Otelier on the Road: Investigating 2025 Demand Drivers at HDC

The U.S. hotel industry is facing a pivotal period as it navigates through shifts in demand and guest behavior. To ensure a successful 2025, owners and operators must home in on specific growth opportunities, according to speakers at the 2024 Hotel Data Conference in Nashville. 

HDC has become an annual milestone for many hoteliers, often kicking off budget season by providing a high-level overview of what to expect in the broader markets.  

This year, takeaways included shifting focus to group demand, which has helped offset declining transient travel throughout 2024. Key trends headed into 2025 include the importance of enhancing guest experiences, the potential impact of nationwide pricing transparency laws, and a focus on rate-driven growth.  

Here’s a roundup of coverage from HDC that provides five key takeaways from the event. 

1. 2025 A ‘Pivotal’ Year for Hotels 

In Hotel News Now coverage, Kelsey Fenerty, Manager of Analytics at STR, predicts that 2025 will be a crucial year for the industry, particularly as group demand continues to grow. Business travelers and corporate groups remain loyal to hotels, preferring the amenities and services they offer over short-term rentals like Airbnb, she said. 

Fenerty notes that corporate travelers are a key, untapped source of domestic demand. With more companies requiring employees to return to the office, the frequency of in-person meetings and events is expected to increase, boosting hotel stays. Additionally, major events like sports tournaments are making a comeback, and economic conditions will further influence hotel performance. 

Fenerty’s key trends to watch in 2025: 

• A slowdown in leisure travel due to rising credit card debt and economic uncertainties
• Increased competition among hotels for weekend demand
• Shifts in international travel due to events like the 2026 FIFA World Cup 

2. Bifurcation: Upscale Segments Lead Growth 

The conference highlighted what many reports called a "bifurcation" in the U.S. hotel industry, with upscale and upper-upscale segments outperforming midscale and economy sectors. Hotel Management coverage suggested the resurgence of group and business travel, combined with signs of a leisure travel slowdown, are the contributing factors.  

In the report, Emmy Hise, Senior Director of Hospitality Analytics at CoStar Group, pointed to the continued return of group travelers and cooling inflation as positive trends, but warned that outbound travel disruptions and lower profitability persist despite high TSA passenger numbers. 

3. Sunny Forecast Ahead 

Despite a softer second quarter, STR and Tourism Economics maintained their RevPAR growth forecast of 2% for 2024 and 2.6% for 2025, as reported by Hotel Investment Today. 

RevPAR growth is expected to be driven primarily by rate growth rather than occupancy. Amanda Hite, STR President, noted a slight increase in demand expectations and a decrease in supply, while ADR underperformed, leading to minor adjustments. 

The forecast shows strong performance in the upscale (+2.7%) and upper-upscale (+3%) segments, with luxury seeing modest gains (+1.6%) due to demand growth. However, the luxury segment’s growth is held back by weaker leisure travel, while group demand supports upper-upscale. 

Challenges remain, particularly in ADR, which presents a downside risk. The top 25 U.S. markets continue to lead RevPAR gains, contributing significantly to industry revenue. Looking ahead, GOP and EBITDA are expected to improve in 2025, with labor costs decreasing. 

4. Focus on Experience to Stay Relevant 

Hotel News Now reported from the conference that industry experts are emphasizing the importance of enhancing guest experiences to drive demand and pricing power. As leisure travel slows, offering unique, memorable experiences is seen as crucial for attracting travelers.  

The need for innovation, including incremental tech adoption like AI, is critical. Technology will also continue to play a role in forecasting future trends and incorporating them into strategic planning. 

The focus on unique travel experiences will continue to grow, HNN suggests, especially as overtourism in Europe drives more travelers to explore off-the-beaten-path destinations in the U.S. 

5. Hotel Pricing Transparency Expected 

Finally, HNN covered an important conference panel on the impact of new hotel pricing transparency laws in California and the likelihood of these regulations being implemented nationwide. Troy Flanagan, EVP of External Government Affairs and Industry Relations at AHLA, predicts that California's law, which mandates that all mandatory costs be included in advertised hotel rates, will soon become a federal standard. 

California's law, enacted in late 2023 and effective as of July 1, 2024, requires hotels to display the full mandatory price of a room upfront, excluding government taxes and optional fees like parking or spa use. This regulation also extends to prices at hotel restaurants and in-room food and beverage services but does not apply to standalone restaurants. The law aims to provide consumers with clear, upfront pricing, reducing confusion and potential surprise fees. 

HNN concludes that, as the California rules are still new, there are uncertainties about specific applications, and hoteliers are advised to seek legal counsel to navigate these regulations.  

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