September’s hotel data shows a clear shift in momentum. RevPAR declined roughly 2% year-over-year, marking the fourth consecutive month of negative growth since April. The pattern signals that the U.S. hotel industry recovery is no longer moving in unison — luxury and upper-upscale properties continue to hold firm, while midscale and economy hotels are losing steam.
This divergence defines today’s hospitality environment: a two-speed recovery driven by strength at the top and softness at the bottom.
The Numbers: What’s Driving the Downturn
The latest September data underscores continued deceleration across major markets. RevPAR fell about 2% YoY, extending a four-month trend of contraction. The national weighted average landed near –2.25%, reflecting weakness concentrated in large states such as Arizona, Nevada, and Texas, which collectively weigh heavily on national performance metrics.
By contrast, smaller markets like West Virginia and Mississippi delivered modest positive results, though their limited inventory prevents them from significantly lifting the national average.
Importantly, the slowdown is not a rate issue — it’s an occupancy story. Average daily rates have held steady, suggesting that demand, not pricing, is driving the softness. Corporate and leisure booking windows have shortened, and group travel has become more selective, especially outside of major metros.
The Long-Term Picture Shows Subtle Stability
Despite short-term declines, long-term data reflects resilience. The trailing twelve-month RevPAR increased +0.96%, signaling that the broader recovery remains intact.
The Gulf and Great Lakes regions continue to outperform, both posting steady growth and maintaining balanced supply-demand dynamics. The Southwest region, however, remains a consistent underperformer, with –6.13% trailing twelve-month RevPAR, the weakest of any major U.S. region.
While September’s softness has drawn attention, the larger picture remains relatively stable. Demand may be uneven, but the structural fundamentals — limited to new supply, disciplined pricing, and improving business travel patterns — are supporting a slow, steady recovery trajectory.
Premium Travelers vs. Price Sensitivity
Recent travel and spending data reveal an increasingly divided traveler base. American Express reported record travel bookings and a 14% increase in front-of-cabin airline purchases, while Delta and United Airlines highlighted ongoing strength in business and premium-class demand.
At the same time, hotel performance at the lower end of the market is weakening. Choice Hotels and Wyndham both reported RevPAR declines between –3% and –4%, reflecting persistent pressure in the midscale and economy segments. These brands are facing headwinds from inflation-sensitive consumers, a decline in government demand, and a cooling leisure market.
This contrast between affluent travelers and cost-conscious guests has defined much of 2025. Upscale and luxury hotels continue to benefit from premium spending, while mid-market and economy hotels are navigating slower recovery and tighter margins. The hotel industry recovery, in other words, isn’t happening evenly — it’s happening in layers.
The ADR Integrity Challenge
Maintaining rate of integrity has become a growing challenge in today’s tech-driven environment. The widespread use of cancel-and-rebook tools in platforms like Concur allows travelers to automatically rebook rooms at lower prices if rates drop prior to arrival.
Recent examples highlight just how sharp those drops can be — Boston room rates fell 22%, and New York saw reductions as steep as 33% just days before arrival. These shifts show how dynamic pricing, weather events, and fluctuating demand patterns are making revenue management increasingly complex.
For hoteliers, protecting ADR integrity now requires active monitoring and sophisticated pricing strategies to ensure yield is preserved. The balance between rate competitiveness and profit stability has never been more critical.
Brand and Investor Sentiment
Brand performance and investor sentiment have begun to diverge as well.
Choice Hotels and Wyndham both cut full-year RevPAR and earnings guidance, acknowledging that near-term weakness will likely extend through early 2026. Their U.S.-heavy exposure makes them particularly sensitive to domestic softness.
On the other hand, Hilton is expected to maintain a positive long-term tone even as it moderates its 4Q25 outlook, citing favorable macro conditions and international expansion opportunities. Investors continue to reward brands with asset-light models and global growth pipelines — those that can leverage scale without overexposure to underperforming U.S. segments.
The prevailing mood among long-term investors remains cautiously optimistic. The current dip is seen as a phase of normalization following two years of post-pandemic strength rather than a broader industry reversal.
The Forecast: A Flat Finish to 2025
The latest Baird hotel industry forecast suggests that the sector is headed for a flat finish to the year. The 2025 RevPAR growth estimate has been revised from 0.6% down to 0.3%, and 2026 projections have been trimmed slightly from 1.2% to 1.0%.
A favorable holiday calendar and easier year-over-year comparisons may provide some modest relief in Q4, but expectations remain muted.
In essence, the hotel industry is entering a holding pattern — a phase of recalibration after the volatility of the past few years. While growth will likely remain subdued through early 2026, long-term momentum could return as international travel normalizes, and premium segments sustain demand.
The Path Forward for the Hotel Industry Recovery
The U.S. hotel industry recovery continues to balance between resilience and restraint. Despite near-term weakness, the long-term fundamentals remain sound. Sustained growth will depend on three key drivers:
- Stabilizing international travel flows, particularly inbound arrivals.
- Reinforcing business and group travel recovery, especially in urban markets.
- Maintaining pricing discipline in an increasingly transparent, tech-driven booking landscape.
Ultimately, the next phase of growth won’t come from recovery — it will come from rebalancing. As the market evolves, hoteliers, investors, and developers must stay agile, focusing on operational efficiency and market positioning to capture the next cycle of opportunity.
At NewGen Advisory, we help clients make sense of this shifting landscape through data-backed insight, advisory expertise, and strategic transaction support. Whether you’re assessing market performance, repositioning an asset, or exploring new investments, our team can help you navigate the path forward with clarity and confidence. Contact us today to discuss your hotel investment strategy and learn how we can help you capitalize on emerging opportunities in today’s evolving hospitality market.