1.4% RevPAR increase for 2024: LARC forecast

As of July, only 28% of economists surveyed by the Wall Street Journal expected a recession in the next 12 months, which is the lowest level since January 2022.

However, despite U.S. economic growth improving in the second quarter, there are still plenty of warning signs and uncertainty about the overall economy.

LARC’s industry projections

The LARC expects U.S. RevPAR to increase by 1.4% to $99.56, driven by ADR growth of 1.8% to $158.65, while occupancy declines by 0.3% to 62.8%. For 2025, LARC expects U.S. RevPAR to increase by 2.5% to $102.02, driven by ADR growth of 3.1% to $163.55 while occupancy declines 0.6% to 62.4%.

The report forecasts that U.S. hotel EBITDA will decline by 0.3% in 2024, with slight margin erosion, and hotel values will increase by 3%. For 2025, LARC forecasts that U.S. hotel EBITDA will increase by 1.2%, with slight margin erosion, and hotel values will increase by 2%. Over the next five years, LARC expects hotel values to increase by a total of 10%.

The LARC said most of its outlook change was driven by softer second-quarter results than expected. The remainder of the year is minimally changed, with RevPAR growth averaging about 1.5% for the second half of the year, which is consistent with the prior forecast.

Ultimately, its 2024 view for supply and demand both improved, driving its occupancy forecast slightly higher.

The outlook for ADR slightly declined, which, combined with an improved occupancy growth outlook, drives a 0.4% decrease to our 2024 RevPAR outlook.

The top-line negative revision translates to a reduction in its hotel EBITDA outlook, reducing its outlook for hotel values.

LARC market outlooks

Here are the LARC’s best and worst-performing markets based on its forecasts.  

Top 2024 markets for RevPAR growth: Houston, Minneapolis, San Jose, Indianapolis and Seattle

Bottom 2024 markets for RevPAR Growth: Maui, Nashville, Phoenix, Anaheim and Los Angeles

Top 2025 markets for RevPAR growth: Maui, San Jose, Honolulu, Philadelphia and New Orleans

Bottom 2025 markets for RevPAR growth: Kauai, Indianapolis, Omaha, Kansas City and Austin

5-YEAR OUTLOOK (2023- 2028)

Top markets for RevPAR growth: Maui, Raleigh, Honolulu, Orlando and Sedona

Bottom markets for RevPAR growth: Cincinnati, Austin, Savannah, Kansas City and Portland, Maine

Top markets for value change: Las Vegas, Puerto Rico, Seattle, Orlando and New Orleans

Bottom markets for value change: Chicago, Boston, St. Louis, San Diego and Austin

Hotel industry projections

Hotel industry growth is being fueled by corporate transient, group, and inbound foreign travel. Domestic leisure demand continues to wane while group trends remain solid. The LARC estimates the convention center booking pace is up 4% year over year in 2024, following the 13% increase in 2023. In 2025, the convention center booking pace is up 3% year over year.

Momentum in foreign inbound arrivals to the U.S. is encouraging, and as foreign travelers tend to stay longer and spend more than domestic travelers, the continued recovery of this portion of the leisure segment will have an outsized impact on hotel performance.

Unfortunately, an outsized portion of U.S. citizens are electing to travel abroad. In 2023, outbound international travel was 11% above 2019 levels and through June, year-to-date U.S. citizen outbound international travel is up 10% year over year and 20% above 2019 levels.