U.S. economic growth slowed during 4Q-2024 with Real GDP growth of 2.3%, slightly below the 3.1% increase in 3Q-2024. Despite slowing economic growth, U.S. RevPAR growth accelerated to a 3.6% year-over-year increase in 4Q-2024, driven by a combination of increased demand tied to natural disaster relief and pent-up demand following a swift resolution of the U.S. general election.

While economic growth has been strong in recent quarters, job growth has been more volatile. In January, U.S. Totalnonfarm jobs increased by just 143,000, while the same metric for December was 307,000 and 261,000 in November. Despite that volatility, continued economic growth is the general consensus. As of January, only 22% of economists surveyed by the Wall Street Journal expect a recession within twelve months.

Additionally, any softness tied to the U.S. consumer appears to be abating. In each of the last four months of 2024, retail sales data improved on a month-over-month basis. While January levels regressed slightly, it was attributed to a weather impact. Additionally, both the Visa Spending Momentum Index and the Visa Discretionary Spending Index have been rising and are at the highest levels in over a year, which suggests the potential for improving leisure travel demand through 2025. However, a strong U.S. Dollar may continue to lead the U.S. to be a considerable net exporter of travel, which will limit the impact of the shifting U.S. consumer landscape on U.S. hotels.

With the new administration in place, uncertainty surrounding economic policy remains. Broad-based tariff increases could be a headwind for economic growth and drive inflation higher. Increased deportations will weigh on the labor pool which could be a headwind for economic growth and further impact the U.S. hotel industry’s ability to source staffing. Lastly, the expectation for the extension of individual tax cuts and an expansion of corporate tax cuts could be positive for the economy in the near-term. However, economists expect those cuts to be funded by increased deficit spending, which will generate additional long-term risk to the economy. As such, the 10-year treasury yield has backed up in recent months and expectations for the fed to continue a dovish policy stance have subsided.

We are increasingly confident that 2025 leisure demand growth will resume, fueled by an improving U.S. consumer and soft comparisons. Corporate transient demand is expected to remain solid in the near term as pent-up demand from the election cycle is unlocked in the first half of the year. However, our positive short-term outlook for corporate transient demand growth moderates as the year progresses, limited by sluggish job growth and corporate profit declines. Group trends remain strong, contributing to a base level of demand that will further support pricing power. Nationally, we estimate that the convention center booking pace is up 4% on a year-overyear basis in 2025, following the 3% increase in 2024.

Additionally, an outsized portion of U.S. citizens are electing to travel abroad. In 2024, outbound international travel was 21% above 2019 levels, which was also up 9% year-over-year. While that should create soft comparisons moving forward, momentum for outbound international travel remains strong. In fact, in 2024, there were 13 million more U.S. citizen outbound travelers than in 2019.

Despite challenges related to U.S. citizens traveling abroad, there is ample opportunity for growth in foreigners travelling to the U.S. In fact, in 2024, foreign inbound visitation to the U.S. was still 8% below 2019 levels and up 9% year-over-year. In 2024, there were 5 million fewer inbound foreign travelers to the U.S. than in 2019. As such, in 2019 the U.S. was a net importer of about 5 million travelers. In 2024, the U.S. was a net exporter of about 14 million travelers. That 18 million traveler swing is weighing on hotel performance, especially in gateway markets. 

International Visitation Relative to 2019 Levels 

— Source: Lodging Analytics Research & Consulting, Inc

As foreign travelers tend to stay longer and spend more than domestic travelers, the continued recovery of this portion of the leisure segment will have an outsized impact on hotel performance. In fact, according to the U.S. Travel Association, overseas visitors (which accounted for 47% of total international visitors in 2023) had an average length of stay in the U.S. of 18 nights, far exceeding the domestic traveler length of stay, estimated at around 2 nights. 

However, when these trends begin to reverse, it remains to be seen. In each year from 2022 to 2024 the U.S. has been a net exporter of 1 million more travelers that the prior year. The strength of the dollar is one factor that impacts these results and while 6 months ago, it was expected to fall meaningfully in 2025, that is no longer the case. Additionally, rhetoric from the new administration coupled with cost cutting initiatives that impact visa and border crossing wait times could weigh on foreign appetite to travel to the U.S. Lastly, with the U.S. hosting the World Cup in 2026 and Olympics in 2028, many foreigners may be waiting to book their U.S. trips to coincide with those events, which could limit the near-term recovery of inbound foreign arrivals. 

Moody’s Analytics economic forecasts incorporate the following key national assumptions that drive our outlook:

• The Fed will cut the target Fed Funds Rate by 25 bps per quarter beginning again in September.
• U.S. GDP will increase 2.5% in the first quarter and 2.3% in 2025. 

