U.S. Topline

The top-line U.S. RevPAR forecast has been downgraded 80-basis points to +1.0%. The downgrade is driven by a combination of calendar shifts, weakening macroeconomic indicators, and uncertainty caused by erratic tariff implementation and large-scale federal job losses as well as increasingly soft international inbound travel.

Despite the downgrade, both demand and ADR will continue to grow in 2025. The rate side remains strong with a slight downward shift to +1.3% for the year, while the primary reason for muted 2025 performance is demand, now forecasted to grow just +0.5% relative to 2024.

Natural disaster impacts and offsets continue to play an important role in the 2025 forecast. RevPAR growth is expected to be stronger in the first half of the year, as the continued impact from Hurricanes Helene and Milton continued to lift performance in affected markets through Q1. Impacts from these events began moderating around mid-March as expected, and offsets to the hurricanes will negatively influence demand growth comparisons in Q4 2025.

U.S. Chain scales

Hotel demand is expected to remain bifurcated along chain scales throughout 2025 and the first half of 2026. Luxury hotels remain the top-performing chain scale, with consistent growth in both demand and ADR year to date. Higher-end properties will continue to perform better than other chain scales due to their consumer base being less affected by short-term economic pressures.

All chain scales, except Luxury, have been downgraded in RevPAR due to various degrees this quarter. The primary area of focus is on the demand side, with the heaviest revisions to the select service properties. Typically, these properties have a solid foundation of both corporate and leisure demand. However, both types of demand are at risk as microeconomic concerns spread in middle-income consumers, and corporate travel becomes more focused and hesitant.

U.S. Markets

Hurricanes Milton and Helene continued to drive demand through March 2025, with normalization in April. This manifested in South Carolina, North Carolina, Georgia, and Florida, with multiple markets experiencing weekly double-digit demand increases YoY through March. Additionally, weather-related markets were able to keep Group rates steady with these markets showing ADR at +4.7% YoY through the middle of May. Q4 2025 will see significant pullback as hurricane performance falls out of the forecast, holding all else constant.

This forecast also shows some near-term pullbacks on supply as pipeline projects are directly impacted by the current macroeconomic environment. There are two factors in that equation, as properties not yet under construction are cancelled or delayed, while those under construction remain in the phase for extended periods of time.

Finally, an area where our assumptions have shifted is event impact on the forecast. Survey data still widely shows interest in travel for large-scale events, but consumers’ willingness to do so is scaled back with the economic uncertainty. Major events, such as the Super Bowl, will continue to bring in heavy demand and even heavier ADR growth, but the impact from more mid-scale to lower-end events is much more muted. Only these “peak” events or market-specific events will drive heavy performance. Legacy act events are failing to sell out like initially predicted, with tours cutting shows or postponing altogether. For conferences and conventions, Group bookings are becoming more selective, as well as sending fewer attendees.

Segmentation

Much of the corporate optimism from the start of the year has diminished, as the current administration is no longer perceived as “business friendly.” Since February, business sentiment has been dropping with April experiencing the lowest point post-tariffs. This is not a “doom and gloom” scenario, and some industry segments continue to perform well. STR is not yet seeing evidence of increasing business event cancellations, but the focus is on event renewal, with multiple vendors opting to push to the second half of 2026 or even into 2027. The Group booking window remains shortened. Until the economic climate shifts, we expect booking windows to remain at this level.

An additional standout is Business Transient, which is currently driving performance in the upper-tier segments. Weekday demand and ADR growth continue to improve, with growth outpacing that of weekends and shoulder days. The current economic situation does pose potential downside risk here with business costs rising more unpredictably, and the current pause of interest rate cuts could have downward pressure on business travel.

International Inbound and Outbound

International inbound demand has started to slip as a result of global tariff implementation and the resultant impact on international travelers’ perception of the U.S. Tourism Economics now forecasts substantial demand declines from Canada (estimated down 9% YoY for 2025), Mexico, EU countries, and APAC countries in 2025.

