U.S. Hotel Sector Navigates Moderated RevPAR Growth Amid Supply Influx

By Majid Radaei, RadCRE · · Market Updates

U.S. hotels posted a 2.5% RevPAR increase in 2025, slowing from previous years but demonstrating resilience. Urban and resort markets continue to outperform, though supply growth warrants monitoring.

U.S. Hotel RevPAR Growth Moderates as Supply Expands

The U.S. hotel sector is exhibiting a more nuanced growth trajectory, with RevPAR (Revenue Per Available Room) recording a 2.5% increase in 2025 according to preliminary data from STR, a CoStar Company. This performance marks a moderation from the stronger post-pandemic recovery years, reflecting both a normalization of demand and a notable uptick in new supply. While specific segments and geographic markets continue to demonstrate robust performance, the broader landscape suggests increasing competition and a recalibration of investor expectations.

Key Performance Indicators and Market Segment Trends

Urban and resort destinations largely led the RevPAR growth, albeit at a slower pace. For example, markets like New York City, bolstered by continued international travel and renewed business activity, saw RevPAR gains above the national average. Conversely, some suburban and tertiary markets experienced flatter growth, occasionally even slight declines, particularly where new construction is concentrated.

Transaction volume in 2025 remained competitive but saw fewer mega-deals compared to prior years. Notable acquisitions included Blackstone's continued strategic dispositions and acquisitions, such as their reported sale of a portfolio of extended-stay hotels to Starwood Capital Group for an undisclosed but significant sum, reflecting ongoing institutional interest in specific product types. Green Street's Commercial Property Price Index for hotels, while showing modest gains, indicates a more discerning capital pool focused on resilient assets with strong operational fundamentals.

The pace of new hotel construction remains a critical factor. Data from STR and CBRE Hotels Research indicates that while construction starts were tempered in 2023 and early 2024 due to tighter lending conditions, projects already in the pipeline are now nearing completion. This pipeline, particularly in select-service and extended-stay segments, is expected to add approximately 1.5-2.0% to the national room supply in 2026, putting some downward pressure on occupancy rates in certain submarkets.

Financing Landscape and Investor Sentiment

The financing environment for hotel acquisitions and developments remains cautious but accessible for well-capitalized sponsors and strong projects. Lenders, including major banks and debt funds, are scrutinizing hotel metrics more closely. For example, bridge loans for value-add hotel plays are typically priced around SOFR + 300-600 basis points, with higher leverage deals commanding the upper end. CMBS spreads for hotel assets, while improving, still reflect a risk premium compared to other asset classes, often ranging from T + 200-350 bps depending on the market and property type.

Our Take

Majid Radaei, Founder of RAD Commercial Realty, notes, "While the headline RevPAR growth appears to be slowing, it's crucial for hotel investors to look beyond the aggregate numbers. We're seeing pockets of exceptional performance, particularly in urban core luxury and well-located select-service assets in high-growth metros. The key is understanding specific market supply-demand dynamics and having a robust, institutional-grade underwriting model. Lenders are still active, but their conditions are tighter, requiring more equity and a clearer path to stabilization. We've seen an increase in demand for creative capital stack solutions, combining senior debt with preferred equity or a structured mezz piece to bridge the equity gap and optimize returns for our clients."

Outlook and RadCRE's Role

Looking ahead, the U.S. hotel sector is anticipated to continue its growth, albeit with renewed emphasis on operational efficiency and strategic asset management. Investors will increasingly prioritize markets with strong employment growth, diverse demand generators, and a balanced supply pipeline. RadCRE, with its deep expertise in hotel investment sales and comprehensive capital markets advisory, assists clients in navigating this evolving landscape. Our team leverages extensive market intelligence and an institutional-grade underwriting approach to identify undervalued assets, optimize capital structures, and facilitate successful acquisitions and dispositions across the hospitality spectrum, from select-service to full-service luxury properties.

Tags: commercial real estate, hotel investment sales, RevPAR trends, hospitality sector performance, CRE financing, SOFR, CMBS spreads, value-add hotels

Sources: STR, CoStar, Green Street, CBRE Hotels Research, Blackstone, Starwood Capital Group