Hospitality projections in an uncertain time.

Byline: Industry Insights Correspondent

As the U.S. economy navigates post-pandemic recalibrations, the hotel industry stands at a crossroads. While 2024 was marked by fleeting demand surges from mega-events like the Taylor Swift Eras Tour and the 2024 Presidential Election, 2025 is shaping up to be a year of cautious optimism, driven by stabilizing monetary policies, corporate travel rebounds, and strategic investments in key markets. Here’s an in-depth look at the forces reshaping America’s lodging landscape.

1. The Macroeconomic Backdrop: A Balancing Act

The Federal Reserve’s dual rate cuts in late 2024—a 50-basis-point reduction in September and a 25-basis-point trim in November—have injected cautious optimism into the sector. Inflation, which cooled to 2.8% in Q2 2024 and 2.2% in Q3, has eased financing constraints, spurring new hotel construction projects after years of stagnation 2 8. However, the lingering effects of a “higher for longer” interest rate environment and moderating GDP growth (2.7% in 2024, slowing to 2.1% in 2025) continue to suppress demand, particularly in leisure segments 6 11.

Revenue per available room (RevPAR), a critical industry metric, is projected to grow modestly at 1.5% nationally, driven largely by average daily rate (ADR) increases rather than occupancy gains 2 8. CBRE forecasts a slight RevPAR rebound in late 2024 and 2025, tied to improving business travel and group demand 11 12.

2. The Rise of “Superstar” Markets

While the national outlook remains muted, select markets are outperforming:

• New York City: The epicenter of corporate and group travel, NYC is poised for a 4% increase in room inventory in 2025. Upper-priced hotels here are expected to lead RevPAR growth (3.6%), buoyed by ADR hikes and occupancy gains 2 8.

• Las Vegas and Orlando: These leisure-heavy markets continue to benefit from robust convention calendars and international tourism rebounds. Las Vegas, in particular, has seen a resurgence in midweek corporate bookings 5 15.

• Sunbelt Surge: Nashville, Phoenix, and Fort Worth are attracting developers with above-average demand growth. Nashville’s lodging demand is forecast to rise 4.6%, driven by a blend of business relocations and leisure appeal 6 15.

• Savannah’s Renaissance: This historic gem is defying trends with a 4.1% spike in lodging inventory, supported by occupancy and ADR levels surpassing pre-pandemic highs 10.

3. The Corporate Travel Conundrum

Corporate travel remains the industry’s Achilles’ heel. One-night stays—a proxy for business trips—have plummeted, especially in Economy and Midscale segments. Nationally, hotels are averaging 45,000 fewer daily check-ins compared to 2019, with Mondays to Wednesdays hit hardest 5. However, analysts note green shoots: the post-election stock market rally and anticipated corporate spending could revive this lucrative segment. Amanda Hite of STR highlights that “higher-end hotels are best positioned to capitalize on any rebound” 6 15.

Group travel, meanwhile, is a bright spot. Cities like San Francisco and Chicago are reporting stronger convention bookings, while luxury resorts in Miami and Los Angeles are leveraging hybrid event demand 11 12.

4. The Luxury Edge and Labor Cost Relief

Luxury and upper-priced hotels are outpacing budget counterparts. With affluent travelers less sensitive to inflation, ADR growth for premium chains is projected at 2.7% in 2025, nearly double the economy segment’s 1.4% 10. 15. Labor costs, a persistent pressure point, are finally easing. STR forecasts a $168 reduction in labor expenses for upper-midscale chains in 2025, boosting profit margins 15..

5. Geopolitical Wildcards

The industry faces headwinds from potential policy shifts post-2024 election. Tariffs, immigration reforms, and airlift capacity constraints could dampen international inbound travel, which remains 15% below 2019 levels 6 11. Conversely, a weaker dollar or accelerated visa processing could reignite demand from Europe and Asia-Pacific 15.

Conclusion: A Year of Strategic Patience

The 2025 outlook is one of guarded optimism. While major metros and luxury assets thrive, broader growth hinges on corporate travel’s revival and macroeconomic stability. As Rachel Rothman of CBRE notes, “The historical link between GDP and hotel demand has frayed, but rate cuts and cooling inflation could mend it” 11 12. For investors, the playbook is clear: target high-yield markets, prioritize premium experiences, and brace for policy-driven volatility.

Now, TNB has had success in past volatile markets, we love to put towards service, great team management and other reasons. Of course we have to credit our markets and hotel types as well. Cities like Bend, Oregon where the city is a year round playground and seen as an escape from the stress of the larger cities in the PNW, have performed incredibly since COVID and offer year round vacation opportunities. It is a great place to have high value brands like the Fairfield Inn by Marriott or Towneplace Suites extended stay style properties. Also our Holiday Inn Express in Ontario, Oregon which maintains a steady flow of traffic for business travelers and roadtrip transient business. Also a city like Boise, Idaho which became one of the fastest growing cities in the USA in the past 10 years. Our two extended stay properties there have flourished even through remodel as staples of a growing business market. TNB’s advantages lie not only in our map, but our team who has shown incredible flexibility during times of change.

Sources: PwC, STR, CBRE, Hospitality Upgrade, Hotel Investment Today, Lodging Magazine

This analysis synthesizes data from industry reports and forecasts as of January 2025. For further details, refer to the cited sources