CBRE reduced its 2025 GDP projection again, to 1.5% from 1,9%, despite the strong Q2.
CBRE reduced its estimate of 2026 GDP growth to 1.8%, from 2.5%. This is below the long-term average of 2.1%. CBRE anticipates that inflation will remain high for longer, with the CPI growth forecast for 2025 increasing by 10 basis points to 2.9%. The forecast for 2026 increases by 30 basis points to 3.0%. Inflation could continue to put pressure on hotel margins and profits.
In June, employment continued to increase and unemployment remained stable.
Employment increased 1.4% in June while unemployment remained 4.1%. The real disposable income has been declining steadily, but wage increases and employment growth, which have outpaced inflation by 101 basis points, indicate that consumers still have the money to travel. Unfortunately, it hasn’t led to an acceleration in RevPAR growth.
CMBS volumes declined in June, while average loan sizes increased.
CMBS rates rose 50 bps to 7.8% in June and credit spreads widened 50 basis points y/y. CMBS loan issuance decreased from $2.9B to $0.9B from June 2024 to June 2025, but average loan size increased from $63.2M to $68.5M. The number of loans issued decreased from 45 to 14. This is due to lower volumes and increased deal sizes.
RevPAR for June fell by 1.2%, as occupancy declined and offset weak ADR increases.
ADR growth was 0.4%, but this was offset by occupancy dropping 1.7%. This resulted in a decrease in RevPAR year-over-year. RevPAR growth declined for all chain sizes in June with the exception of luxury chains, which saw an increase of 2.8%.
The demand for STR increased by 5.6%, while the demand for lodging declined by 0.6%.
In June, the STR share in total demand rose again to 14.6% compared to 13.9% in 2020 and 10.6% in 2019, up from 2019. STR RevPAR grew 5.8% y/y in June as ADR increased to 142% from 2019 and occupancy fell slightly, from 102% 2019 to 101%.
Hotel operating profits increased in May by 1.4%, which is slightly less than the pace of the year-to-date.
The top-line growth of 2.1% for May resulted in a profit dollar increase of only 1.4%, which is lower than the growth rates of 1.5% for the year to date. Although expenses, and in particular insurance costs, are starting to slow down on a TTM-basis, margins have still contracted by 0.1 p.p. We expect margins will continue to be squeezed as higher inflation and stagnant growth in revenue persists through 2026.
Only 35% of the markets reported an increase in RevPAR.
In June, 35% of Hotel Horizons’ 65 tracked markets reported positive RevPAR growth, while the remaining 65% experienced declining RevPAR. Only 35 of the 65 Hotel Horizons markets tracked experienced positive RevPAR growth in June, while 65% posted declining RevPAR.
Inbound international travel volume fell again in the month of June.
Inbound international travel fell by 3.4% in the month of June. This shortfall was made worse by an increase of 0.6% in international travelers who were traveling outbound. The imbalance between outbound and inbound travel will likely persist, as the change in sentiment becomes more pronounced. This will serve as a drag on hotel demand until at least 2026.
TSA’s July throughput increased by 1.1%, the highest increase in several weeks.
RevPAR trend has been poor despite higher throughput, lower fares and wage growth. Google searches for corporate travel and redemption travel were up again in July. They increased by 7% and 9 % y/y respectively. This could indicate an improvement in travel trends this fall.
