Hospitality vs. Multifamily Real Estate Demand: 2025 Trends and Outlook to 2030

Introduction

Institutional investors, lenders, and developers are closely tracking the post-pandemic trajectories of the hospitality (hotel) and multifamily (apartment) sectors. In 2025, both asset classes face shifting demand drivers amid a complex economic backdrop. This article takes a journalistic yet analytical dive into how each sector is performing and why – examining core demand fundamentals in 2025, the influence of macroeconomic conditions and policy changes, capital flow trends, and the interplay between hotels and apartments. We also look ahead to 2030, highlighting key risks, opportunities, and regional dynamics that could shape long-term performance.

2025 Demand Drivers in Hospitality

Hospitality demand in 2025 is stabilizing after the industry’s rapid post-COVID rebound. Travel Patterns: Leisure travel remains a pillar of hotel demand, but its growth is normalizing as consumers exhaust pent-up “revenge travel” budgets. Instead, business and group travel are emerging as the next engines of growth: CBRE projects increased group meetings and business trips will drive RevPAR (revenue per available room) gains in urban markets. High-profile cities and convention hubs are seeing occupancies recover on the back of conferences and international visitors. CBRE forecasts urban U.S. hotels will see the strongest RevPAR growth in 2025 (around 2.8% YoY) as corporate and group demand returns. By contrast, hotels in suburban and small-town markets – big beneficiaries of the 2020–2022 domestic leisure boom – are cooling, with sub-2% RevPAR growth expected as travel patterns re-normalize.

International Tourism: A notable drag is the incomplete recovery of inbound international tourism. Through mid-2025, foreign visits to the U.S. remain well below pre-pandemic levels (inbound travel in May fell to ~84% of 2019 volumes). Outbound travel by Americans, however, has surged above 2019 levels, creating a net outbound-inbound gap that weighs on U.S. gateway city hotels. A weaker U.S. dollar and easing travel restrictions could gradually narrow this gap; CBRE expects a “slight increase” in international visits in 2025, but not a full rebound yet. This dynamic helps explain why coastal urban hotels (which rely on foreign tourism) are improving slower than Sunbelt leisure resorts, although the gap is closing.

Short-Term Rentals Competition: Another structural demand factor is competition from alternative accommodations. Short-term rentals (e.g. Airbnb) have steadily eaten into lodging demand – their share of lodging nights in the U.S. climbed to roughly 13–14% in 2024–25, up from ~11% pre-pandemic. In May 2025, demand for short-term rentals was up 6.0% year-over-year even as hotel room demand slightly contracted. These rentals often capture price-sensitive leisure travelers, forcing hotels to keep rates competitive. Indeed, while average daily rates (ADR) are still rising modestly (up ~1.2% in 2025), occupancy has been under pressure (e.g. down ~0.7% year-over-year in May) due in part to this competition. Markets like New York City illustrate the competitive interplay: new regulations there restricting short-term rentals have helped drive record-high hotel room rates by shifting demand back to hotels. In general, hotels with unique experiences or upscale amenities are faring better, while commoditized budget hotels face greater pressure from home-sharing alternatives.

Consumer and Corporate Sentiment: Underlying economic conditions in 2025 present a mixed picture for hotel demand. Employment and incomes are still rising – U.S. unemployment sits around 4.2% and wage growth is outpacing inflation – which bolsters discretionary spending power for travel. However, consumer confidence has wavered. In Q2 2025, major surveys showed sharp drops in sentiment to near historic lows, reflecting anxiety over inflation and geopolitical risks. This has started to temper leisure travel growth: TSA air travel counts were down ~1% in early summer, and domestic leisure trips have slowed, especially among price-sensitive travelers. In contrast, corporate travel budgets appear to be slowly loosening – Google search data shows interest in business travel picked up ~5% year-over-year by mid-2025. The net effect is relatively flat overall hotel demand in 2025, with RevPAR growth expected to be modest (around 1–2%) for the year. Higher room rates are doing the heavy lifting on revenue, while occupancy levels hover around the low 60s percent nationally (a few points shy of 2019’s peak).

2025 Demand Drivers in Multifamily

Multifamily housing demand in 2025 is robust and on a historic run. After a short-lived pandemic dip, renter household formation has roared back – fueled by job growth, demographic trends, and the soaring cost of homeownership. Employment gains (the U.S. added over 4 million jobs in 2024 and continues to grow in 2025) have empowered more young adults to form independent households, underpinning strong apartment absorption. In the first half of 2025 alone, U.S. apartments absorbed 216,000 net units, on pace with the record demand seen in 2024. Major markets collectively saw one of their strongest leasing quarters on record in Q2 2025, with over 116,000 units absorbed in that quarter alone. This exceptional renter demand has been crucial, because it arrived just in time to soak up a flood of new supply.

