The U.S. tourism accommodation market stands at a critical crossroads, characterized by a complex phase of transformation. From a traveler’s viewpoint, the market presents a striking dichotomy: domestic leisure travel maintains remarkable resilience, while international tourist arrivals continue to decline—a pattern best described as “internal warmth versus external coldness.” This divide is further amplified by shifts in booking behaviors, which have become increasingly short-term and spontaneous, and significant disparities across different accommodation segments and regional markets. To truly understand the landscape, it is essential to dissect these trends, their underlying drivers, and their implications for travelers seeking comfort, value, and flexibility in their stays.
Market Demand: A Tale of Two Worlds
Domestic Demand: A Pillar of Stability Amid Uncertainty
Despite lingering economic uncertainties—including inflationary pressures, fluctuating interest rates, and concerns about a potential recession—the U.S. domestic leisure travel sector has emerged as a stabilizing force for the accommodation market. Travelers within the country are not abandoning their vacation plans; instead, they are adapting them to fit evolving priorities, such as shorter trips, local destinations, and value-driven options. Data from Lodgify, a leading vacation rental software provider, underscores this resilience: in the summer of 2025, occupancy rates for U.S. vacation rentals rose slightly year-over-year to 49%, with the number of bookings per listing increasing by nearly 10%. This uptick is particularly notable given the broader economic headwinds, as it suggests that domestic travelers remain committed to leisure activities, even if they are making more deliberate choices about where and how to spend.
At the city level, major tourist hubs are experiencing record-breaking performance, further highlighting the strength of domestic demand. Chicago, a perennial favorite for cultural, culinary, and entertainment experiences, serves as a prime example. During the summer of 2025, hotels in downtown Chicago filled over 3.56 million rooms—an increase of 4.3% compared to 2024—and generated $949 million in revenue, marking an all-time high. This success is not isolated to Chicago; other urban destinations, such as New York, Los Angeles, and Miami, have also reported robust occupancy rates and revenue growth, driven primarily by domestic travelers. These trends reflect a broader shift in domestic travel behavior: while international trips may be delayed or canceled, Americans are choosing to explore their own country, supporting local economies and sustaining the accommodation sector.
International Demand: A Steep Decline with Far-Reaching Consequences
In sharp contrast to the resilience of domestic travel, the U.S. tourism accommodation market is grappling with a significant decline in international tourists. This downturn is not merely a short-term blip but a sustained trend with profound implications for hotels, vacation rentals, and the broader tourism industry. According to forecasts from Oxford Economics, the number of international visitors to the U.S. is expected to drop by 8.7% in 2025—a worrying reversal of the post-pandemic recovery that began in 2023. The decline is already visible in travel booking data: from May to July 2025, flight reservations to the U.S. fell by 11% year-over-year, indicating that fewer international travelers are choosing the U.S. as their destination.
The economic impact of this decline is substantial. A joint analysis by the World Travel & Tourism Council (WTTC) and Oxford Economics reveals that the U.S. will be the only major global economy to experience a decline in tourism revenue in 2025, with an estimated loss of approximately $12.5 billion. Several factors contribute to this trend, but one of the most significant is the “America First” policy agenda and its associated trade tensions. Tariff wars, stricter immigration policies, and a perception of the U.S. as less welcoming to international visitors have collectively deterred travelers from countries such as China, Mexico, and the European Union. For example, Chinese tourists—who once represented a major source of high-spending visitors—have seen their travel to the U.S. decline due to trade disputes and visa complexities. Similarly, Mexican travelers, who historically account for a large share of cross-border tourism, have been impacted by policy changes and economic uncertainties. For accommodation providers that rely heavily on international guests—such as luxury hotels in major cities or resorts in popular tourist areas—this decline has translated into lower occupancy rates and reduced revenue, forcing them to pivot their strategies to target domestic travelers instead.
