Higher-end hotels are expected to continue driving the hospitality industry’s performance, according to reports from CoStar, based in Washington, D.C., and Tourism Economics, headquartered in Philadelphia.
The two hotel data firms made only slight adjustments to their growth projections for the sector. Forecasted increases in average daily rate (ADR) and revenue per available room (RevPAR) remain steady at 1.6% and 1.8%, respectively. Meanwhile, the occupancy rate for 2025 was revised upward by just one basis point to 63.1%.
“While business optimism is improving, economic conditions have not shifted significantly since our previous forecast,” said Amanda Hite, President of STR, a division of CoStar. “The stronger performance observed in the fourth quarter was largely driven by temporary factors, such as holiday travel surges and weather-related disruptions, and does not indicate a broader trend. Additionally, the potential impact of the new administration has not been incorporated into the forecast, as significant policy changes have yet to be implemented, and their effects remain uncertain. As a result, our overall forecast remains largely unchanged, with only minor adjustments across the chain scales.” Hite emphasized that higher-end hotels are expected to lead the industry’s growth in 2025.
Aran Ryan, Director of Industry Studies at Tourism Economics, noted that economic conditions should create a “favorable environment” for travel in 2025. “Unemployment is low, inflation is easing, consumer spending is strong—especially among higher-income households—and business investment activity remains robust,” he explained. However, Ryan warned that trade and immigration policies under the Trump Administration could pose risks to inbound travel. These risks include potential trade conflicts, visa restrictions, and general uncertainty surrounding border and policy decisions.
Hite also highlighted that hotel labor costs are expected to stabilize in 2025, as hotels have adapted their operations to current labor market trends. This stabilization could lead to slightly improved gross operating profit (GOP) margins. “With continued growth in group and business travel, Food and Beverage departments are likely to see some of the highest growth rates this year,” she said. “Meanwhile, growth in rooms and undistributed operating expenses is expected to moderate, although utility costs are almost certain to rise.”
In summary, while the hotel industry’s outlook for 2025 remains largely consistent with previous forecasts, higher-end properties are poised to play a key role in driving performance, supported by stable economic conditions and operational adjustments.
Source: newslink.mba.org