Housing Affordability Pressures: A critical driver of multifamily demand is the widening cost gap between renting and owning. Sky-high home prices and the spike in mortgage rates have made homebuying prohibitively expensive for many Americans. By late 2024, the average monthly payment to buy a median-priced home (with a 10% down payment) was roughly 35% higher than the average apartment rent. This “cost-to-buy premium” has risen to modern highs as 30-year mortgage rates hovered around ~6–7% and home values stayed elevated. As shown below, the disparity remains stark even as interest rates are expected to ease slightly: renting will still be ~32% cheaper than buying on average by the end of 2025. In high-cost coastal markets like Los Angeles and New York, buying a home can cost 2–3× the monthly rent for a comparable unit. This financial calculus is keeping would-be first-time buyers in the renter pool for longer. Notably, an estimated 80% of existing U.S. homeowners have locked-in mortgages below 5%, making them reluctant to sell and further limiting starter home inventory. The outcome is that renters have limited escape routes, sustaining apartment demand even as rents rise.

Supply and Demand Imbalance: The multifamily sector is also benefitting from a demographic sweet spot and migration trends. The large millennial cohort is squarely in its prime renting years (late 20s to 30s), and younger Gen Z renters are following on their heels. At the same time, migration to Sun Belt and Mountain West regions continues to prop up housing demand in those high-growth markets. These factors have enabled renter demand to largely outpace expectations, even as the industry delivered a record number of new apartments. In fact, 2024 marked an historic peak for new supply – over 500,000 units were completed in the U.S. in 2024, the first time in at least five decades that half a million apartments were delivered in a single year. Completions in 2025 will also be elevated (another ~500,000 units are slated to open). This construction boom was concentrated: about 60% of 2024’s new units were in just 20 major metro areas, especially fast-growing metros in Texas, Florida, and the Carolinas.

Crucially, demand has kept stride with this supply surge. National apartment vacancy did tick up over the past three years as new buildings opened, rising for a third consecutive year in 2024. But the vacancy expansion has been modest. By mid-2025, vacancy is leveling off and even beginning to improve. The overall U.S. multifamily vacancy rate is expected to edge down to about 4.9% by end of 2025, reversing the upward trend. In the first half of 2025, net absorption actually exceeded new deliveries for the first time since 2021 – a clear inflection point toward a tighter market. Landlords have managed this by prioritizing occupancy over rent hikes: generous concessions and lease incentives in oversupplied cities have filled units, albeit while suppressing rent growth. As a result, rent growth nationally has been muted (~1.5–2% annually) in 2024–25, a comedown from the heady 10–15% rent surges seen in 2021. But owners (and renters) can expect those numbers to trend up again. With the construction pipeline shrinking dramatically – new multifamily starts in 2025 are ~74% below the 2021 peak – supply pressure will ease just as robust demand persists. CBRE forecasts a return to above-trend rent growth in 2026 and beyond as vacancies tighten once more. In short, 2025 is a year where the apartment sector absorbs an unprecedented supply glut, but strong tenant demand (fueled by jobs and affordability constraints) is setting the stage for a favorable equilibrium.

Macroeconomic and Policy Impacts on Each Sector

The broader economic climate of 2025 is a pivotal influence on both hotels and housing – and it’s a climate of slower growth and uncertainty. After the rapid post-pandemic expansion, the U.S. economy has downshifted to what could be termed a mid-cycle pause. CBRE trimmed its 2025 U.S. GDP growth forecast to roughly 1.3–1.4%, well below prior projections. Other forecasters are even more bearish: PwC expects only +0.7% real GDP (Q4/Q4 2025), signaling a palpable deceleration. A confluence of factors is responsible – the lagged impact of Federal Reserve interest rate hikes, fading fiscal stimulus, and rising geopolitical risks (such as trade tensions). For the hospitality sector, this means demand headwinds: travel is discretionary, and slower economic growth tends to temper both corporate travel budgets and household vacation spending. Indeed, hotel analysts note macroeconomic headwinds are curbing multiple demand channels (leisure and lower-end business travel) in 2025. The anticipated RevPAR growth for hotels has been revised down to a modest ~1% for the year in light of the weaker economy, and some scenarios even envision essentially flat revenues (+0–0.8%) if GDP underperforms.

