presented a slight headwind to national performance. March data was lifted by the shift in the Easter holiday, which fell into April this year.
Room supply growth in the first quarter stood at 0.6 percent, following the continued slow growth trajectory that has defined the industry’ s pipeline for more than three years. Industry participants do not expect the pipeline to change much due to higher interest rates and expected higher construction costs resulting from tariffs. Rather, as developers reprice construction costs, the inconstruction room count may decrease over the next several quarters, yielding slow supply growth numbers for the coming years.
The total number of rooms sold in the first quarter was one percent higher than a year ago. But the total number of rooms sold— just over 295 million— is still 2.3 million, or 0.8 percent, below the high-water mark for the first three months in 2019. Forward booking data published by STR, a CoStar Group company, suggested that occupancies would show muted growth for the following 90 days, which could be enough to lift second-quarter demand results above 2019 results.
At industry conferences and one-on-one calls, participants worry the current macroeconomic environment could lead to slower growth in room demand and room rates. Among the topics cited as potential threats to the industry are tariffs, which could make the U. S. a less attractive market in the eyes of international— especially Canadian— travelers. Job cuts in federal agencies could impact markets such as Washington, D. C., San Diego or Kansas City, which rely on government travelers and re-
Current industry performance has plenty of implications for spa owners and operators. Room demand on the high end is expected to continue to be robust, but travelers will look for more value, given the higher prices. lated consultants. Higher tariffs could squeeze margins for many industries, forcing companies to look for cost cuts elsewhere and give extra scrutiny to their travel and conference budgets.
Current industry performance has plenty of implications for spa owners and operators. Room demand on the high end is expected to continue to be robust, but travelers will look for more value, given the higher prices. Costs for operators will likely continue to increase, especially if tariffs hit their suppliers. Properties with international customers may have to find new demand sources if the number of foreign travelers slows. Industry performance in the coming months is expected to mirror the slowing macroeconomic trends, and operators need to be ready for that new reality. n
JAN D. FREITAG is the national director, hospitality analytics, for the CoStar Group. A sought-after public speaker, Freitag comments on the trends that shape the U. S. hotel industry and is frequently quoted in trade publications and the general news media. He is a trusted source of timely insights for investors, owners and operators. He holds a bachelor’ s degree, with distinction, from the School of Hotel Administration, Cornell University, and received his Executive MBA, with honors, from Vanderbilt University.
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