2025 Global Hotel Outlook

Executive Summary

U.S.

CBRE expects 2025 U.S. RevPAR to grow 2% given the outlook for mid-single-digit increases in inbound international visitation, modest increases in group demand and a slight improvement in business travel. Margins and profits likely will decline as expenses outpace total revenue growth.

Northern Latin America

Tourism in Northern Latin America (Mexico, Costa Rica and Colombia) is expected to continue recovering. Tourist arrivals to Mexico and Costa Rica were up by 7% and 13%, respectively, last year, while Colombia welcomed 6 million international tourists.

Europe

The outlook for Europe’s hotel and tourism sector is mostly positive, with a more normal rate of RevPAR growth driven by intra-European and other global demand. However, geopolitical issues will remain a headwind, with some travelers limiting their visitation to Western Europe.

Middle East

The Middle East is expected to leverage the gains made last year in tourism, hospitality, aviation and entertainment across multiple markets. Tourism to Dubai increased by 9% year-over-year, while tourism to Abu Dhabi jumped by 26%.

Asia-Pacific

Most Asia-Pacific markets continued to recover to pre-pandemic levels, with total international arrivals in the region last year at 92% of 2019 levels. International arrivals are expected to exceed 2019 levels by 2.6% this year. Occupancy rates will continue to recover, while average daily rates will moderate.

U.S. Outlook

Diminishing top-line headwinds and tailwinds are setting 2025 up for RevPAR growth of approximately 2%. This growth will be largely fueled by room rate gains, as other contributors like inbound international travel, airline passenger throughput, real GDP growth and growth in discretionary income are slowing. Competitive encroachment from alternative lodging sources remains a concern.

RevPAR growth is expected to be strongest in urban locations at 2.8% and softest in suburban and small town locations at 1.3% and 1.8%, respectively, that both had outsized performance in 2024 due to the solar eclipse. Higher-priced hotels are once again expected to outperform in 2025 from mid-single-digit percentage increases in inbound international travel, modest increases in group demand and a slight improvement in business travel.

The industry continues to incur cost increases above top-line growth, leading to an expected third consecutive year of margin and profit declines in 2025. Many natural disasters have resulted in higher insurance costs, while wage and food inflation could be exacerbated by stricter immigration enforcement and potential tariffs on agricultural products from Canada and Mexico. In total, we expect NOI margins to compress by 60 basis points (bps). These potential cost increases also will be a headwind to capital investment.

2025 Global Hotel Outlook Figure 1: Americas Hotel Performance & Key Macroeconomic Indicators as a Percentage of 2019; all forward projections are based on historical data as of Dec. 31, 2024. (source: Source: CoStar, Kalibri Labs, CBRE Hotels Research, Oxford Economics, International Air Transport Association.)

Although the U.S. saw a 11.5% decline in hotel investment volume last year, contributing to a 41% drop since 2019, total global demand for hotel assets was up by 16% and cross-border capital surged by 55%. U.S. hotel investment volume has been hindered by a strong dollar, REIT-multiple compression, government policy shifts, higher interest rates and profit pressures. The capital markets are generally risk-averse, and uncertainty increases the risk premium and return hurdles. With more than two years of dry powder on the sidelines and CBRE’s outlook for a 75-bp reduction in the federal funds rate by year-end and a narrowing of buyer and seller expectations, we expect to see investment volumes reaccelerate in the second half of the year as government policies become clearer.

Over two-thirds of the 65 major U.S. markets tracked by CBRE recorded RevPAR growth last year and all but five have fully recovered to pre-COVID levels. Assuming no disruptive public policy changes and a relatively stable dollar, we expect markets with strong business and leisure appeal and modest supply growth to outperform. These include New York City, where Airbnb restrictions are helping to drive record room rates, and Orlando, where new theme parks and healthy group business are driving strong demand. Major upcoming events, including the 2026 World Cup, the 2028 Olympics and the country’s 250th anniversary in 2026, combined with the strong appeal of national parks, global gateway cities and leisure destinations, should drive RevPAR growth of between 1.5% and 3.5% over the medium term, barring a recession.

Northern Latin America Outlook

Northern Latin America (Mexico, Colombia and Costa Rica) has seen a remarkable recovery in tourism since the COVID pandemic and is expected to remain among the most popular regions for international tourists.

International tourist arrivals to Mexico totaled 36.6 million from January to October 2024, up 7.2% from the same period in 2023. International tourist arrivals by air totaled 18 million, up by 2.2% from 2023 and 16.2% from 2019, with air travelers from the U.S. and Canada accounting for 11.5 million and 1.9 million, respectively. Spending by international visitors to Mexico totaled $26.5 billion through October, an increase of 7.8% over the $24.6 billion for all of 2019.

