U.S. Hotels State of the Union August 2025 Edition

Key Takeaways

Economy

CBRE cut its 2025 GDP forecast again to 1.5% from 1.9%, despite strong Q2.

In July, CBRE also reduced its 2026 GDP growth estimate to 1.8% from 2.5%, below the long-run average of 2.1%. CBRE expects inflation to remain higher for longer with the 2025 CPI growth forecast increasing 10 bps to 2.9% and the 2026 forecast increasing 30 bps to 3.0%. Rising inflation could put sustained pressure on hotel profits and margins.

CMBS volumes decreased in June, but average loan size increased.

CMBS rates increased 50 bps in June to 7.8% and credit spreads widened by 50 basis points y/y. CMBS loan issuance fell from $2.9B in June 2024 to $0.9B in June 2025; however, average loan size rose from $63.2 million to $68.5 million. As a result of the lower volumes and higher deal size, the number of loans issued fell from 45 to 14 year-over-year.

Employment continued to grow in June, and unemployment remained steady.

June employment increased 1.4% while unemployment remained at 4.1%. Real disposable income growth has been steadily falling, but employment growth and wage gains, which outpaced inflation by 101 bps, suggest consumers have money to travel. Unfortunately, this has not led to accelerating RevPAR growth.

Current Trends

June RevPAR fell 1.2% as weak ADR gains were offset by lower occupancy.

ADR growth of 0.4% was offset by a 1.7% drop in occupancy, resulting in decreasing RevPAR y/y. RevPAR growth for all chain scales declined in June except for luxury chains which experienced a 2.8% increase in RevPAR.

Hotel operating profits grew in May 1.4%, just below YTD pace.

Top line growth of 2.1% in May led to a 1.4% increase in profit dollars, below YTD growth levels of 1.5%. While expense growth, particularly insurance costs, have started to moderate on a TTM basis, margins still contracted 0.1 p.p. As higher inflation and stagnant revenue growth persist through 2026, we expect margins to continue to be under pressure..

STR demand rose 5.6% in contrast to the 0.6% decline in lodging demand.

STR share of total demand increased again in June to 14.6% compared with 13.9% in 2024 and up from 10.6% in 2019. STR RevPAR increased 5.8% in June y/y as ADR rose to 142% of 2019 and occupancy dropped slightly from 102% of 2019 to 101%.

Food for Thought

In June, only 35% of markets posted RevPAR increases.

Of the 65 Hotel Horizons markets tracked, only 35% experienced positive RevPAR growth in June compared with 65% which posted declining RevPAR. This is fewer markets experiencing growth than at any other point in the recovery.

For the first time in several months, TSA throughput increased 1.1% in July.

Despite stronger throughput, lower airfares and continued wage growth, RevPAR trends have been weak. Still, Google searches for corporate and redemption travel increased again in July, up 7% and 9% y/y, respectively, which could point to improving travel trends in the fall.

Inbound international travel volumes fell again in June.

Inbound international visitation fell 3.4% in June. This short fall was exacerbated by a 0.6% increase in outbound international travelers. It is likely that the imbalance between inbound and outbound travel volumes will persist as the shift in sentiment takes hold and serves as a headwind to hotel demand at least through 2026.