Hotel budget season forecast: The market trends you need to know

Key findings to help you set your budget

• Hotel rates have only made limited gains in 2024, despite strong consumer demand for travel overall.

• Average growth in hotel room rates is low or negative in most regions for 2024, with Latin America a notable exception.

• Hotel room prices are largely falling in the short term but 2025 should see a pickup in rate growth in most locations.

• Appetite for travel has not diminished: IATA recorded double-digit growth in revenue passenger kilometers (calculated as the number of revenue passengers multiplied by the total distance traveled) in H1 2024.

• Business travel similarly has roared back, with double-digit growth in volumes and forecast spend in 2024

• Consumer travelers are looking for value. Cheaper destinations are performing well, and more bookings are being made off-peak, especially at the higher end of the market

• There has been a massive expansion in short-term rental supply, with alternative accommodation listings up 42% compared to two years ago.

The hotel pricing picture in 2024 and 2025 by region

After a strong surge in pricing performance following the lift of travel restrictions, hotels are now facing a more restrained environment for raising rates.

Our data shows a slowdown in year-on-year rate growth across all global regions in 2024, compared to 2022 and 2023, with the exception of Latin America.

This slowdown is primarily due to stagnation in hotel pricing after several strong years. While consumers remain eager to travel - something we’ll discuss shortly - demand patterns have shifted as some of their spending power has been eroded by inflation and the depletion of savings accumulated during lockdowns.

As a result, average hotel room prices have seen minimal increases across Europe, North America, and Oceania in 2024, while prices have declined in Africa, Asia, and the Middle East.

Latin America is defying this trend, with hotel rates up 12.9% compared to 2023. This growth is fueled by an expanding consumer class and a surge in international arrivals, which have significantly exceeded pre-pandemic levels. In contrast, other regions, particularly Asia, are only expected to surpass 2019 tourism levels by the end of this year.

The short-term pricing outlook is not much different either.

Looking at prices over the next 90 days from the time of writing, which is Q3, and comparing to 90 days prior, it appears that most hotels are seeing pricing power eroding and moving rates down compared to their previous forecasts.

In Africa, Asia, the Middle East and North America rates have been declining in the short term.

The main bright spot in this regard is Oceania, which has seen hotels struggle to increase rates recently after being one of the top-performing regions immediately post-pandemic.

There, hotels are, on average, moving rates up by 11% compared to 90 days ago. Europe also has seen strong demand overall, with international arrivals up double digits in H1. That momentum has allowed hotels to increase rates 4% over the period measured.

Looking ahead to 2025, hoteliers expect an improving picture and more pricing power.

Our data, which looks at advertised rates in 2025 up to July, found that pricing performance was stronger in Asia (10.5%), LATAM (15.6%), the Middle East (12.5%) and North America (2.2%) compared to 2024.

What does this mean for hotel budgets?

• Hoteliers shouldn’t expect dramatic changes in fortune in pricing conditions through the remainder of 2024, but can currently plan for improving conditions for room price rises in 2025.

• Fitch currently projects stronger global GDP growth in 2025 compared to 2024. Wages have continued to rise at the accelerated rates seen in 2021-22, while inflation has broadly decreased, leading to solid real wage growth. Additionally, interest rates are expected to decline after significant increases in 2022-23.

• This is expected to enhance consumer confidence and boost disposable income, leading to increased spending on leisure activities like travel. As a result, this creates an opportunity for higher room rates and increased actualized Average Daily Rate (ADR).

• When budgeting for ADR growth, anticipate modest yet positive gains in the leisure segment. While this segment has become more price-sensitive, ADR growth in 2025 is expected to be stronger than average.

• If you want to get real-time hotel room rate intelligence specifically for your market, try Rate Insight, which includes a rate evolution feature, so you can see how rates are evolving in your market in real time.

The number of tourist trips hit record highs

A subdued pricing outlook hides the fact that global trip numbers are on the rise and the industry remains strong.

The data supporting this is abundant.

Starting with global air travel, IATA recorded double-digit increases in Revenue-Per-Kilometer for every month in H1 2024 except for June, which still experienced a 9.1% rise compared to the same month last year.

Elsewhere, European Travel Commission (ETC) data found that international arrivals were up 12% in H1 and overnights rose 10% YoY.

