While half of the nation’s major markets are registering declining RevPAR performance in recent weeks, others remain on the positive side, and some rather significantly bright. However, light clouds are starting to move in and dim the sun on the hotel sector, and darker storm clouds are in the distance. Alas, it remains to be seen if the storm will largely dissipate in the coming months or if we will be in for some turbulent weather. The headwinds are what they are, though, and while widespread corporate downsizing is not the reality at present, many corporate CEOs are beginning to pull back on new hiring, pausing major projects and expansion, shoring up cash, and curtailing travel. Moreover, while the collapse of U.S.-China trade has yet to wash its detrimental wave across the nation, economists warn this lies ahead this summer (with ports to be hit first in May). Not helping matters is the inbound decline of international travel, particularly from Canada. Accordingly, we’ve updated our forecast to reflect a pullback in occupancy this year and lighter ADR growth.

For example, the Bay Area, Seattle, and Tampa Bay are experiencing strong demand trends, while DC, Denver, and Philadelphia struggle (other markets fall somewhere in the middle). In this type of bifurcated environment, it is important to forecast based on local factors – which may be overwhelmingly positive or less so – rather than paint any type of national trend brush across your analysis. Today’s national average is simply not indicative of all markets.

We will be keeping an eye on labor costs as new immigration policies take hold, as we have found an attitude of “wait and see” persisting across most industry players. According to the American Immigration Council, approximately 7.6% of the hospitality workforce comprises undocumented immigrants (1.1 million people). This population is more concentrated in certain key roles within a hotel, which will make any major change within those departments be more significantly felt than the 7.6% implies. We will also be keeping a close eye on insurance costs, particularly in coastal communities that are affected by hurricanes, or those in fire-prone regions (particularly the LA region). Insurance fire maps are being or have been updated and new rates are rolling out now. We continue to see a wide range in profitability, and now is the time for owners to wake up and move on from management companies that have not been able to drive proper returns out of their assets since the pandemic (even given these unavoidable cost factors). Smart buyers also contract with separate firms well versed in managing insurance costs and property tax assessments. If a buyer can cluster a hotel with another owned property nearby, certain positions can be shared across the properties and, thus, reduce the cost burden on both to create elevated GOP. This has helped certain deals get across the finish line, making nearby hotel owners a key buyer pool for listed properties.

Lastly, renovations that have been delayed because of the pandemic are now coming due, and these aren’t cheap (constructions costs as reported by the Turner Cost Index rose 3.9% in 2024, and 1.2% in just the first quarter alone). Heightened tariffs will certainly take its toll on construction costs as time passes, but our HVS Design division reminds us that only roughly 40% of typical construction costs comprise actual materials (the other 60% are soft costs and labor) and many of those materials (like concrete) are sourced locally. We will be watching to see how construction and renovations budgets evolve.

* Although the HVI cannot tell you what a particular hotel is worth, it does provide excellent “big picture” data, indicating which market areas are experiencing positive trends, and thus may present good investment opportunities. The HVI for the U.S. is a measure of the strength of the lodging industry as a whole and, specifically, the hospitality investment market. The HVI for the various identified markets can provide a basis to evaluate and compare different geographic regions. For more insight on the limitations and applicability of the HVI, please read the message on the HVI home page by clicking on the graphic at the top of this page.

ADR, Demand, Occupancy, RevPAR, and Supply Projections:

Change In Value For Market:

United States RevPAR Change

United States RevPAR

For more information, please contact:

	Rod Clough, MAI President - Americas (He/Him) [email protected] +1 214 629-1136 (w)
	Anne Lloyd-Jones, MAI, CRE Director of Consulting & Valuation Services National Practice Leader [email protected] +1 914 772-1570 (m)
	Tanya Pierson, MAI Senior Managing Director Valuation, Market & Feasibility Consulting [email protected] +1 303 588-6558 (w)