Consumer Confidence: A Divide Along Income Lines
While domestic demand remains strong overall, there is a notable split in consumer confidence among U.S. travelers, particularly along income brackets. In July 2025, the willingness of U.S. travelers to book vacation accommodations fell to its lowest level since December 2022, according to a survey by a leading travel research firm. This decline in confidence is not evenly distributed: it is primarily driven by middle- and high-income households, while lower-income households have shown a slight increase in booking intentions. However, the modest uptick among lower-income travelers is not sufficient to offset the broader downward trend, creating a sense of unease in the accommodation market.
Credit card data from Bank of America provides further insights into this income-driven divide. During the first half of 2025, households with annual incomes below
66,000 reduced their hotel spending by 5.366,000 and 150,000) cut back by2.2150,000) only reduced their hotel spending by 1.1%. This pattern suggests that lower- and middle-income travelers are feeling the pinch of economic uncertainty more acutely, leading them to prioritize essential expenses over discretionary travel. High-income travelers, on the other hand, have greater financial flexibility and are less likely to abandon their travel plans, though they may still opt for more cost-effective options or shorter trips. For accommodation providers, this divide means that targeting high-income travelers remains a viable strategy, while those catering to lower- and middle-income segments must focus on offering competitive pricing, flexible cancellation policies, and value-added amenities to attract guests.
Booking Behaviors and Travel Patterns: Embracing Flexibility and Spontaneity
The Rise of Short-Term and Spontaneous Travel
One of the most significant shifts in traveler behavior in recent years has been the move toward shorter, more spontaneous trips. This trend is driven by a combination of factors, including the desire for flexibility in an uncertain world, the availability of last-minute deals, and the growing preference for “micro-vacations”—short getaways that allow travelers to recharge without taking extended time off work. Lodgify’s data from the summer of 2025 highlights this shift: over 70% of vacation rental bookings were for stays of just 1 to 3 days, and the average length of stay shortened to 3.56 days, down from 4.2 days in 2024. This represents a notable departure from pre-pandemic trends, when longer vacations (of 5 days or more) were more common.
Alongside shorter stays, last-minute bookings have become increasingly prevalent. In 2025, reservations made 0 to 7 days before check-in increased by 7.1% year-over-year, according to Lodgify. This trend reflects a change in traveler mindset: instead of planning trips months in advance, many travelers are now waiting until the last minute to book, using real-time information—such as weather forecasts, price drops, or sudden changes in their schedules—to make decisions. For example, a traveler might notice a sunny weekend forecast and book a last-minute beach getaway, or take advantage of a hotel’s flash sale for a midweek stay. This shift toward spontaneity has significant implications for accommodation providers, who must now focus on optimizing their inventory management and dynamic pricing strategies to capitalize on last-minute demand. It also means that providers need to be more agile in their marketing efforts, using targeted ads and real-time notifications to reach travelers who are ready to book immediately.
The Growth of Direct Booking Channels
Another key trend in the U.S. accommodation market is the rising popularity of direct booking channels—reservations made directly through a hotel’s website, mobile app, or phone line, rather than through third-party platforms such as Airbnb, Booking.com, or Expedia. While Airbnb still dominates the vacation rental market with a 47% share, direct bookings have captured 31.7% of the market, up from 26.5% in 2023, according to a 2025 report by Phocuswright, a travel research firm. What’s more, the average daily rate (ADR) for direct bookings is growing faster than that of third-party platforms, indicating that travelers are not only choosing to book directly but are also willing to pay slightly higher prices for the benefits that direct bookings offer.
There are several reasons why travelers are increasingly opting for direct bookings. First, many accommodation providers offer exclusive perks to direct bookers, such as free breakfast, room upgrades, late checkout, or loyalty program points. These incentives make direct bookings more attractive than third-party options, which often do not include such benefits. Second, direct bookings provide travelers with greater control over their reservations. They can communicate directly with the hotel or vacation rental manager to request specific amenities (such as a room with a view or a crib for a baby) or resolve issues quickly, without having to go through a third party. Third, travelers are becoming more aware of the fees that third-party platforms charge, both to providers and to guests. By booking directly, travelers can sometimes avoid these fees, resulting in lower overall costs. For example, a hotel might offer a 10% discount for direct bookings, which offsets any potential savings from a third-party deal.
