By: Tuhin Sarkar

US Hotel Growth Forecasts Cut for 2025–26 as CoStar and Tourism Economics Warn of Slower Travel Demand — this is the reality the hospitality industry is facing right now. US Hotel Growth Forecasts are no longer pointing to the strong upward trend many had hoped for. Instead, forecasts for 2025–26 from CoStar and Tourism Economics have been cut. The reason is clear. These respected analysts now warn that slower travel demand will weigh on hotels across the country.

CoStar has adjusted its figures to reflect a weaker outlook. Tourism Economics has done the same, warning that slower travel demand is becoming a more permanent feature of the market. This change means hotel owners and operators must prepare for tighter margins and more competition for guests. The cut to the US Hotel Growth Forecasts for 2025–26 shows how economic uncertainty, higher costs, and shifting travel habits can reshape an entire industry.

Slower travel demand, as CoStar and Tourism Economics explain, will not stop all growth, but it will make it harder to achieve. Hotels will need to work smarter to attract travellers, maintain rates, and protect profits. The forecast cut for 2025–26 is a signal to the industry to adapt now. Those who take the warnings from CoStar and Tourism Economics seriously will be better placed to navigate slower travel demand and still succeed in a changing market.

A Softer Road Ahead for US Hotels

The US hotel sector is preparing for a slower pace of growth in 2025 and 2026. CoStar and Tourism Economics have revised their forecasts down. They expect demand, Average Daily Rate (ADR), and Revenue Per Available Room (RevPAR) to grow less than first predicted. Profit levels remain stable, but margins are under strain. These updates were shared at the 17th Annual Hotel Data Conference.

The reason for the cut is clear. The economy is showing signs of slower momentum. Inflation is still high. International visitor numbers are not growing as fast as expected. Business and consumer spending is also softer. These factors are affecting how many people travel, how long they stay, and how much they spend on hotels.

What the Numbers Now Show

The changes to the forecast are measurable. For 2025, demand growth has been reduced by 0.6 percentage points. ADR growth is down by 0.5 points. RevPAR growth is lower by 1.1 points. For 2026, demand is cut by 0.5 points, ADR by 0.3 points, and RevPAR by 0.7 points.

GOPPAR, which is Gross Operating Profit Per Available Room, is unchanged. But margins will shrink. Forecasts now suggest a 0.3 percentage point drop in 2025 and a 2.3 point drop in 2026. Food and beverage costs are the biggest risk. Labour, energy, and supply chain costs also remain high.

The US hotel industry is heading for slower growth in 2025 and 2026. CoStar and Tourism Economics have cut their forecasts, signalling weaker demand ahead. The announcement was made at the 17th Annual Hotel Data Conference. Key measures like demand, Average Daily Rate (ADR), and Revenue Per Available Room (RevPAR) are all set to drop. Demand is expected to fall by 0.6 percentage points in 2025 and 0.5 in 2026.

The downgrade reflects the impact of persistent inflation and changing travel behaviour. It also shows that global trade and political uncertainty are shaping travel patterns. While the drop is modest, it comes at a time when hotels are already adjusting to slower international arrivals and tighter consumer spending.

Why the Forecast Has Been Cut

Amanda Hite, president of STR, explained that inflation remains a key factor. Travellers are more cautious with spending. Tough calendar comparisons with previous peak years also make growth harder to achieve. Travel patterns are shifting, with shorter booking windows and fewer extended stays.

These trends are hitting hotel performance across both leisure and business travel segments. The slowdown is not only about fewer guests but also about how much they are willing to spend per stay. Even with these headwinds, industry leaders believe recovery is still possible in the medium term.

Inflation and Travel Patterns Shape 2025 Outlook

Persistent inflation continues to eat into both consumer and corporate travel budgets. Higher prices for flights, food, and experiences have forced many travellers to shorten trips or downgrade hotel choices. This shift reduces ADR growth potential and impacts revenue targets.

Hotels are seeing a change in demand sources. While domestic leisure travel remains resilient, business travel and group bookings have yet to return to pre-pandemic levels. These patterns have made forecasting more complex and forced operators to rethink pricing strategies.

Tariffs and Trade Talks Add to Industry Uncertainty

Aran Ryan from Tourism Economics noted that while the US economy is slowing, it should avoid recession. The bigger concern is the drag from tariffs and ongoing trade negotiations. Tariffs can affect travel indirectly by increasing costs for imported goods and reducing overall consumer confidence.

The conclusion of trade talks could lift sentiment and help stabilise hotel performance. For now, uncertainty over policy direction continues to limit investment and expansion plans for many hotel operators. This environment makes it harder for the industry to commit to large-scale developments.

RevPAR and ADR Growth Lose Momentum

The revised forecast points to slower growth in key performance indicators. RevPAR, a crucial measure of hotel health, is expected to grow more slowly than previously projected. ADR will also face pressure as operators work to keep rooms filled amid softer demand.

