CBRE more modest with revised forecast

The new numbers represent slightly softer growth than had been anticipated in CBRE’s February forecast, which projected 2.0% RevPAR growth, based on a 21-bp boost in occupancy rates and a 1.6% increase in ADR.

CBRE’s forecast is predicated on an expected 1.4% increase in GDP growth this year (down from 2.4% annual growth as of the February forecast) and a 2.9% average inflation rate for 2025 (40 bps higher than anticipated in February). While the economy is expected to grow more slowly, CBRE said growth will be strong enough to support the lodging industry’s performance.

CBRE expects supply growth to average 0.8% annually over the next four years, which is half of the industry’s historical average. A drop in demand or sharper-than-expected spike in construction costs could cause supply growth to decelerate further.

“Economic and geopolitical uncertainties aside, several factors will drive RevPAR growth in 2025. These include an uptick in group and business travel, along with a weaker U.S. dollar and lower airfares, which may encourage domestic travelers to stay closer to home while boosting inbound international visitation to the U.S.,” said Rachael Rothman, CBRE’s head of Hotel Research & Data Analytics. “These trends are expected to particularly benefit urban hotels, regional resorts and drive-to destinations.”

Looking ahead, CBRE projects RevPAR growth in the range of 1.0% to 3.0% over the next few years. Several events, including the 2026 FIFA World Cup, the United States’ 250th anniversary in 2026 and the 2028 Summer Olympics will help drive demand, as will the opening of a theme park in Orlando and other new attractions. These developments, coupled with the enduring appeal of national parks, gateway cities and domestic leisure destinations, are expected to sustain growth momentum, barring an unforeseen economic downturn.

“While the economy – and thus hotel demand – is expected to grow more slowly in the near term, supply growth is also likely to decelerate due to increased construction costs, higher financing costs and a tight labor market,” said Michael Nhu, senior economist and CBRE’s head of Global Hotels Forecasting. “This will enhance pricing leverage for hotel operators over the long-term and benefit existing assets by increasing replacement costs.”

CBRE has included 11 new leisure-oriented markets in its latest forecast, including Boulder and Colorado ski markets, California wine country, the Florida Panhandle, and Utah national parks. These additions reflect recent shifts in travel trends and provide insights into emerging opportunities.