NATIONAL REPORT – PwC reported that the U.S. lodging sector
is expected to experience muted growth in 2025, driven by moderate increase in
average daily room rates and stable occupancy levels, resulting in an annual
increase in revenue per available room of 1.5%.
Despite stagnant supply levels over the past few quarters,
new construction projects are expected to be spurred in 2025 by a combination
of factors, including increasing optimism about a soft landing, easing monetary
policies, and other capital markets tailwinds. However, overall impacts from
the macroeconomic environment are expected to continue to suppress demand and
occupancy growth in 2025.
Since PwC’s May 2024 outlook, the Federal Reserve has cut
rates twice, beginning in September with a 50-basis point cut and most recently
in November with a 25-basis point cut. The Fed’s recent actions, along with
moderating inflation levels of 2.8% and 2.2% quarterly increases in Q2 2024 and
Q3 2024, respectively, per S&P Global, have fostered cautious optimism of a
stabilizing economy and indicate potential easing of a constricted financing
environment. Favorable shifts in the overall financing landscape are expected
to drive increasing construction starts throughout 2025.
Trends, highlights
PwC forecasts occupancy will be sluggish in 1Q25, then
rebounding to 62.9% for the year.
Demand growth in 2025 is expected to be muted, primarily due
to decelerating consumer spending and GDP growth, which is projected to
increase by an annual average of 2.7% and 2.1% in 2024 and 2025, respectively.
Despite the continuing growth in business travel, particularly meetings and
group business, and the potential resurgence of inbound international travelers
to pre-COVID levels, economic challenges are expected to continue to impact
leisure travel. This outlook may shift as the current landscape of political
and economic uncertainty becomes clearer in the coming months after the recent
election, including the potential impact of immigration policies, evolving
travel patterns and restrictions, as well as tariffs, among others.
Expected growth in ADR in 2025 offers a redeeming trend in
light of muted supply and demand growth, driven by the continued strength of
higher-priced chain scales. Performance gains from ADR are expected to average
1.5% and 1.3% in annual growth for 2024 and 2025, respectively, resulting in an
ADR-driven annual increase in RevPAR of 1.3% and 1.5%, respectively.
Significant risks to this outlook include the pace of changes in the
macroeconomic environment, the pace of rate cuts and evolution of monetary policy,
and the impact of policy implementation after the recent election.