CBRE’s
latest “U.S. Hotels State of the Union” report suggests a lack of positive
momentum could mean even more softening.
NATIONAL
REPORT —After failing 1.1% in July, month-to-date RevPAR in August for U.S.
hotels contracted again as weaker ADR growth (0.4%) was offset by a drop in
occupancy (1%). With the lack of positive momentum on the horizon, it is
looking increasingly likely that the past five months of falling occupancy will
suggest ADR declines later in the year, according to CBRE’s U.S. Hotels State
of the Union.
The September report
showed that bifurcation continues as the luxury chain scale outperformed the
industry again with August RevPAR gains of 2.3%. It also shows that while
top-line growth outpaced RevPAR growth in June (+1.2%), cost increases
pressured margins, which contracted 0.1%, resulting in declining profits. As
weaker revenue growth and higher inflation persist through 2026, CBRE said it
expects margins to remain under pressure.
According to
the CBRE report, CMBS rates increased slightly, up 10 basis points, in July to
7.3% and credit spreads narrowed by 20 basis points YOY. CMBS loan issuance
fell from $2.5 billion in July 2024 to $1.1 billion in July 2025. The average
loan size also decreased, from $102.4 million to $78.8 million, as fewer loans
were issued with the loan count falling to 13 from 24 a year ago.
Short-term
rental (STR) demand increased again in July, up 3.6% year-over-year and
outpacing a 0.3% decline in hotel demand. Short-term rental RevPAR increased 6%
in July YOY as ADR rose to 140% of 2019 and occupancy remained steady at 101%
of 2019.
In terms of
the overall economy, CBRE raised its 2025 GDP forecast to +1.6% from +1.3% . But
due to the higher expected base in 2025, it lowered its 2026 GDP growth
estimate to +1.8% from +2%. Both 2025 and 2026 are expected to be below the +2.1%
long run average. At the same time, the consumer price index (CPI) is also
likely to remain elevated through at least 2026.
The report
stated that real disposable income growth slowed to 2% in July, while the
personal savings rate increased to 4.4%. Wage gains continue to outpace
inflation, suggesting that consumers have money to travel. However, CBRE stated
that RevPAR has continued to decline due to cannibalization and the loss of
inbound international travel.
Other
findings from the CBRE report:
- Despite
softer GDP growth and persistent inflation, business sentiment has remained
steady at 99 in July, while earnings growth is forecasted to increase 13.7% in
Q4 2025. However, consumer sentiment has declined from 102 in July 2024 to 97
in July 2025, and hotel demand is increasingly reliant on consumer spending.
-
As shifting
sentiment sets in, inbound international visitation fell 3.1% YOY in July.
Conversely, outbound international travel volumes increased 6.6%. CBRE stated
that the imbalance between inbound and outbound travel volumes is likely to
persist through 2026, which will be a significant headwind to U.S. hotel demand.
-
Throughput
growth may accelerate in the back half of the year as comparisons get easier,
which could lead to more robust RevPAR trends. Google searches for corporate
and redemption travel increased again in August, up 6.4% and 3.3% YOY,
respectively, which could also point to stronger travel trends in the fall.