Air travel, hotel demand rebound from shutdown-related dips
Air travel, hotel demand rebound from shutdown-related dips
AAA projects same percentage of holiday flight demand as last
year
Flight cancellations due to air-traffic controller shortages hampered air passenger counts at the beginning of November. (Getty Images)
https://www.costar.com/article/1429347042/air-travel-hotel-demand-rebound-from-shutdown-related-dips?
The effects of the longest government shutdown in U.S. history on hotel and air travel performance are largely in the rearview mirror two weeks removed from its resolution, though some softness remains on the weekends.
While the vast majority of Thanksgiving travel is done on the road, the conclusion of the 43-day government shutdown on Nov. 12 was ultimately timely for those planning to travel by air this holiday season.
Colin Sherman, director of hospitality market analytics for Texas and U.S. South at CoStar Group, said November began with a sharp decline in both travel and lodging demand as the Federal Aviation Administration cut back on flights to accommodate for air-traffic controller staffing shortages. In early November, there was a 2.3% year-over-year decrease in Transportation Security Administration air passenger counts, with the largest decreases coming midweek and on weekends.
Hotel performance was similarly down at the beginning of November — on the first Sunday of the month, Nov. 2, occupancy was down 17.5%, average daily rate was down 5.8% and revenue per available room was down 22.2% on a year-over-year basis. The following day continued the trend, with occupancy down 7.4%, ADR down 2.7% and RevPAR down 10% on Nov. 3, Sherman said.
"These drops mirrored the immediate pullback in government and business travel, along with broader consumer uncertainty," he said.
The rest of the week saw some steadying before the weekend of Nov. 7 and 8 rebounded ahead of last year's levels, Sherman said. Occupancy and ADR rose 2% to 4%, and RevPAR was up 6% to 7%.
"This improvement was likely driven by pent-up demand and the resumption of deferred travel as federal operations normalized," he said.
Hotel performance remained mixed in the second week of November, with midweek days maintaining year-over-year gains while weekends lagged last year in occupancy and RevPAR — a sign that leisure travel hadn't recovered from the shutdown disruption, Sherman said.
"Overall, November's travel and hotel performance tells a story of disruption and gradual recovery," he said. "As the shutdown ended and travel resumed, both passenger counts and hotel demand rebounded, especially for midweek and Friday/Saturday stays. Still, the lingering softness on weekends and the uneven pace of recovery highlight how sensitive demand remains to policy-driven shocks and shifts in traveler behavior."
Thanksgiving travel
According to data from AAA, there will be an additional 1.6 million travelers this Thanksgiving compared to last year, a new record.
The same percentage of travelers as last year, 7.4%, will use air travel to get to their destination, a sign of consumer confidence in flights two weeks removed from the government shutdown. AAA warned, however, that its projection of 6.07 million air travelers could come in lower than expected due to flight cancellations. This would likely result in more travelers by car, which is already projected at 73 million people.
“Thanksgiving travel numbers are always impressive because this holiday has become synonymous with heading out of town to spend time with loved ones,” said Stacey Barber, vice president of AAA Travel. “People are willing to brave the crowds and make last-minute adjustments to their plans to make lifelong memories, whether it’s visiting extended family or meeting up with friends.”
Four Florida cities — Orlando, Fort Lauderdale, Miami and Tampa — are in the top five domestic Thanksgiving destinations, according to AAA booking data. Paris, Amsterdam, Vienna, Cancun and Punta Cana round out the top five international destinations.
Despite declines, US hotels showed some encouraging signs in October
Comparisons to 2024 hurricanes more of a factor than government shutdown
The 43-day government shutdown had a minimal impact on October U.S. hotel performance, according to CoStar hospitality data. (Getty Images)
https://www.costar.com/article/1224351909/despite-declines-us-hotels-showed-some-encouraging-signs-in-october?
U.S. hotel industry revenue per available room fell 0.9% in October, which was the fifth consecutive monthly decrease but the smallest of the declines during that spanRevPAR has been flat to down for U.S. hotels since April. The most recent decline was driven by an occupancy decrease of 1.6 percentage points. That was the steepest of eight straight monthly occupancy declines in the U.S.Average daily rate rose 1.5%, which was the best increase of the past six months but still well below the inflation rate. Since May, monthly ADR growth on average has risen 0.5%, which is the lowest average growth rate outside of a recession.
