Hotel Industry Ends 2025 With Flat Growth; Human Service Stands Out

The hotel industry faced headwinds last year but is expected to see revenue growth in 2026, aided by a stabilizing environment and major national events.

A sign is posted in front of a Marriott hotel in San Francisco on Nov. 16, 2015. Justin Sullivan/Getty Images

After rebounding strongly from pandemic-era lows over the prior two years, the U.S. hotel industry entered 2025 with flat revenue growth. Looking ahead, British accounting firm PwC predicts modest but steady growth in 2026, while experts say hotels offering more human service are likely to win out.

PwC projects that revenue per available room, the hotel industry’s key performance metric, fell 0.2 percent in 2025 but is expected to grow 0.9 percent in 2026. The firm attributes the outlook to a stabilizing operating environment and a host of major national events expected to attract international visitors.

By contrast, American analytics group CoStar forecasts declines of 0.4 percent in 2025 and 0.3 percent in 2026.

‘Year of Normalization’

The hotel industry faced several headwinds throughout 2025. Among them was a challenging macroeconomic environment characterized by elevated inflation, which constrained household budgets and discretionary spending on leisure travel.

Another macroeconomic factor was a weakening labor market, which increased uncertainty about future employment and income and further weighed on consumer spending sentiment.

The University of Michigan Consumer Sentiment Index, a closely watched gauge of consumer confidence, fell from 71 in January 2025 to 53 by December.

A third headwind was a decline in inbound tourism. International arrivals fell 9.4 percent in 2025, according to TravelAwaits.

At the same time, hotels continued to face intensifying competition from online short-term rental platforms such as Airbnb and Booking.com.

“In early 2025, [revenue per available room] declines were concentrated in urban markets and upscale segments,” PwC noted. “Later in the year, consumer spending showed early signs of stabilization, though year-over-year comparisons remained challenging.”

According to the report, the combination of softer demand and heightened competition constrained hotels’ pricing power, resulting in flat overall revenue growth.

That trend is evident in company-level data. Marriott International’s revenue growth was running at an annualized rate of 4.68 percent in the third quarter of 2025, down from 5.85 percent in 2024 and 14.15 percent in 2023.

Slower revenue growth pressured profitability. Marriott’s net profit margin declined from about 13 percent in 2023 to roughly 10 percent in 2025.

In November 2025, Marriott ended a partnership with Sonder Holdings that had given the hotel chain access to Sonder’s portfolio of urban boutique properties, a move widely viewed as an effort to counter competition from short-term rental platforms.

“2025 was a year of normalization after volatility rather than decline,” Silvia Ferrer, founder and owner of FerrConn Hospitality and a travel industry expert, told The Epoch Times.

Winners and Losers

Ferrer said leisure demand remained resilient but uneven, while hotels faced sustained pressure from rising labor, insurance, energy, and debt-servicing costs, which limited margin expansion even as occupancy stabilized. Growth in average daily rates slowed, forcing operators to focus more on value delivery than relying solely on price increases.

Ferrer said the environment has produced clear winners and losers. Destination resorts, luxury and experiential properties, and hospitality groups that offer integrated, all-inclusive value models performed better than others. She cited Lomas Hospitality as an example, noting its “more inclusive” approach, which bundles airport transportation, curated experiences, and dining into the stay, thereby lowering overall travel costs despite higher headline rates.

By contrast, Ferrer said that undifferentiated mid-scale hotels competing primarily on price, properties heavily reliant on online travel agencies, and assets unable to communicate value clearly struggled amid rising costs.

Carlos Nasillo, CEO of Riderly, stated that the industry in 2025 had become increasingly fragmented.

“Properties that invested in meaningful service differentiation fared better than those that relied heavily on automation,” he told The Epoch Times. “Budget-conscious travelers often turned to Airbnb-style accommodations, while guests seeking distinctive experiences were willing to pay more for boutique hotels.”

Nasillo said that some of the strongest performers reintroduced human check-ins and concierge services, which helped build customer loyalty that discounts alone could not achieve.

At the same time, Nasillo noted that some large chains have focused on cost-cutting under the banner of digital transformation by reducing front-desk staffing and services, thereby weakening their core value proposition.

With business travel remaining subdued, those hotels were forced to compete for leisure travelers with more modest budgets and different expectations, he said.

2 Distinct Trends

Looking ahead to 2026, PwC expects two distinct demand trends to emerge. Leisure travel is projected to benefit from a busy events calendar and continued interest in wellness travel. In contrast, corporate travel, group bookings, and international inbound demand are expected to recover more slowly.

PwC also anticipates continued pressure on revenue per available room in the first half of 2026, followed by a moderate improvement later in the year as large-scale events—including the 2026 FIFA World Cup, America’s 250th anniversary, the 2028 Summer Olympics in Los Angeles, the men’s and women’s Rugby World Cups in 2031 and 2033, and the 2034 Winter Olympics in Salt Lake City—are held and macroeconomic conditions stabilize.

The firm described the outlook as one of normalization rather than resurgence. While travel demand is being reshaped by new patterns, including increased leisure travel to secondary markets and persistently weak corporate travel, PwC noted that more predictable booking cycles and fewer macroeconomic disruptions could help operators adjust their strategies. Growth, however, is expected to remain uneven, favoring certain metropolitan areas and hotel brands.

Ferrer said she expects hotels in 2026 to increasingly adopt strategies borrowed from the cruise industry, including bundled pricing and experience-focused packages, with greater emphasis on total trip value rather than average daily rate alone. She stated that travelers prioritize clarity, predictability, and perceived value over discounts.

Nasillo added that hotels that can focus on hospitality rather than treating rooms as commodities are more likely to be winners.

“Properties offering consistent service and curated experiences may be able to command a premium, while more commoditized chains may find themselves competing primarily on price with alternative accommodations,” he added.