In 2025, the national lodging market has continued to demonstrate resilient performance, maintaining strong average daily rate (ADR) and revenue per available room (RevPAR) metrics despite flat occupancy growth.

Compared to 2023 and 2024, ADR and RevPAR have remained near record levels, driven by solid group and business travel in primary markets, even as some leisure markets began to stabilize or soften. National occupancy remained unchanged from 2023, but overall hotel revenues have continued to grow modestly year over year.

These trends suggest a market that has largely stabilized following the disruptions of the pandemic era. Nevertheless, the high cost of debt and capital, coupled with elevated construction costs, continues to weigh heavily on new hotel development activity. As a result, while the underlying performance environment remains favorable for development in theory, actual construction has been subdued, with the supply growth forecast for 2025 falling well below pre-pandemic averages.

Although top-line hotel performance remains strong, developers continue to face barriers when it comes to bringing new projects to market. Elevated construction costs and expensive financing have slowed the number of new developments in the pipeline. Lenders remain cautious when it comes to new construction, often requiring more equity and applying conservative underwriting standards. As a result, while operational fundamentals support the case for new supply in some submarkets, broader development activity remains muted as stakeholders wait for greater economic and capital market clarity.

HVS has tracked hotel development costs for over four decades, collecting data from actual hotel cost budgets during our assignments. The 2025 survey reports per-room hotel development costs based on data compiled by HVS from hotel projects proposed or under construction during the 2024 calendar year. The data reflect six product categories: limited-service, midscale extended-stay, upscale extended-stay, select-service, full-service, and luxury hotels.

The HVS U.S. Hotel Development Cost Survey sets forth averages of development costs in each defined lodging product category. The survey is not meant to be a comparative tool to calculate year-to-year changes, but rather, it reflects the actual cost of building hotels across the United States in 2024.

As will be discussed, the medians and averages set forth in this survey are greatly affected by the types and locations of hotels being developed at this point in the economic cycle. Our goal in sharing this publication is to provide a basis for developers, investors, consultants, and other market participants to evaluate hotel development projects.

Given that development costs for hotels are dependent on a multitude of factors unique to each development and location, this report should not be relied upon to determine the cost of actual hotel projects or for valuation purposes. Instead, it is intended to provide support for preliminary cost estimates, as well as to show a comparison across the various hotel categories.

SUPPLY-AND-DEMAND DYNAMICS AFFECTING HOTEL DEVELOPMENT

In 2024, U.S. hotel occupancy remained identical to the 2023 level, while ADR exceeded previous levels. STR reported national year-end 2023 occupancy at 63.0% and ADR at $158.67.

In the year-to-date period through May 2025, the metrics were reported at 60.9% and $159.58, respectively, equating to a 0.4% decline in occupancy and a 1.6% increase in ADR when compared to the same period in 2024. Meanwhile, RevPAR was up 1.2% compared to the same period in 2024, illustrating a trend of slow but steady growth.

EXHIBIT 1: U.S. ADR & REVPAR REACH ALL-TIME HIGHS IN RECENT YEARS, BUT OCCUPANCY STILL RECOVERING

Source: STR

In 2024, the national market experienced a continuation of the dynamic from 2023 in which many leisure-oriented markets, which were the first to bounce back after the pandemic, underwent a correction, with some resort destinations showing flat or declining performance as the initial surge in demand tapered off.

Urban destinations continued their recovery trajectory at a pace above the nationwide average. To further illustrate this point, primary markets, which comprise the top 25 cities in the United States, experienced a 2.7% increase in RevPAR in 2024 as compared to 2023; in contrast, all other markets experienced more modest RevPAR growth of 0.9%.

This differential lessened in the year-to-date 2025 period, with 1.4% growth in RevPAR for primary markets compared to 1.1% growth for all other markets, indicating that the rebalancing or normalization of leisure vs. urban destinations may be complete.

At the same time, the broader lodging industry has navigated and continues to navigate a complex economic and political landscape. The uncertainty surrounding the 2024 U.S. election, elevated inflation (albeit at a slower pace than in prior years), and weak international visitation contributed to caution among both travelers and investors.

By the first half of 2025, the market began adjusting to the new administration and its evolving policy direction. As with previous cycles, shifts in regulation, spending priorities, and macroeconomic sentiment can lead to changes in lodging demand, often in sectors or markets that had not previously been in focus.

This underlying volatility continues to shape developer and investor expectations heading into the remainder of the year.

Read the full survey in details here