Government shutdown, less of an impact than feared
October took on a bulk of the U.S. government shutdown, which began Oct. 1 and ended Nov. 12. Given that the national hotel occupancy decrease was the largest thus far in 2025, it’s easy to assume the shutdown was the culprit. However, our analysis suggests that was not the case.
Hotel room demand during the 43 days of the U.S. government shutdown fell 2.2 million room nights year over year. In the 43 days prior to the government shutdown, demand was down 1.5 million room nights year over year. However, TSA screenings during the 43 days were up 2%. So why was demand down more?
Simply, the 13 hurricane markets, those affected last year by Hurricane Helene and Hurricane Milton, reduced hotel demand by more than 1 million room nights, which accounted for 57% of the total U.S. room demand decline in the month. Half of those room nights came from economy-class hotels.
Excluding the hurricane markets, room demand was still down, but in line with what we have seen since April. More importantly, U.S. hotel RevPAR for the month would have been basically flat (-0.1%) without those markets.
Daily data also shows the same impact. Room demand without the hurricane markets was down 690,000 rooms during the shutdown versus 1.2 million room nights in the 43 days prior to the shutdown.
One market where the shutdown impact was obvious was Washington, D.C., where RevPAR retreated 8.8% on falling occupancy. Even in the capital though, the impact seems limited.
In the three months ending September, D.C. hotel room demand was down an average of 3.4%. In October, the measure fell 5.4%, which is the largest decrease so far this year, but keep in mind that demand was down 4.1% in September.
D.C.’s largest decrease was seen in upper-upscale hotels, where demand fell 9.8% with group demand down 10.8%. The central business district accounted for more than one-third of the market’s demand decrease.
Moreover, D.C. central business district RevPAR was down 10.7%, which was not as bad as August (-16.9%) or September (-17%). Room demand was also down more in each of those two months.
Top 25 RevPAR up while occupancy second-highest of the year
The top 25 U.S. hotel markets – excluding Tampa, which was one of the 13 hurricane markets, and Las Vegas – saw RevPAR increase 0.5% during October.
The largest October RevPAR declines were seen in New Orleans (-27.7%) and Miami (-13%). Both markets had difficult comps from last year’s Taylor Swift Eras Tour. Houston also saw a large decrease in RevPAR (-8.8%) as it continued to see difficult comps from last year’s late spring/early summer storms as demand last October was up 10.6% vs. down 7.7% this past month. A year ago, Houston’s October RevPAR rose 20.2%.
Twelve Top 25 Markets saw RevPAR that ranged from flat performance to year-over-year increases, led by San Francisco (+31.2%) and Anaheim (+11.1%). Both markets benefited from a strong convention calendar.
Other hotel markets seeing solid RevPAR gains included Chicago, Orlando and St. Louis, where the measure rose by more than 7% during the month. New York City again posted the nation’s highest occupancy (89.4%) like it has since May. The city also saw its highest occupancy of the year as did Austin, Boston, Los Angeles, Nashville, San Francisco, and 16 other markets in and out of the Top 25. As a group, top 25 occupancy was the second highest of the year (71.9%) behind June’s 72.7%.
San Francisco’s RevPAR growth was driven by ADR (23.3%), due to this year’s Dreamforce conference, which shifted from September last year. Strong ADR growth (+90.7%) occurred Oct. 12-16, which surrounds and includes the conference dates. Excluding those dates, ADR would still have been up 7.9% with RevPAR rising 13.1%. San Francisco’s RevPAR has grown in nearly every month of the year except May. Even though growth has been significant this year, YTD occupancy is still down 13.1 percentage points from 2019 — a decrease of 2.3 million room nights — with real ADR also negative.
Group demand the 10th highest
Group demand in luxury and upper-upscale class hotels was flat (-0.4%) even though total room demand was up 0.8%, which was the largest increase since April. Overall, group demand in October was the 10th highest ever since STR began tracking the metric. For the year, group demand is down 1.5% since last year.
Luxury-class hotels again led the U.S. hotel industry with October RevPAR rising by 3.7% on a 3.9% ADR gain. Hotels in the upper-upscale class saw RevPAR increase 1.2%, also on ADR, with the remainder down, ranging from down 1.9% in upscale to down 8.7% in economy.
Year-to-date U.S. hotel RevPAR is down 0.1% on falling occupancy as ADR is up 1%. Excluding Las Vegas, U.S. RevPAR is up 0.5% with hurricane markets contributing the most to the industry (+2.6%) given their strong performance early in the year, which started to reverse out in October.
