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Dive Brief:

Despite a more cautious economic outlook for the months ahead, hotels in the first quarter of 2025 saw 2.2% year-over-year RevPAR growth to a record $92, with March achieving the highest year-to-date RevPAR in U.S. history, according to JLL’s U.S. Hotel Investment Trends Report for Q1 2025, obtained by Hotel Dive. Q1 RevPAR growth was driven by strong ADRs, though occupancy dipped in the quarter due to a slowdown in budget leisure travel, per JLL. Inbound international travel also slowed in the quarter, and JLL expects further softening of inbound arrivals in future months.  Despite volatility, hotels remain a favored asset class among lenders, and the buyer pool is diverse even as some real estate investment trusts have pulled back, according to JLL. A “scarcity” of new hotels — and tariffs likely “exacerbating supply challenges” — could drive performance resilience this year.

Dive Insight:

Urban hotels, in particular, performed well thanks to group and corporate demand, showing the highest year-on-year RevPAR growth in Q1.

According to a recent Cendyn and Amadeus’ Hospitality Group and Business Performance Index report, solid events volumes boosted group and business performance in Q1, which continued to grow at a healthy pace.

Mid-sized deals in urban markets drove “resilient” hotel liquidity in the quarter, according to the report, as investors aimed to tap into corporate group demand. Earlier this year, investors indicated to CBRE a preference for central business districts and resort markets over other locations in 2025.

Bifurcation, however, continued to impact hotels, with higher chain scales outperforming lower ones. Economy hotels, in particular, saw their RevPAR drop 5.7% as compared to Q1 2023, though the sector’s RevPAR was up 1.9% year on year, per the report.

Manhattan, in particular, has exemplified the nationwide trend of performance bifurcation, according to PwC.

Q1 hotel transaction volume rose 23% year on year, and select-service and extended stay hotels “dominated” in terms of hotel transactions closed in the quarter. While high rates curbed large-value deals in Q1, some $145 billion in hotel loan maturities slated for this year and the next will catalyze hotel transactions, according to JLL.

Select-service and extended stay hotels are poised to deliver “durable returns in a volatile market,” according to JLL research released in February.

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