For many hotels, the focus in 2025 will be on maintaining occupancy while protecting profitability. This could mean more targeted promotions, dynamic pricing strategies, and a sharper focus on value-added services to attract guests. The competitive landscape will become more intense as operators fight for market share.

ADR and RevPAR Lose Pace

ADR is still expected to rise in 2025 and 2026. But the pace of increase will be slower. This means hotels may not be able to raise rates as much as they did in the last two years. RevPAR, which combines occupancy and ADR, will also grow more slowly.

Hotels will need to be more creative in pricing. Offering value-added packages, loyalty rewards, or flexible booking terms may help keep occupancy up while protecting ADR. Revenue managers will have to focus on balancing price and volume to avoid losing market share.

Margins Under Pressure

Even with stable GOPPAR, hotel margins are forecast to shrink. The main reason is rising costs. Food and beverage departments are under particular strain. Ingredients cost more. Labour costs are climbing. Energy prices remain high.

Hotels will need to find ways to operate more efficiently. This could mean adjusting menus, reducing waste, and using technology to manage staffing. Savings in these areas can help offset higher costs without hurting the guest experience.

The Impact of Tariffs and Trade

Trade disputes and tariffs are an added layer of uncertainty. They can raise costs for imported goods used in hotels, from food to furniture. They can also reduce consumer confidence, making people less likely to travel.

The conclusion of trade talks could bring a lift in sentiment. For now, operators remain cautious about investing in new projects until the policy environment becomes clearer.

The Role of International Travel

International visitors are key to many US markets. Cities like New York, Miami, Los Angeles, and San Francisco depend on overseas travellers for a large share of their hotel business. Visa delays, higher airfares, and political issues have slowed the return of these guests.

Marketing efforts abroad could help. Tourism boards and hotel brands are already targeting campaigns to bring more visitors from Europe, Asia, and South America. If successful, this could ease some of the pressure on urban hotel performance.

Preparing for a Slower Market

Hotels can still succeed in a slower growth market. The focus should be on attracting domestic travellers, enhancing loyalty programmes, and building strong relationships with corporate clients. Flexible pricing can help keep occupancy stable.

Working with event organisers, airlines, and attractions can also create new demand. Bundled deals and cross-promotions can give guests more reasons to book.

GOPPAR Stable but Margins Under Pressure

While the Gross Operating Profit Per Available Room (GOPPAR) forecast remains unchanged, profit margins are expected to tighten. Rising expenses, especially in food and beverage operations, are the main concern. Labour costs, energy prices, and supply chain pressures are also contributing factors.

Hotels may need to adjust service models to manage these costs without damaging guest satisfaction. This could include menu adjustments, energy efficiency upgrades, and selective staffing changes. Operators will have to balance cost control with maintaining the quality of guest experiences.

Policy Shifts Could Lift 2026 Recovery

Both CoStar and Tourism Economics expect conditions to improve in 2026. Tax cuts and reduced policy uncertainty could boost consumer spending and corporate travel budgets. This would help demand recover and support better performance for ADR and RevPAR.

A stabilising global economy and improved trade relations could also encourage more international travel to the US. For now, hotel operators will need to navigate a challenging year while positioning themselves for a possible rebound.

The Role of International Visitors in Growth

Declining international visitor numbers have been a notable factor in the 2025 downgrade. Visa delays, higher travel costs, and geopolitical issues have slowed inbound tourism. This impacts major US cities more heavily, where overseas travellers make up a significant portion of hotel demand.

If inbound travel improves in late 2025 and into 2026, it could give the hotel sector a much-needed lift. Tourism boards and hotel brands are expected to increase overseas marketing efforts to capture this opportunity.

Strategies Hotels Can Use to Offset Slowdown

Hotels can still find growth opportunities despite the weaker forecast. Focusing on domestic markets, leveraging loyalty programmes, and investing in targeted digital marketing can help maintain occupancy. Flexible pricing and tailored packages can also draw in travellers seeking value.

Partnerships with airlines, attractions, and event organisers could generate new demand streams. Hotels that adapt quickly to changing travel patterns will be better placed to outperform in a slower market.

Industry Remains Cautiously Optimistic

Despite the downgrade, industry leaders are not predicting a downturn as severe as past crises. The fundamentals of US tourism remain strong. There is still steady demand for leisure travel, and business travel is slowly recovering.

The key for 2025 will be resilience and adaptability. Hotels that manage costs, maintain service quality, and stay aligned with evolving guest needs can still achieve healthy performance even in a softer growth environment.

Long-Term Growth Still Possible

While 2025 will be a year of slower growth, the long-term outlook for the US hotel sector remains positive. Economic cycles are natural, and recovery periods often lead to innovation and stronger business models.

Investments in technology, sustainability, and guest experience will be critical in shaping the industry’s future. Those who prepare now will be best positioned to capture market share when demand accelerates again.