• CoStar and Tourism Economics have revised their growth projections for the U.S. hotel industry downward through 2026, citing underperformance in Q1 and ongoing macroeconomic concerns.
• Despite the slowdown, industry leaders anticipate continued growth in specific segments like business transient, although challenges such as shorter booking windows and softer demand persist.

At the recent NYU International Hospitality Investment Forum, industry analysts CoStar and Tourism Economics presented a revised forecast for the U.S. hotel sector, projecting slower growth through 2026. The updated figures reflect a cautious outlook due to weaker-than-expected performance in the year’s first quarter and heightened macroeconomic uncertainties.

The revised projections indicate declines across several key metrics through 2025 and 2026. For 2025, the forecast adjustments include a 0.1 percentage point decrease in supply growth, a 0.6 point drop in demand, a 0.3 point reduction in average daily rate (ADR), and a 0.8 point decrease in revenue per available room (RevPAR). The forecast for 2026 also shows similar downward adjustments, with supply growth decreasing by 0.5 points, demand by 0.3 points, ADR by 0.7 points, and RevPAR by 0.6 points.

Amanda Hite, President of STR, noted that while overall top-line performance is still on an upward trajectory, the growth is tempered by lower consumer confidence and a resultant softer demand, particularly in mid to lower-priced hotel tiers. “Rate increases in the group segment and a recovery in business transient are positive signs, but gains in the leisure segment are expected to be more sporadic,” Hite explained.

The industry also faces challenges from shortened booking windows, which complicate revenue management for hoteliers. Aran Ryan, Director of Industry Studies at Tourism Economics, added that the broader economic environment would continue to impact the travel sector, with consumers experiencing higher prices and a weaker job market, and businesses likely slowing down investments.

Additionally, the projection for gross operating profit per available room (GOPPAR) for 2025 has been lowered by $3, indicating that while profit growth is expected to continue, it will do so at a modest pace due to softer demand and rising operational costs. Adjusted for inflation, GOP is reported to be lower than the previous year, signaling tighter profit margins for hotel operators.

As the industry navigates these challenging conditions, stakeholders remain cautiously optimistic, focusing on adaptive strategies to sustain growth and profitability in a fluctuating economic landscape.