Is the U.S. lodging industry entering a "hotel recession"? That's the question hospitality analysts are asking as the sector heads toward six consecutive months of declines in revenue per available room (RevPAR), even as the broader economy maintains strength.
Jan Freitag
Jan Freitag, CoStar Group's director of hospitality analytics, described the current environment as "uncharted territory" during a September episode of "Tell Me More: A Hospitality Data Podcast," on which he and co-host Isaac Collazo, STR's vice president of analytics, examined the industry's deteriorating performance.
Freitag suggested during the episode that two consecutive quarters of U.S. RevPAR decline could constitute a hotel industry-specific recession, while emphasizing that no official definition of a "hotel recession" exists. But with CoStar's initial September data showing U.S. RevPAR down around 1.4% through the month's final weekend, the industry appears to be meeting that threshold.
Citing data from Oxford Economics that forecasts U.S. GDP growth of 1.9% for 2025 and a relatively steady unemployment rate, Freitag said in an interview that the sector's performance is "abnormal."
"We're not in a recession. And normally, if GDP grows, we'd be seeing room demand increases, and we're just not seeing that in the number of rooms sold right now," Freitag said.
Yet, CoStar reports year-to-date U.S. RevPAR growth through August at just 0.2%, the lowest level on record outside of recessionary periods and 2020, the year the pandemic struck. Average daily rate growth of 1% is similarly weak, lagging inflation in 23 of the past 36 months.
"It is the longest streak that ADR has been below the rate of inflation since the Great Recession," Collazo said.
Luxury hotels buck trend
The downturn, however, has not affected all hotels equally. In August, luxury hotels were the only price segment to post a positive RevPAR change, up 3.5%, while economy hotels saw the largest decrease, down 4.6% for the month. Freitag called this evidence of what economists dub "a K-shaped economy."
"The upper end is doing OK, while the lower end is decidedly not," he said.
The bifurcation is also geographic. The nation's top 25 markets have been hit the hardest, posting a 3% RevPAR decline in August, compared to 0.4% growth in all other U.S. markets. These major metro areas are facing headwinds on multiple fronts, with Freitag citing declining international inbound travel, softening group demand and leisure travelers seeking better value elsewhere.
"L.A., San Francisco, Seattle, New York, Boston -- these are all markets that traditionally are the first port of entry for international travelers," Freitag said. "They [attract] leisure, business and groups. They have it all, but that means they also get hit from all sides."
Another issue appears to be value perception. While U.S. hotel performance has softened, short-term rentals are posting healthy RevPAR growth, and cruise lines report strong demand for 2026, Freitag said, suggesting that travelers are choosing options they perceive as better values.
"For hotels, you [pay for] the room plus the food, plus the beverage, plus the resort fee, plus the parking, and consumers are saying, 'Well, with a cruise, I just have to pay once,'" he said.
Additionally, international outbound travel by Americans is up 2.6% through August, despite the dollar being down 10%. Some of that overseas travel comes at the expense of domestic hotel stays.
"If you overlay that with luxury room rates in Italy, Spain, Greece and Portugal, those are up," Freitag said. "The high-end traveler is not only traveling, but they're traveling abroad."
Underlying all these challenges, however, is a pervasive sense of economic uncertainty, particularly as it relates to tariffs and trade policy. And further compounding matters is the ongoing government shutdown, delaying the release of key economic reports and jobs data.
"It just adds to the uncertainty," Freitag said. "People are just staying put, and psychologically, that also comes with this sense of, 'Maybe I'm not going to splurge. I don't know what my expense situation is going to be, so let me just sit tight.'"