The American hotel sector in 2025
Tourism and business activities are factors that are maintaining stability
10 August, 2025
After a long period of volatility and tentative forecasts, the US hotel sector is once again showing signs of stability. At issue is not full recovery, but a clearer picture is emerging that is illustrating which segments are succeeding in sustaining high demands even in times of high financing costs, changes in consumer behavior and ongoing macroeconomic uncertainties.
Recovery – but not sector-wide
In 2024, the American hotel sector showed relative recovery, with the occupancy ratio passing the 63% mark and an ADR (average daily rate) that was 4.2% higher than in 2023. However, the RevPAR Index (Revenue per Available Room) continued to reflect a slowdown in the pace of growth, especially in markets not benefiting from extensive business tourism.
Forecasts for 2025 are remaining moderate, with the forecasted increase in the RevPAR Index at only 3.2%. It is important to note that this increase derives mainly from the continuing price increases and not from any increase in the number of guests. Furthermore, the downtrend in inflation levels, which contributed to a temporary increase in consumers’ real income, is already largely reflected in the current pricing.
Regional trends: not all markets react in the same way
Geographic location continues to be a critical factor in the sector. Cities like Miami, New Orleans and Las Vegas are sustaining high demands thanks to stable leisure tourism, while markets based on business-tourism, like San Francisco or Chicago, are recording a slower pace of recovery.
Differences are also evident in terms of hotel categories: luxury hotels are still struggling to return to their pre-Covid occupancy levels, while midscale hotels are succeeding in stabilizing their performance, mainly because they are within the range of consumers’ spending capabilities.
Key considerations for investors in alternative real estate
Investments in the hotel sector as part of an alternative real estate portfolio offer potential for returns, as well as exposure to uncertainties. Investors should take into account several prominent trends:
- Location-based investments: cities that are enjoying stable tourism are continuing to offer relatively high demands, even during economically challenging times.
- Opportunities for gradual growth: markets recording consistent, albeit slow, recovery may be an attractive entry point, particularly for the medium term.
- Combination of cash flow and value improvement: hotels with stable RevPAR that may be upgraded or operationally streamlined, may offer an investment mix that includes both current income and potential for capital returns.
RevPAR, the average revenue per available room is a key indicator of hotel performance which balances between occupancy and price.
In summary: cautious stability in an emerging market
The hotel market, like many markets, is highly sensitive to economic changes, consumer trends and regulations. For qualified investors who are active in the hotel market through private funds or dedicated debt investments, this is a period for focusing on careful analyses, but not necessarily for halting investments.
Their ability to keep abreast of the latest market analyses and regulatory developments and maintain controlled risk management will continue to be key to building gradual and intelligent exposure to the dynamic hotel market in the United States.
The data in this article were taken from the CoStar website, a leading source of market data and analyses in the field of commercial real estate.
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