The U.S. hotel average daily rate and revenue per available room will increase year over year in 2025, according to a new projection from Lodging Analytics Research & Consulting, which warned currently solid demand for business transient stays could soften later in the year.
LARC projected 2025 U.S. ADR would increase 3.7 percent year over year, up from its most recent projection in December of 2.7 percent, and RevPAR to increase 3.1 percent, up from a 2.7 percent increase in its prior forecast.
The firm projected 2025 occupancy to decline 0.6 percent year over year, but in a report attributed the forecast decline primarily to "difficult comparisons" to high occupancy levels due to disaster-relief demand in the fourth quarter of 2024, following multiple hurricanes in the Southeast and wildfires in Los Angeles.
LARC suggested overall U.S. hotel demand would increase slightly in 2025 from 2024 levels, including "modest growth" in the corporate transient segment.
"Corporate transient demand is expected to remain solid in the near term as pent-up demand from the election cycle is unlocked in the first half of the year," LARC president and co-founder Ryan Meliker wrote to clients in a letter accompanying the projection. "However, our positive short-term outlook for corporate transient demand growth moderates as the year progresses, limited by sluggish job growth and corporate profit declines."
LARC uses economic forecasts from Moody's to help develop its forecasts, Meliker wrote, including projections of year-over-year increases in the U.S. gross national product of 2.5 percent in the first quarter and 2.3 percent for full-year 2025. "Should any … core macroeconomic assumptions meaningfully change, it could have a substantial impact on our U.S. lodging industry forecast," he wrote.
Some signs are emerging that suggest that possibility. The Federal Reserve Bank of Atlanta's GDPNow forecasting model now projects a first-quarter decline in U.S. GDP of 2.8 percent, year over year, down from a forecast of a 1.5 percent decline on Feb. 28 and an increase of nearly 3 percent earlier in the month.
LARC's projected full-year 2025 RevPAR growth would exceed the year-over year increases in the most recent forecasts by STR (1.8 percent) and CBRE (2 percent).