In the bustling ballroom of the NYU International Hospitality Investment Forum, the mood took a sharp turn from optimism to pragmatism as CoStar and Tourism Economics unveiled a rather sobering revision to the U.S. hotel sector forecast through 2026. The headline? Growth is still on the menu—but portions are shrinking.
Yes, you heard right. The once-robust optimism that buoyed post-pandemic hospitality projections has lost a bit of its sparkle. With Q1 2025 performance underwhelming and macroeconomic grey clouds refusing to drift off, the analysts have hit the brakes—ever so gently—on their expectations.
Let’s crunch the numbers without choking on our muesli. For 2025, key metrics have all had their tyres let down, just a touch: supply (-0.1 percentage points), demand (-0.6 ppts), average daily rate (ADR) (-0.3 ppts), and revenue per available room (RevPAR) (-0.8 ppts). And if you were hoping 2026 might rebound with a vengeance, best sit down. The adjusted forecast says otherwise: supply down (-0.5 ppts), demand (-0.3 ppts), ADR (-0.7 ppts) and RevPAR taking another dip (-0.6 ppts).
Still, don’t go cancelling the cocktail hour just yet.
“Top-line performance is still growing—even in the current environment,” said Amanda Hite, the president of STR, with the tone of someone offering reassurance without sugar-coating reality. “Until consumer confidence improves, however, demand is going to remain softer—especially in the middle and lower price tiers.”
Translation? Five-star hotels might keep their champagne chilled, but three-star properties may want to double-check the budget for those tiny soap bars.
Hite also noted that rate, always a reliable ally, is still propping up the numbers, especially in the group travel segment. Meanwhile, business travel, that long-lost cousin of pre-COVID days, is slowly regaining its footing, though its shoes are still a bit scuffed.
But it’s leisure travel—the darling of the recovery years—that’s starting to show cracks. “Gains are going to be more isolated,” Hite warned. “And our forward-looking data shows booking windows are still shortened. That’s making life trickier for hoteliers planning ahead.”
Indeed, in the age of now-you-see-it-now-you-don’t itineraries, long-term booking reliability is a pipe dream for many in the industry.
Adding to the gravity of the moment, Aran Ryan, director of industry studies at Tourism Economics, chimed in: “We’re looking ahead to a second half of the year with consumers facing higher prices, a weaker labour market, businesses tapping the brakes on investment, and soft international visitor volumes.”
He did concede that recession risks have eased (a momentary sip of relief), but the overall tone remained circumspect. “The economy—and the travel sector—will walk on a tightrope through this period,” Ryan added.
As if to complete the trio of cautionary notes, CoStar and Tourism Economics also revised down their 2025 projection for gross operating profit per available room (GOPPAR) by $3. In today’s market, that’s the equivalent of three fewer room service club sandwiches per guest, give or take.
“While GOP growth will continue,” said Hite, “the pace will be modest due to softer demand, rising departmental costs, and limited margin gains from ancillary revenues.”
And here comes the kicker—when adjusted for inflation, the GOP is down from last year. In other words, hotels are technically working harder for a lower return on investment. It’s the business version of running on a treadmill that’s gradually speeding up.
Despite the cautionary figures and trimmed expectations, the hotel industry isn’t spiralling into despair, far from it. Like a seasoned maître d’ during a peak dinner rush, the sector knows how to steady the ship when things get choppy.
But one thing’s for sure: the road ahead isn’t going to be paved with plush carpets and complimentary slippers. It’s going to require agility, sharper pricing strategies, and perhaps a bit of old-fashioned charm to weather the next 18 months.
And as the industry adjusts its cufflinks and checks its balance sheets, one hopes the guests will keep arriving—if not with open wallets, at least with open minds and solid last-minute bookings.
For more data and updates from CoStar, visit www.costargroup.com, your go-to for all things hospitality analytics and real estate intelligence.
By Soo James