Mexico’s average hotel occupancy rate stood at 59% through October 2024, a full percentage point below the rate in 2019. In urban markets, average occupancy reached 54% and was as high as 64% in Monterrey and 59% in Mexico City. However, beach destinations such as Cancun, Los Cabos and Puerto Vallarta recorded average occupancy rates of 74%, 72% and 68%, respectively. CBRE expects another strong year for major high-end tourist destinations in 2025.

A strong recovery of Colombia’s tourism sector is expected in 2025 after the country welcomed 6 million international tourists and had an estimated 55 million air passengers in 2024. This influx of visitors is expected to drive hotel demand and raise the average occupancy rate to approximately 50%.

2025 Global Hotel Outlook Figure 2: Northern Latin America Hotel Performance & Key Macroeconomic Indicators as a Percentage of 2019 (source: Source: CBRE Research, Oxford Economics, Mexico Central Bank, Colombia National Administrative Department of Statistics, Colombia Ministry of Commerce, Industry & Trade, National Institute of Statistics & Census of Costa Rica, Costa Rica Institute)

Nevertheless, Colombia's hotel sector is facing increased competition from alternative lodging sources. The Hotel & Tourism Association of Colombia reports that the supply of tourist rental housing increased by 80% over the past two years compared with just 8% growth of hotel supply. Major cities such as Bogota, Medellin and Cartagena are seeing significant new development, including boutique hotels and eco-friendly resorts that cater to the preferences of modern travelers.

In Costa Rica, the tourism industry is a vital part of the national economy. The country welcomed approximately 2.8 million tourists in 2024, representing a 13% year-over-year increase. North American travelers account for most of the arrivals, although there is significant visitation from French, German and British travelers as well.

Costa Rica's hotel industry has shown great resilience in the aftermath of the COVID pandemic. Using a promotional strategy that highlights sustainability and nature, the country quickly regained its attractiveness to visitors reaching an average hotel occupancy rate of 65% in 2023 or 98% of 2019 levels. The country added 15 new hotels last year, according to the Costa Rican Institute of Tourism.

European Outlook

The outlook for Europe’s hotel and tourism sector remains positive. While softening demand by U.S. travelers poses some concern, strong intra-European and other global demand should support RevPAR growth in 2025. However, potential geopolitical headwinds could prompt some travelers to limit their visitation to Western Europe.

The International Air Transport Association forecasts that Europe’s total air passengers will rise by 5.5% this year, slightly below the pre-pandemic annual average from 2009 to 2019.

Additional growth is expected from both global leisure and business travel, with improved flight connectivity between cities and source markets becoming increasingly essential. Travel demand from Asian markets, including mainland China, is projected to fully recover to pre-pandemic levels by the end of 2025, according to Tourism Economics.

Moreover, forecast growth rates for inbound overnight arrivals suggest a promising outlook, with several markets expected to help drive growth in arrivals.

Germany and the Netherlands are among the top-performing countries for inbound arrivals, with projected increases of over 20%. Greece is also expected to see strong growth in arrivals, underscoring its appeal as a tourism destination.

2025 Global Hotel Outlook Figure 3: Europe Hotel Performance & Key Macroeconomic Indicators as a Percentage of 2019 (source: Source: CoStar, Oxford Economics, International Air Transport Association.)

While the sizable gains of the past 24 months are likely to moderate, RevPAR growth is expected to remain resilient across Europe this year, supported by solid demand fundamentals and strategic pricing management. This moderation reflects a natural shift toward balanced growth, underscoring the sector’s ability to adapt and perform well despite potential market challenges.

European hotel supply growth in key markets remains below historical averages. While the U.K. and Germany lead in room count, Ireland and Poland are expected to have bigger increases in hotel supply compared with last year.

Greece, France, Spain and Italy are expected to have a favorable balance between supply and demand. These markets are on track to add little new supply through 2029 amid sustained growth in international arrivals and total hotel demand.

Robust hotel investment activity is expected this year. The pricing gap between buyers and sellers is narrowing, driven by more realistic valuations and active lenders. Stabilizing yields, growing confidence in total returns and easing debt costs are laying a solid foundation for vigorous deal flow.

From an investment perspective, less new hotel development should increase the value of existing hotel assets. Additionally, this trend may encourage a shift in tourism demand from traditional hotspots to less-crowded destinations, creating new opportunities for investors and hotel operators.

Middle East Outlook

The hotel segment in the Middle East is set to leverage the momentum gained in 2024, which saw major breakthroughs in tourism, aviation and entertainment across multiple markets.

The tourism outlook for the United Arab Emirates (UAE) is particularly strong due to several government initiatives, the most prevalent of which was issuance of the country’s first commercial gaming license to Wynn Al Marjan Island. Additional gaming licenses are expected to be awarded across the emirates.

