Goldman Sachs has sharply revised its 2025 forecast for the U.S. hotel industry, reducing its RevPAR growth estimate to 0.4% from 1.4%. Behind the numbers lies a story of weakening demand, policy volatility, and strategic drift. This signals a shift from recovery to recalibration for hoteliers, investors, and travelers alike.
Weakening Metrics Reflect Deeper Structural Pressures
In mid-April 2025, Goldman Sachs released a sobering analysis of the U.S. hotel sector. The investment bank downgraded its 2025 revenue per available room (RevPAR) forecast to 0.4% growth, a sharp decline from its earlier projection of 1.4%. This revision reflects a convergence of macroeconomic stressors, from softening consumer confidence to rising policy risk under the Trump administration.
The downgrade came alongside a re-rating of major hotel stocks. Hyatt Hotels was cut to “sell,” with a 3% stock decline immediately following the announcement. Marriott International and Hilton Worldwide were downgraded to “neutral,” falling about 1%.
These movements echoed a broader underperformance in the sector: since March 2025, shares of Hyatt, Marriott, and Hilton have declined by 32%, 27%, and 21%, respectively, compared to the S&P 500’s 13% drop over the same period.
Three Forces Driving the Downgrade
1. Deteriorating Consumer and Corporate Demand
Goldman Sachs cited declining consumer confidence and inflation-linked price sensitivity as key risks to demand. The firm revised its U.S. GDP growth expectations from 2.4% to 1.7%, as tariffs and input costs squeeze household budgets. Meanwhile, corporate travel budgets are contracting.
United Airlines reported a 50% year-on-year decline in government travel as of March 2025, and Goldman forecasts a 25% drop in government-related hotel bookings this year alone.
2. Airline Sector Weakness as a Lead Indicator
Warnings from major U.S. airlines have added fuel to the downgrade. Delta, Southwest, and American Airlines revised their Q1 forecasts downward, citing sluggish booking trends.
Delta CEO Ed Bastian remarked that consumers are “acting as if we’re going into a recession,” withdrawing full-year guidance. Weak airline revenue has historically been a reliable indicator of stress in the hotel sector.
3. Geopolitical Risk and Policy Uncertainty
The Trump administration’s trade rhetoric—especially around Canada and critical imports—has led to tangible disruptions in inbound travel.
Canadian arrivals to the U.S. dropped by double digits in early 2025, with Goldman estimating this alone could shave 0.5–0.8 percentage points off RevPAR growth this year.
Meanwhile, talk of “reciprocal tariffs” on global auto imports has raised fears of retaliatory policies that could further affect inbound tourism and hotel performance.
Segment Winners and Losers in a Slowing Market
The pressure is not evenly distributed. Luxury and upper-upscale hotels, which rely heavily on international and corporate travelers, face an outsized risk. In contrast, midscale and economy brands, especially asset-light franchises like Choice Hotels, have demonstrated relative resilience, supported by cost-conscious leisure travel and flexible operating models.
Goldman Sachs notably upgraded Choice Hotels from a “sell” to a “buy” rating. The company was praised for its franchise-based structure and broader geographic diversification. This marks a growing investor preference for low-capex, fee-driven hotel groups with limited exposure to volatile resort markets.
Development Delays and Strategic Retrenchment
Uncertainty is already dampening new hotel construction. Developers face rising costs, shifting interest rate expectations, and unclear demand signals. Mitch Patel, CEO of Vision Hospitality Group, described the current market as “the most challenging” in his 25-year career, citing a 20–30% rise in construction expenses since 2023.
Many firms have paused new developments entirely, adopting a conservative “wait-and-watch” posture.
Operationally, hotel brands emphasize leaner operations, digital channel optimization, and property-level differentiation—especially in areas such as cleanliness, complimentary amenities, and review management—as price-sensitive travelers scrutinize every dollar spent.
Outlook Scenarios: What 2025 Could Look Like
Macroeconomic movements and policy volatility will shape the industry’s path forward. Based on Goldman’s base case and historical trends, three plausible scenarios emerge:
Cautious Stability:
The U.S. avoids recession, but RevPAR remains flat. Hotel chains reduce capital expenditures, focus on loyalty retention, and rely on pricing flexibility to maintain margins.
Mild Downturn:
A shallow recession hits. Group travel and government bookings continue to decline. Operators cut costs aggressively and delay new brand rollouts or renovations.
Unexpected Rebound:
The Fed cuts rates earlier than expected, stabilizing consumer spending and sparking a late-2025 recovery in leisure and business travel. Hotel stocks rebound, especially among value-driven chains.
VoyageWire Take
Goldman Sachs’ downgrade is not just a forecast revision—it’s a strategic warning shot. The U.S. hotel industry is no longer in recovery from the pandemic. It enters a phase defined by margin compression, pricing volatility, and digital recalibration.
Executives must resist the temptation to chase growth and double down on core strengths: cost control, tech-driven demand management, and portfolio defensiveness. For investors, the shift toward asset-light, globally diversified hotel platforms is likely to accelerate.
The coming year will favor operators who can do more with less—those who prioritize agility over expansion and resilience over revenue hype. The message from Wall Street is clear: the hospitality cycle has turned. How the industry responds will determine who thrives in 2026 and who lags.
Please Note: This article is based on verified market data and public statements as of April 2025, with no forward-looking claims beyond those published by Goldman Sachs and cited executives.