Similarly, Mastercard’s spending data showed no slowdown in the first quarter of 2024, with a record high of approximately 15.9 million international journeys by Americans. Additionally, nine of the top 10 highest spending days for flights and cruises in their records occurred in Q1.

Asian markets are also showing strong performance, with the World Travel and Tourism Council (WTTC) projecting a 29% year-on-year growth in spending in Northeast Asia.

What does this mean for hotel budgets?

• Travel volume is increasing, and travelers are spending more time on their vacations. According to Mastercard's analysis, the average length of a vacation trip has increased by a day, rising from 4 days in 2019-20 to 5 days as of March 2024.

• Hoteliers can plan in their budgets for strong occupancy through the rest of 2024 and into 2025 but should expect this demand to be more evenly distributed throughout the year compared to previous years, as we will discuss below.

• Discover who’s searching for accommodation in your city with our free interactive tool. For more detailed, long-term demand insights, start a free trial of Market Insight.

Business travel returns to pre-pandemic levels

Like leisure travel, business travel is seeing robust growth in 2024

Advantage Travel Partnership’s Global Business Travel Review reported a 17.3% increase in UK business travel volumes during the first half of the year.

Cvent found that 69% of European travel managers expect volumes to rise this year, and the Global Business Travel Association (GBTA) projects that travel spending will finally reach pre-pandemic levels, hitting $1.48 trillion with an 11.1% year-on-year growth.

However, it seems that behavioral changes are influencing this growth, meaning it will look different from the pre-pandemic trends

Spending per trip is expected to settle at a lower level. The Advantage Travel Partnership reported a decline in business and first-class bookings, while economy-class bookings increased by nearly 8% year-on-year.

In Cvent’s research, 31% of travel managers noted they had commitments/contracts with more hotels than 5 years ago, while 26% mentioned they had shifted to a dynamic pricing model.

Secondly, business travel is becoming less formal and increasingly influenced by changing work habits. Travel managers highlighted hybrid and remote work as the key trend reshaping business travel priorities. According to the GBTA, a comfortable majority of respondents (58%) reported an increase in work trips that transitioned into vacations.

What does this mean for hotel budgets?

• Hotels can expect business travel and the Meetings, Incentives, Conferences, and Exhibitions (MICE) segment to return to pre-pandemic levels in nominal terms. However, real-term spending may still be lower, as many companies are focused on maintaining a healthy profit and loss sheet.

• Hotels should consider setting more aggressive budget goals for all corporate segments, aiming for demand levels in both occupancy and ADR that match or even exceed those of 2019.

• Use Lighthouse Business Intelligence to slice and dice your PMS data, for actionable, segmented customer insights, including your business and MICE travelers.

Traveling more but traveling smarter: tourists diversify trip times and destinations

So why aren't hotel room rates rising more in 2024? How can such a resurgent market not drive stronger pricing growth?

The answer seems to come from two factors. First, consumers are feeling the impact of economic headwinds. Widespread inflation has strained household finances, and in China, where inflation was relatively mild, a property sector crisis has slowed economic growth.

As a result, there’s a stronger focus on finding value.

Tourists are now exploring longer booking windows, seeking more affordable destinations, and looking to get more bang for their buck whilst on vacation.

This trend is evident across a wide range of data.

Perhaps most profound is a shift in the booking window, as consumers book longer stays at cheaper accommodation and make more bookings off-peak.

Mastercard found that the travelers were staying an additional 2.1 days in properties where the price had changed by a relatively small amount from pre-pandemic, but only 0.7 days in locations where prices had risen substantially.

They are also placing more reservations in off-peak periods. We found that in five of the seven global regions, hotel prices performed better in Q1 2024 than across the year overall.

For example, while average prices across the year are down -2.2% in Asia, they are up 2.8% YoY in Q1 in Asia and up from 1.2% in Europe to 4.7% across the same periods in Europe.

This trend is more pronounced among groups that can afford to take time off in shoulder seasons, which has meant that the shift is largest in the luxury sector.

Luxury travel firm Zicasso reported in its 2024 Summer Travel Trends report that bookings are up 25% in the fall shoulder season and 16% in spring.

Then, the destinations performing best this year are often those that present strong value propositions for travelers.

According to ETC forecasts, the top-performing locations in Europe are shifting towards more affordable southern European destinations. Leading the growth in international overnight arrivals are Albania (86%), Serbia (48%), Montenegro (31%), Portugal (26%), and Greece (22%). In contrast, more expensive destinations like Germany (-9%), Italy (-9%), the UK (-12%), France (-15%), and Finland (-20%) are seeing declines.