The UAE saw a 15.5% increase in tourism last year totaling 29.2 million international visitors. The country has a goal of attracting 45.5. million visitors by 2033 through the addition of several leisure anchors and infrastructure initiatives.

Dubai International Airport handled 92.3 million passengers 2024, reflecting the emirates’ continued commitment to the aviation industry as a major economic growth driver. Planned investment of more than $35 billion in the aviation sector over the next 10 years is expected to help facilitate ambitious tourism targets. This includes the expansion of Dubai’s Al Maktoum International Airport, with planned annual capacity for 260 million passengers making it the world's largest airport by 2040.

2025 Global Hotel Outlook Figure 4: Middle East Hotel Performance & Key Macroeconomic Indicators as a Percentage of 2019 (source: Source: CoStar, Oxford Economics, International Air Transport Association.)

Elsewhere, Doha’s Hamad International Airport had a 15% increase in total passengers last year to 53 million. Passenger traffic levels surpassed those during the 2022 World Cup and show Qatar’s growth prospects as both a transit hub and an increasingly popular tourism destination.

Saudi Arabia welcomed 17.5 million international leisure visitors, an increase of 656% since 2019 when the borders were first opened to foreign tourists. As of November 2024, the country’s average hotel occupancy rate stood at 60.4%, up by 1.5 percentage points from November 2019, while average ADR and RevPAR grew by 13% and 16% year-over-year, respectively, according to CoStar.

As part of the country’s efforts to diversify its economy and reduce its dependence on oil revenue, close to 1 million Saudis were employed in the tourism sector last year, making it one of the largest sources of employment.

CBRE expects strong growth of the Saudi tourism sector over the medium to long term, as the country has secured multiple high-profile events such as the 2029 Asian Winter Games, Expo 2030 and the 2034 FIFA World Cup.

Asia-Pacific Outlook

Most Asia-Pacific markets continued to recover in 2024, with total international arrivals up by 31% and just 8% below 2019 levels. International visitor arrivals are expected to fully recover in 2025, with the Pacific Asia Travel Association forecasting an annual total of 700 million for a 2.6% increase from 2019.

While international tourism continued to recover, lower inflation caused ADR growth to moderate in 2024, with this trend expected to continue in 2025. The region’s average occupancy rate increased to 66% in 2024 and is expected to further improve in 2025. Markets with weaker currencies, such as Japan, Korea and Thailand, are expected to lead the recovery in occupancy.

Except for travel to Hong Kong SAR and Singapore, mainland China continues to lag in outbound travel as domestic demand weakened following slower-than-expected economic growth over the past few years. Despite increasing by 78% year-over-year, mainland China tourist arrivals in other Asia-Pacific markets were at only 72% of pre-COVID levels. This translates to a 20% contribution to the total tourist arrivals in other Asia-Pacific markets, down from 30% in 2019. Destination markets can expect further growth in mainland China tourists this year if economic conditions improve. Markets such as Thailand and Japan, which have made temporary visa exemptions for mainland Chinese travelers, will be the main beneficiaries.

Strong international travel demand was met with increased capacity for the major Asia-Pacific airlines, many of whose available seat kilometers—the number of available seats multiplied by the number of kilometers flown by a plane—are now close to or have surpassed 2019 levels. Asia-Pacific passenger load factor reached 84% in October 2024, a new record for the region. The increased capacity and high load factor should result in more air passengers, with the International Air Transport Association forecasting that the Asia-Pacific region will lead in total passenger growth in 2025.

2025 Global Hotel Outlook Figure 5: Asia-Pacific Hotel Performance & Key Macroeconomic Indicators as a Percentage of 2019 (source: Source: CoStar, Oxford Economics, International Air Transport Association.)

The continued recovery of international tourist arrivals and hotel owners’ need to offset elevated operational costs kept ADRs elevated in most Asia-Pacific markets last year. However, growth started to normalize due to lower inflation. Certain markets such as Japan and Indonesia posted strong ADR growth of 17% and 16%, respectively.

Most Asia-Pacific markets saw higher occupancy rates last year due to increased international arrivals. However, the region’s overall average occupancy rate of 66% was slightly below the 2019 level. The 2025 outlook for occupancy is cautiously optimistic. While below-average GDP growth and softening consumer confidence could weigh on demand, the potential of strengthening currencies by Japan, Korea and Australia may help offset any weakness in demand resulting from economic headwinds.

CBRE expects modest Asia-Pacific RevPAR growth in 2025, driven by further occupancy gains as daily rates continue to moderate. Although future supply will be limited due to high construction costs, the upscale and luxury segments will see increases as wealth continues to grow in the region. Global hotel operators will continue to expand their market share by focusing on lifestyle brands, which include wellness initiatives, avant-garde design and brand loyalty programs.

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