While the US economy may generally be stable, the hotel sector is dealing with substantial challenges, with metrics indicating a protracted downturn. Experts in the field are warning that the United States hotel industry may be entering a potential ‘recession‘, as both revenue per available room (RevPAR) and average daily rate (ADR) have shown that they are unable to keep pace with the larger economy.

The latest data reveals that RevPAR growth for U.S. hotels is at a historic low, posting just 0.2% growth this year. This is the weakest performance on record, excluding the pandemic year of 2020 and other recession periods. August 2025 marked the third consecutive month in which RevPAR dropped by more than 1%, signalling ongoing struggles for the hotel sector.

The Broader Economy Shows Stability, But Hotels Are Lagging Behind

Despite the hotel industry’s declining performance, the broader U.S. economy continues to show signs of stability. With a steady unemployment rate and GDP growth projections of 1.9% for 2025, the general economic outlook remains positive. However, this stability contrasts sharply with the hotel industry’s struggles, raising questions about the sector’s ability to recover in the current economic climate.

Top U.S. markets, which typically drive the performance of the hotel sector, have seen a 3% drop in RevPAR in August 2025, contributing to the overall downturn. In comparison, smaller markets across the U.S. experienced only a 0.4% growth in RevPAR during the same period, highlighting the discrepancy between larger and regional markets.

While other industries are showing signs of growth, the hotel sector is lagging, with average daily rates (ADR) failing to keep up with inflation for the past 23 out of 36 months. The current downturn represents the longest period since the Great Recession when ADR did not match inflation, further complicating recovery for the hospitality industry.

Uncertainty in the Hotel Industry: What Defines a True Recession?

Industry experts have pointed out that, while two consecutive quarters of RevPAR decline might traditionally define a recession, the current environment presents a more complex situation. The data reveals that even though the U.S. economy as a whole is experiencing relatively steady growth, the hotel industry is facing ongoing challenges, making it difficult to accurately forecast future trends.

Forecasting errors have become a common theme within the hospitality sector, as traditional models fail to account for the continued stagnation in hotel performance. Experts agree that the disconnect between broader economic growth and the hotel industry’s struggles remains a key concern, with the sector’s downturn defying the patterns predicted by traditional forecasting methods.

The Path Ahead for the U.S. Hotel Sector

The U.S. hotel industry finds itself at a crossroads, with declining RevPAR growth and lagging ADR performance despite the broader economy’s relative stability. The hotel sector’s performance has raised concerns about the potential for a “hotel recession”, with ongoing struggles in key U.S. markets and declining revenue trends. The current period of stagnation in the hotel industry challenges traditional forecasting methods, creating uncertainty for the sector’s future.

For tourists, the decline could mean lower hotel rates in certain areas in addition to lower quality of service when hotels face financial strain. The recovery of the US hotel industry will involve innovating, adapting to evolving demands of customers, and making strategic investments to keep pace with the general economic growth seen in other sectors of the economy.

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