Similarly, the WTTC projects that international visitor spending in Albania will soar by 55% in 2024 while spending in Germany is expected to remain 10% below 2019 levels.

Our data also highlights strong demand in several of these countries, particularly Croatia, Greece, Portugal, and Spain.

In Greece, these trends are particularly evident. The country is outperforming the broader European market, with three-star hotels showing more significant room rate growth than five-star properties. In 2024, three-star hotel rates have risen by 8.9% year-on-year, outpacing the overall market growth of 8.4%, and the 8.3% increase seen in five-star hotels.

Looking ahead to 2025, the gap between three- and five-star hotels is widening further. Three-star hotels have advertised rates 11.9% higher than the same period in 2024, while five-star properties are trailing with a 7.7% increase.

What does this mean for hotel budgets?

• Off-peak periods are becoming more important, especially at the higher end of the market. Hotels should be ready for a subtle shift in overall rates as a result.

• Revenue may become less concentrated in peak periods, so hotels should adjust their budgeting to capitalize on guests seeking off-peak stays. This is especially true for older consumers and luxury travelers who have more flexibility in their plans

• If you need to build a traveler profile and analyze segmented guest data, then Lighthouse Business Intelligence is perfect for you.

• This is especially true when combined with Market Insight, which leverages forward-looking search data to predict marketed demand 365 days in advance.

• It also provides valuable insights such as the length of stay that guests may be interested in, the intended travel dates, and the geographical location where the searches originate from.

More choice for tourists as short-term rental supply explodes

With travelers searching further and wider than before, they are also booking more alternative lodging.

The post-pandemic period has seen a major expansion in demand for short-term rentals. Lighthouse data shows that reservations are up by more than 50% in North America in 2024 compared to 2019 and by more than 100% in Latin America.

However, that has also come with a massive expansion in supply as property owners seek to profit from this boom.

The number of short-term rental listings worldwide has risen by 4.7 million from June 2022 to June 2024.

That number is just a little shy of the total number of households in a medium-sized country and the equivalent of converting a country with the population of Sweden entirely over to vacation rentals.

In percentage terms this is a growth of 42% in two years, and while Europe has added the most listings in pure number terms, at 2.4 million, the highest growth has been in the Americas, where listings have jumped 58% in LATAM and 53% in North America.

For comparison, the supply of European hotel rooms grew at a compound annual growth rate of 1.4% between 2009 and 2023 according to CBRE.

For instance, during the 2024 Olympics in Paris, the increase in STR supply added 50,000 rooms to the market - equivalent to introducing 500 (100 roomed) new hotels - all competing for the same guests.

What does this mean for hotel budgets?

• Short-term rental and hotel booking profiles don’t always overlap and often travelers are looking for subtly different things in these property types.

• However, research now shows that they are very much interlinked and have an effect on Revenue Per Available Room (RevPAR).

• You are now competing with short-term rental accommodation for the same customer.

• The sheer scale of this expansion is a massive injection of supply and helps in part to explain why rates have been subdued in a year of overall demand growth.

• For 2025 budget planning - hoteliers in Europe and North America, where supply is greatest and the effect on rates most pronounced - need to account for local competition from short-term rentals and moderate projections of RevPAR growth based on the density of competing properties.

• For example, the meteoric rise in short-term rental listings in Paris for the 2024 Olympic Games had a major impact on the ability to push up hotel rates over this period. Take a look here.

• Rate Insight is the first platform to combine both hotel and short-term rental pricing data; so you get a complete view of the competition in your market and make smarter pricing decisions.

Final thoughts

The data shows us a picture of changing behaviors among travelers that will define the remainder of 2024 and into 2025.

While demand is on the rise and consumers continue to prioritize travel and experiences, their booking patterns are evolving, with a growing emphasis on value—partly because they now have more options.

Travelers have access to a broader range of destinations, greater flexibility to travel off-peak and around work schedules, and more accommodation choices than ever before. This expanded competitive landscape makes forecasting and budgeting more challenging for hotels.

In this environment, real-time, high-quality data becomes a critical advantage. That’s why we’ve built the industry’s most powerful and integrated commercial platform for the hospitality sector. If you want insights like these, tailored specifically to your business, get in touch with us to set up a budget designed for success.