Global hotel performance remains resilient

Despite another challenging year in many respects, the global hotel industry remained resilient in 2024. By November, global hotel demand reached an astounding 4.8 billion room nights, 102 million more than 2023, leading to Revenue per Available Room (RevPAR) growth of 3.7%. Resort and leisure-heavy markets, which were generally the first to recover following the Covid-19 pandemic, have begun to see some normalisation in demand. In contrast, demand for urban markets has accelerated significantly. Slowing supply growth combined with the resurgence of group, corporate and international travel should encourage 3% to 5% global RevPAR growth in 2025.

EMEA hotel performance continued to set records throughout 2024, exceeding 2019 levels by 25.3% and growing 5.6% compared to 2023. Taylor Swift’s Eras Tour, the Paris Olympics and a strong US dollar all contributed to exceptionally strong demand. Asia Pacific RevPAR grew a modest 1.6% relative to 2023 but continues to lag behind 2019 performance, impacted by ongoing visa challenges and a slowing economy in China. Conversely, international travel into the region has soared, driven by depreciating currencies. In the Americas, RevPAR reached a historic high as of November 2024 but increased only 1.9% year-over-year, a result of declining consumer savings and a noticeable pullback in leisure travel.

Short-term: Hotel owners will face increasing profitability pressures in 2025 due to easing top-line performance amid a backdrop of rising costs. This is expected to trigger a significant increase in investment transaction activity, especially as loans mature and owners encounter rising capex demands. Private equity, HNWIs, foreign capital and select REITs are predicted to be the most acquisitive, with hotels in urban and other high barrier-to-entry markets most in demand. Slowing supply growth driven by high construction costs should encourage additional M&A, with brands targeting accretive platforms and portfolios to drive net unit growth, a key determinant of shareholder value.

Long-term: As the distinctions between living, working and playing continue to merge, traditional hotel brands will increasingly diversify into new verticals, with non-traditional lodging and branded residences likely to capture the most investor interest. India, now the world's most populous country, will soon emerge as one of the largest outbound travel markets globally, offering hotels a novel type of traveller and investors expanded possibilities to deploy capital. With global hotel supply forecast to grow 180bps less than its long-term average over the next five years, hotel brands are anticipated to strategically utilise their balance sheets to discover inventive ways to enhance their share of wallet.