As such, for 2025, we forecast RevPAR to increase 3.1%, driven by a 3.7% increase in ADR and a 0.6% decrease in occupancy. The acceleration in RevPAR growth form 2024 levels is driven by tailwinds (or at least fewer headwinds) because of the U.S. election, improving group trends and fewer headwinds tied to domestic leisure demand. However, should any of the above core macroeconomic assumptions meaningfully change, it could have a substantial impact on our U.S. lodging industry forecast. 

We continue to expect there to be U.S. lodging markets that materially outperform as well as those that underperform national averages. Over the medium-tolong term, we expect markets with outsized exposure to leisure transient and group to outperform. However, in the immediate term, those with outsized exposure to continued corporate transient recovery should perform well. 

Furthermore, we anticipate financing costs to stabilize and transaction volumes to rebound in 2025. Expense pressures will become a substantial factor in identifying markets that are winners and those that are losers, especially with several major cities with recently completed or upcoming collective bargaining negotiations. In recent agreements across the country, the hotel union and hotel owners/operators agreed to roughly a 10% annual increase in wages over the next five years and a reset back to pre-pandemic staffing levels. We expect non-union hotels to keep pace with wage growth at union properties across these markets, though many are already paying wages above union-mandated levels. 

Layering in added political risks like the Safe Hotels Act in New York City, which could be duplicated in other major markets, wage and expense growth is likely to be a bigger component of value change than top-line performance across many markets. As such, wage and expense growth and their strain on margin growth materially shape our views on markets that are best and worst for investment today. 

Transparency surrounding forecasting is critical to the lodging industry. We believe the best business decisions are based on the highest quality data and information available at the time of drawing such conclusion(s). We take that approach with our forecasts, using the best and most relevant available information to provide the most likely outcomes at the time of issuance. 

LARC’s industry-leading market intelligence is available to help all industry participants navigate the current environment and position themselves for success. Please contact us to learn more about our services and products, or if there is any other way we may be able to serve you. 

 U.S. Lodging Industry and Market Outlook – March 2025 

LARC’s Industry Outlook

Currently, for 2025, Lodging Analytics Research & Consulting (LARC) expects U.S. RevPAR to increase by 3.1% to $103.02, driven by ADR growth of 3.7% to $164.54 while occupancy declines 0.6% to 62.6%. The first and third quarters of the year will be the strongest of the year while growth will be softest in the fourth quarter, tied to difficult disaster relief comparisons across the Southeast and Texas. 

LARC forecasts 2025 U.S. Hotel EBITDA to increase 1.8%, with slight margin erosion, and Hotel Values to increase 3%. Over the next five years, LARC expects Hotel Values to increase by a total of 8%. 

March 2025 U.S. Hotel Industry Forecast Summary 

— Source: Lodging Analytics Research & Consulting, Inc

The below table illustrates a summary of LARC’s current U.S. Hotel Industry Outlook in contrast to last quarter’s outlook. 

2025 U.S. Hotel Industry Forecast: March 2025 Edition vs. December 2024 Edition 

— Source: Lodging Analytics Research & Consulting, Inc

Our 2025 operating outlook is slightly improved from a quarter ago. The most significant change is improving confidence in leisure demand having bottomed out and growth to resume in 2025 along with continued modest growth in the corporate transient segment. This translates into higher ADR growth, but occupancy will be lower, primarily tied to difficult comparisons from disaster relief efforts in the fourth quarter. Our value appreciation forecast also improves, tied to an improving long-term cash flow outlook. 

LARC’s U.S. RevPAR model has an R-squared of 98.7% within a standard error of 2.7%, back-tested to 2000. LARC’s U.S. Cap Rate model has an R-squared of 98.6% within a standard error of 26 bps, back-tested to 2005. 

Market Outlooks

Listed below are the best and worst performing markets based on our forecasts. Similar to LARC’s U.S. forecast, our market level forecasts are structured on multi-variable regression models with a high level of historical accuracy. 

Additional details regarding our market outlooks can be found in LARC’s Market Intelligence Reports. Please contact us if you are interested in purchasing any of LARC’s offerings. 

2025 

Top Markets for RevPAR Growth:
Maui, San Francisco, Palm Beach, San Jose & Savannah

Bottom Markets for RevPAR Growth:
Houston, Cleveland, Chicago, Las Vegas & Milwaukee 

5-Year Outlook (2024 – 2029) 

Top Markets for RevPAR Growth:
Maui, Palm Beach, Raleigh, Washington, D.C. (2029 inauguration impact) & Orlando

Bottom Markets for RevPAR Growth:
Cincinnati, Kansas City, Indianapolis, Houston & Louisville

Top Markets for Value Change:
Puerto Rico, Charlotte, New Orleans, Salt Lake City & Orlando

Bottom Markets for Value Change:
Austin, Boston, Chicago, St. Louis & Portland

Ryan Meliker
President
Lodging Analytics Research & Consulting, Inc