Occupancy, average daily rate (ADR), and revenue per available room (RevPAR) continued to experience strong growth as the market moves toward stabilization. Luxury hotels notably outperformed their lower-priced counterparts across these key performance indicators, reflecting a broader resurgence in the luxury segment during 2024. For the overall Manhattan hotel market, Q3 RevPAR increased by 5.1%, while Q4 saw an increase of 11.7% compared to the same periods in 2023.

As a bellwether market, Manhattan’s hotel market averaged an occupancy level of 89.3% in Q4 2024, marking a return to pre-COVID stabilized levels. RevPAR growth was strong in Q4, recording the highest year-over-year growth of any quarter in 2024. However, with the anticipated stabilization of the market, along with several new openings projected, growth is expected to moderate in 2025. Abhishek Jain, Principal, PwC

Stepping Back to Spring into 2025

Looking at macro-trends shaping hospitality in 2025

• Performance Bifurcation Continues – According to data from STR, the U.S. hospitality sector experienced moderate RevPAR growth of 1.8% in 2024, primarily driven by an increase in ADR, while occupancy levels remained largely stagnant. A key trend underlying this data is the bifurcation in performance, with higher-end hotels significantly outperforming their lower-end counterparts. Luxury and upper-upscale hotels have benefited from recent stock market gains, which have bolstered wealth creation among their core clientele. In contrast, the lower-end market has faced challenges, including inflationary pressures and competition from short-term rentals.
• Business Models Continue to Evolve and Adapt – The hospitality industry is undergoing a transformative shift as companies redefine traditional business models. Moving beyond the conventional focus of “heads in beds,” hospitality companies are expanding into adjacent sectors, including branded residences, wellness experiences, mixed-use developments, and alternative accommodations. This evolution reflects not only changing consumer preferences, particularly in the luxury segment, where travelers seek more immersive and personalized experiences, but also increased focus on growth driven by the need to adapt to emerging macro trends.
• Hospitality Leads Human-Led AI Adoption – The integration of artificial intelligence (AI) has also become a significant trend within the industry, enhancing operational efficiencies across dynamic pricing, guest personalization, and predictive maintenance. While mobile check-in services and AI-powered chatbots are among the most widely adopted applications, the potential for broader AI implementation remains largely untapped.
• Looking ahead in 2025 – The U.S. hospitality industry is expected to experience muted RevPAR growth, driven by slight ADR increases amid stable demand. However, industry sentiment suggests that transaction volume will experience a significant uptick in 2025, fueled by anticipated interest rate cuts and greater post-election economic clarity. According to CBRE, 94% of U.S. hotel investors are expected to maintain or increase their hotel investments in 2025, with central business districts (CBDs) and resort locations emerging as the most attractive investment opportunities. As the industry navigates the evolving consumer and technological landscape, adapting to shifting consumer expectations and leveraging AI will be paramount. Modern travelers are increasingly seeking a seamless blend of work, leisure, and wellness. Hotels that offer premium experiences, such as co-working lounges and health-conscious dining options, are poised to strongly position themselves in this landscape. Furthermore, the adoption of AI-driven solutions in revenue management and customer engagement will likely become a key differentiator for hospitality companies.

PwC Manhattan Lodging Index – Fourth Quarter 2024 — Source: PwC

RevPAR increased 11.7% year-over-year during the fourth quarter of 2024, outpacing third quarter growth of 5.1%. Both occupancy and ADR also continued to advance at a quicker pace than Q3. Q4 year-over-year increases in occupancy were highest in October – up 5.5%, and lowest in December – up 1.4%. Q4 2024 average occupancy and ADR increased to 89.3% and $420.74, respectively, resulting in Manhattan RevPAR jumping from $336.30 in Q4 2023 to $375.65 in Q4 2024.

Of the four market classes tracked, luxury properties exhibited the most significant year-over-year increase in RevPAR – up 15.3% for the quarter, driven by a 4.9% increase in occupancy from 80.4% in Q4 2023 to 84.3% in Q4 2024 and a 9.9% increase in ADR from $639.89 to $703.55.

For upscale properties, quarterly occupancy grew by 2.3% and ADR by 6.5% year-over-year, resulting in a RevPAR increase of 9.0% from Q4 2023. Upper upscale properties experienced a 10.6% increase in RevPAR since Q4 2023, driven by a 3.8% increase in occupancy and a 6.5% increase in ADR. Upper-midscale properties posted a 10.8% increase in RevPAR year-over-year, attributable to an increase in occupancy of 4.4% and an increase in ADR of 6.2%. All four market classes saw RevPAR increase by at least 5% since Q4 2023, driven by increases in occupancy and ADR across all classes.

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