US Hospitality Directions: May 2025

In 2025, the U.S. lodging sector faces a challenging landscape, characterized by a combination of macroeconomic and capital market factors, including an uncertain tariff environment, an in-flux immigration policy, elevated interest rate environment, and potentially higher inflation. As a result of the macroeconomic headwinds, GDP in 2025 is expected to grow by 0.7%, compared to 2.5% in 2024, on a fourth quarter over fourth quarter basis. Steady, albeit still high, inflation is anticipated to rise to 2.7% in 2025, which coupled with geopolitical uncertainties is expected to significantly influence consumer behavior, particularly impacting the lower-priced chain scale segments. As a result, our forecast expects RevPAR growth to decelerate significantly to 0.8%. The key risks continue to be on room night demand, just as lodging supply growth is reverting to its long-term average of ~2.0%. Key demand performance trends and risks include:

Inbound Travel

International leisure travel has declined noticeably, marked by a 3.3% drop in visitors in the first quarter compared to last year. In contrast, inbound corporate travel has improved, with a 10% and 17.4% increase from Europe and Canada, respectively.

Domestic Travel

Domestic leisure travel growth has slowed significantly due to a combination of inflation concerns and declining consumer sentiment, while domestic corporate travel is showing mixed results, with stable premium offerings and group travel demand despite softened lower-tier demand.

Continued Demand Bifurcation

Hotel operating performance continues to be bifurcated, with luxury hotels outperforming economy properties. YTD through April luxury RevPAR grew by 7.1%, while economy hotels saw only a 0.9% increase, compared to same period last year. Despite a slowdown in hotel development, upscale segments continue to see new projects.

Our outlook anticipates significant deceleration in travel demand in Q2, with expected positive momentum recommencing in the second half of 2025 as the macroeconomic picture becomes clearer and potential impacts of major economic and fiscal policies are better absorbed. As a result, we expect, RevPAR in Q2 to decline by 1.2% year-over-year, driven primarily by occupancy. We expect RevPAR in Q3 and Q4 to increase by 1.1% and 1.8% respectively, driven by an improving macroeconomic environment supported by stronger GDP growth in those two quarters. For 2026, while global events like the FIFA World Cup could boost tourism.

RevPAR percent change, US and chain scales

US Hospitality Directions: May 2025 (source: Source: PwC, based on data from STR)

About Hospitality Directions

PwC Hospitality Directions US is a near-term outlook for the US lodging sector, commonly used by industry decision-makers and stakeholders to better understand the impact of policy and other macro-environmental factors on the sector’s operating performance. Our outlook includes metrics for the overall sector as well as for the chain scales, and is used by our clients for

• strategic planning and capital allocation purposes
• demand and supply
• occupancy
• average daily rate
• revenue per available room