One of the issues that has plagued the US hotel industry since the pandemic has been the fact that. overall lodging demand (as measured by the number of rooms occupied) has not yet returned to 2019 levels. While leisure demand has been relatively strong for the past several years, and group demand has recently rebounded, corporate travel remains well below historical levels as more and more organizations and individuals have embraced embraced technology strategies to continue the exibility of conducting business remotely. In addition, corporate travel has been constrained by a lingering belt tightening by many organizations. This trend is clearly evidenced by the decline in one night hotel stays the industry has experienced. As shown in the attached chart, one-night stays have declined nationally, but the decline has been especially pronounced in the Economy and Midscale chain scale segments.
At the national level, while the percentage decline may not seem signi ficant, from a number of guests checking in each day perspective, the result is, on average, about 45,000 less check ins per day. A closer examination of the data by day of week, shows the predominant amount of those fewer one-night stay arrivals happens on Monday thru Wednesday, further supporting the thesis that that decline is due to a reduction in corporate/business travel. In thinking about the US hotel industry’s potential for future performance, one must always consider two overarching factors. First, what will be different from a demand standpoint in 2025 vs. 2024 and second, are there economic and industry related factors that will change in a dramatic enough way to drive demand, and subsequently ADR this coming year?
A review of 2024 finds three major events that helped drive lodging demand, as well as ADR in the affected markets, that will not be repeated in 2025. Those events are:
- The Taylor Swift Eras tour
- The Eclipse
- 2024 Presidential election
Each of these events produced outsized demand and ADR growth in enough markets to positively affect overall industry performance. As none of these events will reoccur in 2025, an increase in hotel performance will have to come from more standard demand drivers.
Which brings me to economic and industry related factors that could help drive improved performance in 2025. One of those factors would appear to be the business community’s reaction to the outcome of the 2024 US presidential election. The stock market’s current upward surge would indicate an anticipation of improved corporate financial performance which might drive increased corporate travel. If so, that would be a welcome demand boost for the industry as it would increase a profitable segment of lodging demand. This is especially true as leisure demand growth seems to have plateaued in late 2024.
Considering all the factors mentioned above Kalibri Labs expects both occupancy and ADR to increase slightly in 2025 with ADR being the primary driver of the 2.8% increase in RevPAR that we are anticipating. The primary driver of that growth is likely to be large metropolitan markets which will be the primary beneficiaries of any corporate travel and group demand growth.
