NATIONAL REPORT —Lodging Analytics Research & Consulting
(LARC) is projecting that U.S. RevPAR will increase by 3.1% to $103.2 in 2025,
driven by an ADR increase of 3.7% to $164.54 and an occupancy decrease of 0.6%
to 62.6% as part of its latest U.S. Hotel Industry Forecast. The LARC forecast
remains one of the more bullish for the U.S. hotel industry.
LARC also forecasts that 2025 U.S. hotel EBITDA will increase by 1.8%, with slight margin erosion, and hotel values will increase by 3%. Over the next five years, LARC expects hotel values to increase by a total of 8%.
The LARC letter said the acceleration in RevPAR growth from
2024 is driven by tailwinds from the presidential election, improving group
trends and fewer headwinds tied to domestic leisure demand.
“We continue to expect there to be U.S. lodging markets that
materially outperform as well as those that underperform national averages,” said LARC President and Co-Founder Ryan Meliker.
“Over the medium-to-long term, we expect markets with outsized exposure to
leisure transient and group to outperform. However, in the immediate term,
those with outsized exposure to continued corporate transient recovery should
perform well.”
The LARC said the first and third quarters of the year will
be the strongest, while growth will be softest in the fourth quarter, tied to
difficult disaster relief comparisons across the Southeast and Texas.
The company said its 2025 operating outlook is slightly
improved from a quarter ago. The LARC said the occupancy forecast drop is
primarily tied to difficult comparisons from disaster relief efforts in the
fourth quarter of 2024.
LARC also expects financing costs to stabilize and
transaction volumes to rebound in 2025.
“Expense pressures will become a substantial factor in
identifying markets that are winners and losers, especially with several major
cities with recently completed or upcoming collective bargaining negotiations,” Meliker said.
LARC said In recent agreements across the country, the hotel
union and hotel owners/operators agreed to roughly a 10% annual increase in
wages over the next five years and a reset back to pre-pandemic staffing
levels. “We expect non-union hotels to keep pace with wage growth at union
properties across these markets, though many are already paying wages above
union-mandated levels.”
Meliker added that when you layer in the added political risks
from legislation like the Safe Hotels Act in New York City, “wage and expense
growth is likely to be a bigger component of value change than top-line
performance across many markets.”
Market forecasts
Here are the LARC’s top markets for RevPAR growth in 2025
and over the next five years.
Top markets for 2025 RevPAR growth: Maui, San
Francisco, Palm Beach, San Jose & Savannah
Bottom markets for 2025 RevPAR growth: Houston,
Cleveland, Chicago, Las Vegas & Milwaukee
5-YEAR OUTLOOK (2024-2029)
Top markets for RevPAR growth: Maui, Palm Beach,
Raleigh, Washington, D.C. (2029 inauguration impact) and Orlando
Bottom markets for RevPAR growth: Cincinnati, Kansas
City, Indianapolis, Houston and Louisville
Top markets for value change: Puerto Rico, Charlotte,
New Orleans, Salt Lake City and Orlando
Bottom markets for value change: Austin, Boston,
Chicago, St. Louis and Portland