The growth of direct booking channels is a positive development for accommodation providers, as it allows them to build stronger relationships with guests and reduce their reliance on third-party platforms, which often charge high commission fees (ranging from 15% to 25%). For travelers, direct bookings offer greater convenience, better customer service, and access to exclusive benefits—making them an increasingly appealing option in a crowded market.
Accommodation Segments and Regional Markets: A Story of Disparity
Vacation Rentals and the Rise of Niche Destinations
While the overall tourism market faces challenges, vacation rentals in niche destinations—such as small towns, rural areas, and natural landscapes—are thriving. Travelers are increasingly seeking out “off-the-beaten-path” locations that offer tranquility, natural beauty, and authentic local experiences, away from the crowds of major cities. In the summer of 2025, several small towns emerged as unexpected hotspots for vacation rentals. Kingsbury, Texas, a small community near the Gulf Coast, saw a 45% increase in vacation rental bookings year-over-year, driven by its quiet beaches and proximity to fishing and boating activities. Marion, Texas, located in the Hill Country, experienced a 38% surge in bookings, thanks to its scenic hiking trails and local wineries. Owego, New York, a charming town along the Susquehanna River, also saw strong growth, with bookings up 32%, as travelers sought out its historic downtown and outdoor recreational opportunities.
This shift toward niche destinations reflects a broader change in traveler preferences. In the wake of the pandemic, many people have developed a greater appreciation for nature and a desire to escape the stress of urban life. Niche destinations offer exactly that: they provide a chance to disconnect from technology, engage with local communities, and enjoy activities such as hiking, camping, fishing, or simply relaxing in a quiet setting. For vacation rental providers in these areas, this trend has been a boon. Many small-town rentals are owned by local residents, who are able to offer personalized recommendations and insights into the area’s hidden gems—something that large hotel chains often cannot match. As a result, these rentals are able to command higher occupancy rates and ADRs, even in a competitive market.
Luxury vs. Budget Hotels: A Growing Divide
The U.S. accommodation market is also witnessing a significant divide between luxury hotels and budget hotels, with luxury properties outperforming their budget counterparts by a wide margin. This trend, often referred to as “the great bifurcation,” is driven by a combination of factors, including changes in consumer spending behavior, the rise of experience-driven travel, and the impact of economic uncertainty on different income groups.
According to a 2025 report by Bank of America Securities, budget hotel chains—including economy, mid-scale, and upper-mid-scale properties—are lagging behind luxury hotels in key performance metrics, such as revenue, room demand, and revenue per available room (RevPAR). Since 2023, budget hotels have seen their RevPAR decline by an average of 0.5% per quarter, while luxury hotels have experienced a 2.5% quarterly increase in RevPAR. This gap is expected to widen in the coming years, as luxury hotels continue to attract high-spending travelers, while budget hotels struggle to retain price-sensitive guests.
There are several reasons for this disparity. First, high-income travelers—who are the primary customers of luxury hotels—have been less affected by economic uncertainty, allowing them to maintain their spending on premium travel experiences. Luxury hotels offer a range of amenities that appeal to these travelers, such as spa services, fine dining restaurants, personalized concierge service, and high-end room furnishings. These amenities create a sense of exclusivity and comfort that budget hotels cannot match. Second, experience-driven travel has become a priority for many travelers, particularly millennials and Gen Z. Luxury hotels are well-positioned to cater to this trend, as they often offer unique experiences, such as private tours, cooking classes, or access to exclusive events. Budget hotels, on the other hand, tend to focus on providing basic amenities at a low price, which is less appealing to travelers seeking memorable experiences.
