U.S. Hotel Industry Faces Major Setback, 2025 & 2026 Projections Cut Amid Rising Costs and Economic Uncertainty: Know More

Published on November 13, 2025

The final U.S. hotel forecast for 2025 has seen further downgrades from CoStar and Tourism Economics, with key performance indicators such as occupancy, average daily rate (ADR), and revenue per available room (RevPAR) adjusted to reflect the ongoing economic challenges. These adjustments come amid a continued uncertain macroeconomic environment, marked by rising unemployment and inflation, as well as persistent costs in several key areas impacting the hospitality industry.

Downgrades in Key Hotel Performance Metrics

For the year 2025, the forecasted occupancy rate has been reduced by 0.2 percentage points, now expected to reach 62.3%. While this marks a slight reduction, the average daily rate (ADR) is predicted to maintain a growth of 0.8% for the year. However, revenue per available room (RevPAR), a critical metric for the hospitality sector, has seen a more significant decline. It has been downgraded by 0.3 percentage points, bringing the forecast for 2025 to a -0.4% change in RevPAR. Notably, the last time the U.S. hotel industry experienced a decline in total-year RevPAR was in 2020 and 2009, which were marked by global economic disruptions.

Similar adjustments have been made for 2026 projections. Occupancy is expected to dip by 0.3 percentage points, ADR will be reduced by 0.1 percentage points, and RevPAR is projected to fall by 0.3 percentage points. These revisions highlight the ongoing pressures faced by the hotel industry as it navigates an economic environment marked by rising costs and slower growth.

Economic Pressures and Projections for 2025 and Beyond

CoStar and Tourism Economics have highlighted the persistent macroeconomic pressures that are contributing to the lowered performance projections. According to Amanda Hite, president of STR, the forecasted hotel performance for both the remainder of 2025 and into 2026 has been lowered due to factors such as rising unemployment and inflation. One of the primary issues affecting the hotel sector is that the growth rate for ADR is lagging behind the rate of inflation, which is putting additional strain on profit margins. These pressures are particularly noticeable as operational costs, such as those related to food and beverage services, marketing, and utilities, continue to rise.

Hite also pointed out that labor costs are expected to see a slight increase in 2025, largely due to the increased labor intensity in food and beverage departments. These departments are traditionally more labor-intensive and are expected to contribute to higher operational costs in the coming year. As a result, the hotel industry faces the dual challenge of rising costs and margins that are not growing at a pace that can offset these expenses.

Economic Uncertainty and Global Travel Trends

While the near-term outlook remains uncertain, there are signs that the U.S. travel economy may show some signs of improvement heading into 2026. Aran Ryan, director of industry studies with Tourism Economics, has pointed out that while the job market remains soft, tax cuts, resumed hiring, and a decrease in policy instability are expected to contribute to household income growth. As a result, consumers may experience some relief, which could lead to increased discretionary spending and a mild recovery in the U.S. travel and hotel markets.

Another factor expected to influence U.S. hotel performance in 2026 is the expanding global long-haul travel market. International visitation is anticipated to rise, particularly with the growing interest in global sporting events, such as the World Cup, which is expected to draw in more international tourists and increase demand for hotel rooms. This trend may help bolster performance across the U.S. hotel sector as the year progresses, despite the current challenges facing the industry.

Impact of Rising Expenses on GOPPAR Projections

Gross operating profit per available room (GOPPAR) projections have also been downgraded in the latest forecast, with the decrease for 2025 primarily attributed to rising expenses. A significant portion of these higher costs is related to the food and beverage (F&B) departments, which continue to experience increased costs. The F&B sector, which is a key revenue driver for many hotels, is also facing rising labor and supply chain costs, adding further pressure on the overall profitability of the industry.

In addition to food and beverage expenses, increased costs in other operated departments, marketing, and utilities are contributing to the overall negative forecast for GOPPAR. The continued rise in operational expenses highlights the broader economic pressures that are shaping the hotel industry’s outlook for 2025 and 2026.

Outlook for the Hotel Industry in 2026

Despite the challenges, there is some optimism for the U.S. hotel market as it moves toward 2026. The adjustments made to the 2026 forecast reflect a more cautious, yet moderately optimistic, outlook for the future. The U.S. travel economy is expected to firm up as consumers experience the benefits of household income growth, tax cuts, and an improving job market. Furthermore, international visitation is likely to play a critical role in boosting demand for U.S. hotels, particularly as global long-haul travel expands and global sporting events drive interest.

The hotel industry will need to continue adapting to the evolving economic environment. The combination of rising expenses, a softer job market, and ongoing inflationary pressures means that U.S. hotels will need to navigate carefully to maintain profitability. However, the predicted improvements in international visitation and household income growth offer some hope for a recovery in the sector.

Conclusion

The latest revisions to the U.S. hotel performance projections for 2025 and 2026 reveal a continued challenging environment for the industry. With occupancy rates, ADR, and RevPAR all downgraded for the coming years, hotels will face increased pressure to manage costs and maintain profitability. Rising expenses, particularly in the food and beverage sector, combined with softening labor markets and inflation, are contributing to the lower-than-expected forecast for the U.S. hotel industry. However, with potential improvements in household income and international visitation on the horizon, the U.S. hotel market may experience a moderate recovery as it heads into 2026.