Year to date, international travel declines have been more impactful on both popular tourist destinations and markets that are heavily reliant on Canadian/Mexico travel. While these declines will persist through 2025 and into the first half of 2026, we expect that international inbound demand will begin to recover in 2026 as tensions begin to subside. Major sporting events like the FIFA World Cup and Olympics will not be affected, as they are “one-of-a-kind” events that should help bolster U.S. perception abroad next year. We expect U.S. inbound recovery to be delayed to 2029.

International outbound demand will remain strongest for upper-end travelers in the second half of 2025, but economic uncertainty will in some cases cause a substitution effect toward domestic travel. Flight bookings and air travel remain near peak levels, and resort bookings have been pacing ahead of last year, adding to the assumption that Americans are traveling, but preferring domestic destinations.

Long-Term Outlook

RevPAR growth has been shifted downward to +1.5% in 2026 and +1.8% in 2027 but remains above 2% for 2028-29, continuing a deceleration from the long-term compound annual growth rate (CAGR) of 3.1%. ADR remains the primary driver of performance, although growth rates trail inflation expectations. Demand will continue to grow.

The shifting landscape of the U.S. macroeconomic environment has added some downward pressure on the long-term outlook. Outside of those at the high-end of spending, consumers are expected to continue scrutinizing discretionary and travel spending. The revised demand outlook has potential to soften ADR growth. Desire for travel remains high across all segments, and we expect multiple areas to begin to normalize as conditions become more certain.

About CoStar Group, Inc.

CoStar Group (NASDAQ: CSGP) is a leading provider of online real estate marketplaces, information, and analytics in the property markets. Founded in 1987, CoStar Group conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of real estate information. CoStar is the global leader in commercial real estate information, analytics, and news, enabling clients to analyze, interpret and gain unmatched insight on property values, market conditions and availabilities. Apartments.com is the leading online marketplace for renters seeking great apartment homes, providing property managers and owners a proven platform for marketing their properties. LoopNet is the most heavily trafficked online commercial real estate marketplace with thirteen million average monthly global unique visitors. STR provides premium data benchmarking, analytics, and marketplace insights for the global hospitality industry. Ten-X offers a leading platform for conducting commercial real estate online auctions and negotiated bids. Homes.com is the fastest growing online residential marketplace that connects agents, buyers, and sellers. OnTheMarket is a leading residential property portal in the United Kingdom. BureauxLocaux is one of the largest specialized property portals for buying and leasing commercial real estate in France. Business Immo is France's leading commercial real estate news service. Thomas Daily is Germany's largest online data pool in the real estate industry. Belbex is the premier source of commercial space available to let and for sale in Spain. CoStar Group's websites attracted over 163 million average monthly unique visitors in the third quarter of 2024. Headquartered in Washington, DC, CoStar Group maintains offices throughout the U.S., Europe, Canada, and Asia. From time to time, we plan to utilize our corporate website, CoStarGroup.com, as a channel of distribution for material company information. For more information, visit CoStarGroup.com.

This news release includes "forward-looking statements" including, without limitation, statements regarding CoStar's expectations or beliefs regarding the future. These statements are based upon current beliefs and are subject to many risks and uncertainties that could cause actual results to differ materially from these statements. The following factors, among others, could cause or contribute to such differences: the risk that future media events will not sustain an increase in future occupancy rates. More information about potential factors that could cause results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, those stated in CoStar's filings from time to time with the Securities and Exchange Commission, including in CoStar's Annual Report on Form 10-K for the year ended December 31, 2023 and Forms 10-Q for the quarterly periods ended March 31, 2024, June 30, 2024, and September 30, 2023, each of which is filed with the SEC, including in the "Risk Factors" section of those filings, as well as CoStar's other filings with the SEC available at the SEC's website (www.sec.gov). All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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