Third, the rise of remote work has led to an increase in “workcations”—trips where travelers combine work and leisure. Luxury hotels are better equipped to accommodate remote workers, with features such as high-speed Wi-Fi, dedicated workspaces, and business centers. Budget hotels, by contrast, often lack these amenities, making them less attractive to workcationers. For budget hotel chains, this trend presents a challenge: to remain competitive, they must find ways to upgrade their amenities and services without increasing prices beyond the reach of their target market. Some budget chains have responded by adding features such as free breakfast, fitness centers, and upgraded bedding, but these efforts have so far been insufficient to close the gap with luxury hotels.
Regional Disparities: Urban Centers vs. Sunbelt and Road Trip Markets
In addition to segment-based disparities, the U.S. accommodation market is also characterized by significant regional differences. Urban centers and central business districts (CBDs) are experiencing a strong recovery, driven by the return of business travel, cultural events, and domestic leisure travelers. Luxury hotels, which are heavily concentrated in these areas, have benefited greatly from this recovery. For example, in New York City, CBD hotels reported an occupancy rate of 78% in the summer of 2025, up from 72% in 2024, and a RevPAR increase of 6.3% year-over-year. Similarly, in San Francisco, CBD hotels saw occupancy rates rise to 75%, with RevPAR growing by 5.8%.
In contrast, the Sunbelt region—including states such as Florida, Arizona, and Texas—and road trip markets are facing challenges. The Sunbelt has long been a popular destination for retirees and winter travelers, but in 2025, it has seen a decline in tourism due to several factors, including extreme weather conditions (such as heatwaves and hurricanes), overcrowding, and rising prices. Road trip markets, which rely on travelers driving to destinations, have also been impacted by higher gas prices and a shift toward shorter, more spontaneous trips. Budget hotels, which are more prevalent in the Sunbelt and road trip markets, have been hit particularly hard. For example, in Orlando, Florida—a major Sunbelt and road trip destination—budget hotels reported an occupancy rate of 62% in the summer of 2025, down from 68% in 2024, and a RevPAR decline of 3.1%.
These regional disparities highlight the importance of location in the accommodation market. Urban centers, with their diverse range of attractions and amenities, are better able to adapt to changing traveler preferences and economic conditions. The Sunbelt and road trip markets, by contrast, are more vulnerable to external factors such as weather and gas prices. For accommodation providers operating in these regions, the key to success lies in diversifying their offerings—for example, by adding outdoor activities, partnering with local attractions, or targeting niche markets such as eco-tourists or families—to attract a broader range of guests.
Conclusion and Outlook: Navigating a Changing Market
From a traveler’s perspective, the current U.S. tourism accommodation market is defined by four core trends: a shift in demand toward domestic travel, a move toward shorter and more spontaneous trips, a preference for niche destinations and authentic experiences, and a growing divide between luxury and budget segments. These trends are reshaping the way travelers book and experience accommodation, and they are forcing providers to adapt their strategies to remain competitive.
Looking ahead, the U.S. accommodation market is likely to continue evolving in response to economic, social, and technological changes. Domestic travel will remain a key driver of growth, but providers will need to focus on offering flexibility, value, and personalized experiences to attract and retain guests. The rise of direct booking channels is expected to continue, as travelers seek out the benefits of booking directly and providers look to reduce their reliance on third-party platforms. Niche destinations will also grow in popularity, as travelers increasingly prioritize nature and authenticity over crowded cities.
For luxury hotels, the outlook is positive, as high-income travelers continue to spend on premium experiences. Budget hotels, however, face significant challenges. To remain viable, they must invest in upgrading their amenities and services, while also keeping prices affordable. This may involve partnering with technology companies to improve the guest experience (such as offering mobile check-in) or focusing on specific niche markets (such as budget-conscious families or solo travelers).
Overall, the U.S. tourism accommodation market is in a state of flux, but it also presents significant opportunities for both travelers and providers. Travelers can benefit from a wider range of options, greater flexibility, and more personalized experiences. Providers, in turn, can capitalize on changing trends by adapting their offerings and building stronger relationships with guests. By understanding and responding to these trends, the U.S. accommodation market can continue to thrive in the years to come.
