NEW YORK -- STR and Tourism Economics have revised their 2024-25 U.S. hotel forecast due to a "significant downgrade" in projected growth in revenue per available room (RevPAR) this year.
STR president Amanda Hite presented the data at the 46th annual NYU International Hospitality Industry Investment Conference on Monday.
According to Hite, U.S. RevPAR is forecasted to grow 2% for 2024. In January, STR and Tourism Economics were forecasting 4.1% RevPAR growth.
"Demand is coming in lower than what we expected," said Hite, adding that first-quarter demand in the U.S. was especially soft.
Average daily rate is also expected to moderate, with STR now predicting an ADR increase of 2.1% this year, down from a previously predicted uptick of 3.1%.
Occupancy is expected to decline slightly from 63% last year to 62.8%. Previously, STR and Tourism Economics had forecast a slight increase in occupancy.
Hite said luxury hotels received a more "significant downward revision" in RevPAR growth versus other price segments, with U.S. luxury RevPAR expected to be down 0.2% for 2024. Luxury RevPAR growth in the U.S. was previously projected to be up 5%.
According to Hite, luxury has weakened in part because of a recent influx of new luxury hotels as well as more normalized rate growth with U.S. leisure demand starting to level off.
"They don't have as much leisure business coming in," Hite said. "They're more dependent on groups, which has lower ADR than leisure. I am starting to hear some leisure luxury hotels saying maybe they need to drop rates for the leisure customer and consider ways to increase leisure demand."
Another factor impacting U.S. hotels has been the increasing number of Americans choosing to travel internationally.
"We're seeing more Americans going to other countries, and not just Europe," said Hite. "There are some struggles for Florida, for example, as Americans are choosing destinations like the Caribbean instead for leisure travel."
While the midscale and economy segments have similarly experienced downward pressure, the upscale and upper-upscale segments have emerged as standout performers, driven by strong group demand, according to Hite.
While Hite added that STR and Tourism Economics don't expect U.S. RevPAR trends to improve materially through the latter half of the year, they expect the rate of decline to slow and predict that RevPAR growth will "go positive in 2025."