U.S. Hotels Face Slowing Growth, with Weak Demand and Policy Uncertainty: Goldman Sachs

U.S. hotel groups are facing increasing challenges as consumer demand weakens and policy changes create new obstacles for the travel sector, according to a new analysis from Goldman Sachs.

RevPAR (revenue per available room), a key hotel industry metric, is predicted to grow at just 0.4% year-over-year, Goldman analysts said in a report Monday.

That would be below the trend of the past four weeks, when U.S. RevPAR tracked about 1.6% higher, according to CoStar.

It would also be below the guidance Marriott, Hilton, and Hyatt had issued at the start of the year, which called for growth of between about 2% and 2.5%. Even that would be less than the roughly 3% average of the past four decades (excluding the Covid pandemic).

Goldman’s reduced outlook reflects emerging signs of consumer weakness, geopolitical uncertainty, and negative signals from U.S. airlines, which have recently warned about softer domestic revenue trends.

“We are not incorporating a full recessionary scenario into our forecast,” wrote analysts Lizzie Dove and Ryan Davis. However, they noted that their economist colleagues at Goldman Sachs now forecast a 45% probability of a U.S. recession.

Canada’s Falloff

The hotel industry is contending with deteriorating trends in international tourism to the U.S., especially from Canada, which historically has been the country’s largest driver of inbound tourist visitors.

Canadian trips to the U..S declined in February by double-digit percentages following President Trump’s talk of tariffs and annexation.

Different Impacts by Segment

Government-related travel has also contracted. United Airlines CEO Scott Kirby said last month at a conference that government travel was down as much as 50% year-on-year.

Goldman’s analysts forecast a roughly 25% decline in government spending on travel in the coming year.

The business model composition of hotel companies may prove increasingly important in this environment.

Hotel chains with lower exposure to resort properties catering to international tourists may weather the slowdown better than peers with significant high-end resort portfolios.

Economy and midscale properties have typically outperformed luxury segments during prior downturns. That’s because corporations tend to cut back on business more quickly than consumers pull back on vacations. C consumers are also often willing to trade down to cheaper properties to keep their vacations.

In the recessions between 1990 to 1993 and between 2000 and 2003, U.S. RevPAR declined 12%, note Goldman’s analysts. In the global financial crisis, it dropped by around 20%.

Dove and Davis are cautiously optimistic that the hotel groups are better prepared this time around.

“Over the past decade so, all of the hotel C-Corps have shifted their business models to more fee-based, asset-light models, after spinning off the more macro-sensitive businesses such as owned and leased hotels and timeshare,” they wrote.

On the supply side, the analysts are optimistic that constrained lodging supply growth will help act as a floor supporting room rates. “With an uncertain outlook for construction costs due to tariffs, labor costs and rates, we do see some risk to the 2026 outlook for net rooms growth,” Dove and Davis wrote. 

Accommodations Sector Stock Index Performance Year-to-Date

What am I looking at? The performance of hotels and short-term rental sector stocks within the ST200. The index includes companies publicly traded across global markets, including international and regional hotel brands, hotel REITs, hotel management companies, alternative accommodations, and timeshares.

The Skift Travel 200 (ST200) combines the financial performance of nearly 200 travel companies worth more than a trillion dollars into a single number. See more hotels and short-term rental financial sector performance.

Read the full methodology behind the Skift Travel 200.