Lodging Analytics Research & Consulting (LARC) has projected that a “bottoming of negative pressure on the U.S. consumer, soft comparisons, and growing inbound foreign arrivals (aided by a moderating U.S. Dollar)” would help the hotel industry shrug off some slower-than-expected performance and lead to higher demand in 2025.
In its December 20204 client letter, the firm noted that the 2.8% real GDP annualized growth in the third quarter was slightly under the 3% rate in Q2. The growth was still respectable, however, U.S. Revenue Per Available Room (RevPAR) grew only 0.9%, down from the 2.4% RevPAR in the second quarter.
Although the timing didn’t allow a fuller impact, it could be that Hurricane Helene caused problems through property damage. The nonfarm employment report for October showed volatility, as the consultancy noted, with only 12,000 jobs reported. Helene and Hurricane Milton likely undercut reporting, but the upward revision for October was only an additional 24,000 to reach 36,000 versus the original report of 12,000.
Recommended For You
Inflation has continued to slow. Many expect the Federal Reserve to make another 25-basis-point rate cut again this month, which will probably further boost optimism. LARC expects a gain of clarity from the end of the presidential election and an initial and outward promise of budget and tax cuts will provide an economic “short-term tailwind.” If tariffs, an increased amount of money available through tax cuts, and a “ballooning” national debt could cause an increase in interest rates to provide a later impact on the economy and the lodging industry.
Also, the research firm thinks that “corporate transient demand growth” will help keep lodging “solid” during the first half of 2025. On the other hand, it said the momentum could slip in the second half because of slowing job growth, corporate profit declines, and limited office utilization improvement. There is still convention business that saw a 4% increase in 2024 and a 5% pace for 2025 so far, as LARC wrote. But that would be a highly concentrated effect as only 20 convention centers host 82% of the 250 largest recurring events.
Overall, LARC estimates 2024 RevPAR growth of 1.4% year-over-year, based on a 1.6% increase in average daily rate (ADR) and a 0.3% decrease in occupancy. In 2025, it projects a 2.7% RevPAR increase, based on a 2.7% increase in ADR and flat occupancy.
Plus, that all depends on core macroeconomics expectations from Moody’s of the Fed making 25-basis-point cuts each quarter into 2026, a 2% annualized GDP increase in 2024 Q4, a GDP increase of 2.7% in 2024 and 2.2% in 2025. If there is any “meaningful change” in the assumptions, “it could have a substantial impact on our U.S. lodging industry forecast," said LARC.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
