Recent credit card and debit purchase activity points to a pullback in travel spending this year, with lodging down about 2.5% from the same period last year and airline spending down about 6% year over year. These dynamics could challenge occupancy, average daily rates (ADR) and revenue per available room (RevPAR), according to a Colliers hospitality report.
Heading into the peak summer travel period, the hospitality sector faces a number of headwinds that could impact growth for the remainder of the year. Primarily, a protracted trade war could affect the sentiments of leisure and business travelers from abroad, leading to lower demand. Slower economic growth in the United States, Canada and Mexico could weaken domestic demand, and the potential increasing strength of the U.S. dollar could raise relative costs for foreign visitors, said the report. Up to 15% of travelers in the U.S. are foreign, with nearly half from Canada and Western Europe.
Despite the cautious outlook, hotel performance has improved over the past year. Key performance metrics improved in three of four U.S. regions between April 2024 and March 2025. This trend was fueled by leisure travel and a rebound in group demand for conferences and business meetings, said Colliers. Occupancy rose 0.5% across the country, RevPAR grew 2.4%, and ADR for occupied rooms increased 1.9% over that period.
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The Northeast and Central markets posted the strongest year-over-year occupancy gains, while occupancy in the South grew more modestly and occupancy in the West declined for the 12 months ending March 31. Similarly, RevPAR increased by 4.9% in the Northeast and Central regions and 2.3% in the South, while declining 0.5% in the West. Colliers noted that demand for rooms in the West increased 1.1%, which suggests the drop in occupancy is related to the addition of 13,300 new hotel rooms and 31,000 in the pipeline.
In the Central U.S., cities like Chicago and Kansas City are benefiting from a sustained rebound in leisure travel, a return of corporate events and slow but steady regional tourism since the pandemic, the report said. Hotel fundamentals in the Northeast region are improving as room bookings increase and development wanes. In 2024, the number of room nights booked surpassed their peak 2019 level, but a lingering overhang of supply has continued to put pressure on occupancy.
The South’s development pipeline leads the country with more than 51% of rooms under construction nationally, after accounting for 56% of all deliveries nationwide in 2024. The region’s supply growth is likely the reason for the muted occupancy increases year-over-year. Meanwhile, the West region is likely to feel the effects of lower Canadian and Mexican tourism for the rest of the year, the report said.
Transaction activity across the country remains muted, with yield-driven investments leading the market, said Mark Owens, vice chair and head of Colliers’ hospitality practice group.
“Uncertainty around transitional business plans and their respective costs have dampened activity in the value-add segment,” said Owens. “Constructive dialogue with both equity and debt is required to maximize pricing and to close in today’s environment. Buyers and sellers should expect longer transaction timelines and be flexible in navigating through this period.”
In addition, construction cost increases will crimp new deliveries over the next couple of years, which will help support the valuation of existing properties, said Colliers.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
