently, an "unprecedented trade war."
"Is the tariff shock something that finally breaks the consumer?" Luzzetti said. "I'm going to argue no, that the aggregate consumer fundamentals are strong enough."
He said disposable-income growth for U.S. households is "the strongest it's been in a year" and has been accelerating, said Luzzetti. He added that household wealth-to-income ratios currently sit near record highs and that the personal savings rate has also been on the rise, providing consumers with "as much of a buffer as they've had over the past three to five years."
Luzzetti also pointed to an "incredibly resilient" U.S. labor market as another tailwind, with unemployment at 4.2% and the economy adding around 150,000 to 200,000 jobs per month on average this year.
He added that "not all households have access to record-high wealth relative to income."
"If you are exposed to lower-income households and middle-income households, those balance sheets do not look as strong," he said, adding that delinquency rates have risen across credit cards, auto loans and student debt.
Luzzetti cautioned that data related to consumer sentiment should be taken "with a grain of salt" because there's a disconnect between what Americans say about the economy versus how they spend.
"There's been a massive breakdown between these two indicators over the past 10 years," he said, with consumer confidence indicators heavily polarized along political lines.
"For the most part of the past four years, consumers have indicated we're in a recession, which obviously has not been the case," said Luzzetti.