Global hotel performance remains resilient

Despite another challenging year in many respects, the global hotel industry remained resilient in 2024. Through November, global hotel demand reached a staggering 4.8 billion room nights, 102 million more than 2023, resulting in Revenue per Available Room (RevPAR) growth of 3.7%. Resort and leisure-heavy markets, which were generally the first to recover following the Covid-19 pandemic, have started to see some normalization in demand. By contrast, demand for urban markets has accelerated significantly. Slowing supply growth combined with the return of group, corporate and international travel should fuel 3% to 5% global RevPAR growth in 2025.

EMEA hotel performance continued to set records throughout 2024, exceeding 2019 levels by 25.3% and growing 5.6% versus 2023. Taylor Swift’s Eras Tour, the Paris Olympics and a strong US dollar all contributed to exceptionally robust demand. Asia Pacific RevPAR grew a modest 1.6% relative to 2023 but continues to lag 2019 performance, impacted by ongoing visa challenges and a slowing economy in China. Conversely, international travel into the region has soared, driven by depreciating currencies. In the Americas, RevPAR reached a historic high as of November 2024 but increased only 1.9% year-over-year, a result of declining consumer savings and a noticeable pullback in leisure travel.

Short-term: Hotel owners will face increasing profitability pressures in 2025 caused by moderating top-line performance against a backdrop of rising costs. This is likely to catalyze a material increase in investment transaction activity, particularly as loans mature and owners face rising capex requirements. Private equity, HNWIs, foreign capital and select REITs are expected be the most acquisitive, with hotels in urban and other high barrier-to-entry markets most in demand. Slowing supply growth driven by high construction costs should spur additional M&A, with brands targeting accretive platforms and portfolios to fuel net unit growth, a key driver of shareholder value.

Long-term: As the lines between living, working and playing continue to blur, traditional hotel brands will increasingly expand into new verticals, with non-traditional lodging and branded residences likely to garner the most investor interest. India, now the world’s most populous country, will soon become one of the largest outbound travel markets globally, providing hotels with a new type of traveler and investors with expanded opportunities to deploy capital. With global hotel supply forecast to grow 180bps less than its long-term average over the next five years, hotel brands are expected to strategically use their balance sheets to find creative ways to increase their share of wallet.