US hotel pipeline holds steady
Compared with September, the U.S. hotel development pipeline rose slightly (+0.9%) on an increase in rooms in the planning stages. Under construction and final planning hotel rooms were virtually unchanged from a month prior (+0.1% each). As compared to a year ago, the pipeline is down 4.2% with the largest decrease in construction activity (-11.8%). While down, there are still 1,201 hotels under construction in the U.S. with half in the upper midscale (412) and upscale (269) segments.
The U.S. still has the most hotel rooms in the pipeline (730,000) followed by China (474,000). India, Saudi Arabia, and the U.K. also sit around 100,000+ rooms in the pipeline. The biggest difference between the U.S. and China is that 59% of China’s rooms are under construction as compared to 19% in the U.S. Excluding the U.S., 46.4% of the global pipeline rooms are under construction.
Global RevPAR forging ahead
Globally, hotel RevPAR is up 5.2% on ADR (+4.9%). Excluding the U.S., RevPAR is up 7.9% with strong ADR growth (+6.7%) and rising occupancy. Germany, the Gulf Cooperative Council (GCC), India and Japan all saw RevPAR increase by more than 12% with all driven by solid ADR gains. Australia and Canada posted RevPAR growth of more than 9%, also driven by ADR.
The strong growth seen in Canada was widespread with 14 of 22 hotel markets seeing October RevPAR growth of 8% or more. Toronto’s increase topped 17% on a 14.8% ADR increase. While it is easy to pin the gain on the baseball playoffs and the World Series games in the city, double-digit ADR was seen throughout the month.
Mexico’s slowdown was centered in its largest hotel markets – Cancun, Mexico City, Mexican Caribbean, and Pacific Central – where ADR fell 7.5% on falling occupancy and resulted in an 8.2% RevPAR retreat. A year ago, these four markets saw RevPAR increase 16.6% on a 19.2% ADR gain.
Year-to-date global RevPAR is up 3% on a 3.3% ADR increase. RevPAR growth moves up to 4.3% excluding the U.S. with ADR rising 4.4%. Year-to-date leaders include India, Japan and Latin America, all with double-digit RevPAR increases. Strong growth was seen in the GCC and Mexico (+8%+). On the other end of the spectrum, China, France, Germany and the U.S. all show retreating RevPAR year to date.
Outlook
The U.S. 2025 and 2026 forecasts were recently lowered as little change is expected over the next 14 months. RevPAR in the fourth quarter of 2025 and the first quarter of 2026 will likely decrease with the remainder of 2026 seeing growth.
Overall, 2025 RevPAR is expected to be down 0.4% with the measure rising 0.5% in 2026. Occupancy and ADR will remain under stress, but as the uncertainty and the shock of recent policy changes abate, so too will the pressure on those metrics. Outside of the U.S., most markets will see more of the same, too—overall positive with some weakness here and there.
Isaac Collazo is senior director of analytics at STR.
This article represents an interpretation of data collected by CoStar's hospitality analytics firm, STR. Please feel free to contact an editor with any questions or concerns. For more analysis of STR data, visit the data insights blog on STR.com.
Global Economics Intelligence executive summary, October 2025
https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/global-economics-intelligence
By
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Global growth remains uneven amid policy uncertainty and trade realignments. US government shutdown adds downside risk, while US–China tariff talks and gradually easing inflation offer some optimism.
The US federal government shutdown, which began on October 1 and ended on November 12, was the longest in history, surpassing the previous record of 35 days set in 2018–19. One consequence of the shutdown is that the US Bureau of Labor Statistics, Bureau of Economic Analysis, and Census Bureau have all delayed releases of major reports, including September employment, October inflation data, and third-quarter GDP estimates.
Meanwhile, US President Donald Trump and China’s President Xi Jinping met in South Korea on October 30 for ongoing trade talks. The US agreed to lower the tariffs on Chinese imports imposed to curb fentanyl flows by removing ten percentage points of the cumulative rate, effective November 10, 2025, and would maintain its suspension of heightened reciprocal tariffs on Chinese imports until the same date. (The current 10% reciprocal tariff will stay in effect during this suspension period.) China is to suspend the new export controls on rare earths and related measures that it announced on October 9, 2025. Similarly, President Luiz Inácio Lula da Silva of Brazil met President Trump on the sidelines of the ASEAN summit in Kuala Lumpur, Malaysia, on October 26, in a bid to ease tensions between the two countries. Their respective teams planned to start tariff discussions immediately. Elsewhere, negotiations toward a trade deal between India and the United States face hurdles, including US demands for access to India’s bioenergy market.
