This post is part of our Revenue Reactions series, which offers quick takes on breaking hospitality news. Today, we’re breaking down the 2025 U.S. hotel occupancy and RevPAR decline, what’s driving it, and how hoteliers can respond heading into 2026.
Fresh CoStar data shows that 2025 marked the first full-year decline in both U.S. hotel occupancy and RevPAR since 2020, during the height of the pandemic’s disruption to travel. Occupancy slipped to 62.3% (-1.2% YoY) and RevPAR declined to $100.02 (-0.3% YoY), even as ADR inched up to $160.54 (+0.9% YoY).
Performance varied by market, with rates holding in some urban cores while leisure-oriented destinations softened, reminding us that national averages don’t always reflect what’s happening on the ground at the local or segment level. While these trends vary by property type and market, they’re especially relevant for hotels navigating demand normalization after several years of volatility.
So what’s behind these uneven results? A few key forces shaped hotel performance in 2025. We dive into those below, as well as what this decline means for U.S. based hoteliers in 2026 and beyond.
Key Factors Shaping Occupancy and RevPAR Performance in 2025
Several structural and market-specific factors contributed to these softer results — and none of them exist in isolation:
- Demand softness in key markets: Markets such as Houston and Las Vegas experienced notable occupancy and RevPAR declines, reflecting uneven demand recovery and shifting traveler behaviors.
- ADR growth lagging demand pressure: While rates rose modestly, ADR gains were insufficient to fully offset occupancy declines, putting pressure on total room revenue.
- Performance is increasingly uneven by market: Urban cores like New York and San Francisco maintained stronger rate or RevPAR performance, while other regions softened.
- Broader economic headwinds: Tighter consumer budgets, normalization of travel patterns, and cost inflation continued to influence booking behavior and profitability.
All of this sets the stage for the bigger question: what should hoteliers do next? Together, these forces are reshaping how and where demand shows up, making it clear that the next step is less about reacting broadly and more about responding intelligently. Heading into 2026, the challenge isn’t a lack of demand. Rather, it’s knowing where, when, and at what price that demand will materialize.
How Hoteliers Should Respond to Changing Market Conditions
In this environment, broad, one-size-fits-all tactics simply don’t hold up. Winning strategies require precision:
- Recalibrate rate strategy to market reality: Protect rate integrity, but do it intelligently with fenced offers, targeted value adds, and market specific restrictions instead of blanket discounting.
- Lean into the most profitable demand mix: Tighten controls on low-yield transient business while prioritizing group and higher-contribution segments where pace remains resilient.
- Localize every decision: Submarket and segment-level data matter more than national benchmarks when setting length of stay controls, closed to arrival (CTA) / closed to book (CTB) rules, and channel strategies.
- Manage margins, not just RevPAR: Modest ADR growth combined with rising costs can squeeze GOP. Align labor, housekeeping, and F&B decisions to forecasted pickup and stay patterns.
- Build scenario-based commercial plans: With uneven demand patterns, “what if” modeling is essential for aligning revenue, sales, distribution, and operations.
Easier said than done, right? Putting these approaches into practice depends on having the right insight and support in place.
How IDeaS Helps Hoteliers Navigate Changing Demand
In a market defined by uneven demand and shifting booking patterns, success depends on making faster, more informed decisions. IDeaS empowers hoteliers to:
- Detect meaningful demand shifts early: Real‑time signals highlight emerging booking patterns and anomalies that manual monitoring often misses, helping teams act quickly rather than react slowly.
- Forecast with confidence, even in uneven markets: Forward‑looking analytics reveal when demand will materialize, how strong it will be, and what pricing the market will bear—strengthening commercial alignment and reducing guesswork.
- Protect rate Integrity without overreacting: Intelligent, data‑driven pricing recommendations help prevent unnecessary discounting while still capturing high‑value opportunities when demand is strong.
- Optimize the most profitable mix, not just occupancy: IDeaS identifies which segments are most likely to convert and which combinations produce the highest contribution margins, ensuring teams prioritize profit, not just volume.
- Align Revenue, Sales, and Operations around one source of truth: Scenario‑based forecasts keep every department coordinated, so pricing, labor planning, and distribution decisions are all guided by the same demand outlook.
Turn Today’s Market Volatility into Tomorrow’s Opportunity
Nuanced, proactive commercial strategy will remain critical to protecting margins in 2026 and beyond—but your team doesn’t have to take on this herculean task alone. Our suite of proven, AI-powered revenue management solutions will help set aside the tedious tasks and focus on what matters most in a hard-to-predict environment.
Contact us today to learn more.