China’s GDP recorded a resilient year-on-year growth rate of 4.8% in the third quarter of 2025, albeit slower than the Q2 pace of 5.2%. However, year-to-date GDP growth reached 5.2% and remains comfortably above the annual target of 5.0%. Consumption accounted for over half of GDP growth (56.6%), followed by net exports (24.5%) and investment (18.9%). Seasonally adjusted Q3 GDP data showed the eurozone grew 0.2% versus the previous quarter, according to a flash estimate released on October 30. In the UK, monthly GDP estimates indicate the economy is expanding at a modest 1.1–1.5% annualized pace, supported almost entirely by the services sector. In September, Mexico’s economic activity declined 0.6% year on year, while edging up just 0.1% month on month, signaling near stagnation.
At its October meeting, the US Federal Reserve lowered the target range for the federal funds rate by 25 basis points to 3.75–4%, marking a second consecutive reduction (Exhibit 1). The Federal Open Market Committee (FOMC) noted that economic growth remains moderate, job gains have slowed, and uncertainty surrounding the outlook has increased. In Russia, meanwhile, the Central Bank of the Russian Federation lowered the key interest rate by 50 basis points to 16.5% in October, reducing the size of the cut from 100 basis points seen in previous months. Economic pressures are forcing Russia’s central bank to walk a fine line between curbing inflation and preventing growth from stalling.
Exhibit 1
Other central banks have been more cautious. Both the European Central Bank (ECB) and the Bank of England (BoE) held rates, with the ECB sticking to 2.0% amid easing inflation and slow growth, while the BoE’s Monetary Policy Committee maintained a 4.0% policy rate in both October and November. It was a similar story elsewhere. In Brazil, the Banco Central do Brasil’s Monetary Policy Committee (Copom) held the Selic rate at 15% in a unanimous decision. India also held rates, but a sustained decline in inflation strengthened the case for potential cuts going forward.
Consumer confidence remains below the long-term average, suggesting continued caution in spending (Exhibit 2). In the US, the Consumer Confidence Index (Conference Board) dropped one point in October to 94.6, from a revised 95.6 in September. UK sentiment is gloomy, with consumer confidence deeply negative based on the overall state of the economy. In Brazil, consumer confidence remained below the neutral 100 mark, with the seasonally adjusted September figure trending up to 87.5 (86.2 in August).
Exhibit 2
In general, retail sales picked up in September. In the UK, however, although retail sales rose 1.5% month on month in September, levels continue below pre-COVID-19 benchmarks, indicating weak underlying demand.
Overall inflation expectations eased by 0.1 percentage points for both the medium and long term. In September, US median inflation expectations increased at the one-year-ahead horizon to 3.4% from 3.2% and, at the five-year-ahead horizon, to 3.0% from 2.9%. They remained steady at the three-year-ahead horizon, at 3.0%.
On the commodities markets, precious metal prices continue to rise rapidly, driven by heightened uncertainty surrounding geopolitical tensions. Gold has been reaching new record highs, fueled by rising demand. However, oil prices continue to drop, having fallen to around $60 per barrel as demand weakens and production increases. Food prices declined globally in September, providing some breathing room for consumers.
Inflation among developed economies continues to accelerate and is moving away from the targets set by most central banks. In the US, the consumer price index (CPI) rose 3.0% for the 12 months ending September, after increasing 2.9% over the 12 months ending August. Core inflation was slightly up, to 3.0% (annualized). In the eurozone, headline inflation ticked up to 2.2% in September, but the rise was entirely driven by a smaller annual decline in energy prices. Core inflation remained stable at 2.3% for the fourth consecutive month. In the UK, it’s a different story: inflation remains elevated. Headline CPI inflation reached 3.8% in September, one of the highest rates among developed economies, largely driven by transportation and hotels/recreation prices. The IMF warns that inflation could remain persistently high into 2026, although pressures are expected to ease gradually next year as temporary factors fade. Among developing countries, by contrast, consumer price inflation is mainly easing, driven largely by declining food prices. India’s retail inflation eased dramatically in September, down from August’s 2.07% to 1.54%—the lowest since June 2017.
The global manufacturing purchasing managers’ index (PMI) stabilized in September, signaling modest growth; the services sector remains resilient, though it has been expanding at a slower pace. In the eurozone, recent confidence indicators—the composite PMI and the Economic Sentiment indicator—have only slightly improved on Q2.
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