By contrast, multifamily demand, being a necessity-driven sector, is less sensitive to short-term economic swings. Job growth, while slower than 2021–22, remains positive – enough to support household formation and rent payments. That said, multifamily is not immune to macro forces. Consumer price inflation, running around 3–4% in 2025, affects renters’ cost of living and landlords’ expenses. Both sectors are grappling with elevated operating costs in this inflationary environment. Hotels have been particularly hit by soaring insurance premiums and labor costs: U.S. hotel insurance expenses jumped ~15% in 2024 amid a wave of natural disasters driving up claims. Wage rates for hospitality workers have climbed due to labor shortages and minimum wage increases. CBRE notes that hotel profit margins are under strain for a third straight year as expense growth outpaces revenue. Multifamily operators likewise face higher property insurance (notably in disaster-prone regions) and maintenance costs, although many can pass some costs through via annual rent increases.

Monetary policy and interest rates represent a critical macro factor, especially for capital flows (explored further below). In 2025, interest rates remain high by recent historical standards. The U.S. 10-year Treasury yield is hovering above 4%, and borrowing costs for real estate are significantly above their 2010s lows. For development-driven sectors like multifamily and hotels, this has a chilling effect on new construction. Financing for new projects is more expensive and harder to obtain, which is already evident in the sharp decline in apartment construction starts and the very low pipeline of new hotel projects (hotel supply growth is forecast around just +0.8% annually in coming years, half the historical norm). While reduced supply growth bodes well for incumbent assets (stronger pricing power long-term), in the short run it means fewer development opportunities and less construction activity. High interest rates also hit asset valuations and investment sales, as buyers demand higher cap rates – more on this in the capital flows section.

On the policy front, 2025 is an unusual year marked by transition. A new U.S. presidential administration took office in January, bringing potential shifts in regulations and federal priorities. Early in the year, a wave of executive orders introduced uncertainty around trade and immigration policies. Marcus & Millichap’s outlook cautioned that sudden changes in U.S. trade tariffs or immigration enforcement could quickly impact hotel demand, requiring investors to stay nimble. For instance, additional tariffs on goods can dampen corporate travel (as global trade slows) and raise costs (e.g. tariffs on Canadian/Mexican agricultural products could drive food prices up for hotel F&B operations). Stricter immigration rules could reduce the flow of international tourists and also constrain the hospitality labor pool, making it harder to fill hotel job vacancies. These policy variables are essentially wild cards for the hotel sector in 2025 – as one industry report noted, the outlook assumes “no disruptive public policy changes”, implying that policy surprises skew downside for hotel demand. On the flip side, any policies that promote travel (such as expedited visa processing or tourism marketing initiatives) would be a welcome boost.

For multifamily, federal policy plays a more indirect but still important role. Housing affordability has risen on the political agenda, given high rents and home prices. There are discussions around incentivizing housing supply – for example, the administration and Congress have debated funding for zoning reform and conversion of commercial buildings to residential use. While no sweeping housing bill passed as of mid-2025, many states and cities are enacting their own measures. These include rent control ordinances (a risk for investors in jurisdictions like California or New York, which have tightened rent regulations) and zoning changes to permit more apartments (an opportunity in historically single-family-only neighborhoods). As one example, New York City’s mayor issued an order in 2024 to identify city-owned land for 500,000 new housing units by 2030 – a signal of pro-development policy at the local level. Additionally, the federal government’s actions on interest rates (via the Federal Reserve) and on the GSEs (Fannie Mae and Freddie Mac) impact multifamily financing. In 2025, the Fed’s stance is one of cautious stability – no longer aggressively hiking, but not yet cutting rates substantially. Should economic conditions weaken, a pivot to rate cuts would lower financing costs in late 2025 or 2026, potentially reigniting development and transaction activity in both sectors. However, investors are also eyeing the 2025 political landscape warily: proposals to change tax laws (like 1031 exchange rules or opportunity zone incentives) could affect real estate investment returns, and any major infrastructure or climate legislation could indirectly influence regional growth patterns (for example, new infrastructure spending tends to spur demand for both construction-phase hotel stays and housing in beneficiary regions).

Capital Flows and Investment Trends

After a volatile few years, capital is cautiously returning to commercial real estate in 2025, but it is being selective. Both hospitality and multifamily assets saw a slowdown in investment activity in 2022–2023 as interest rates jumped and price discovery was underway. Now, with valuations having adjusted downward and the economic outlook stabilizing, investors are starting to re-engage. According to Avison Young, U.S. commercial real estate transaction volume in Q1 2025, while slightly below year-ago levels, showed “potential for growth” and signs of renewed interest from private investors. Multifamily in particular is benefiting from its status as a preferred asset class: in 2025, apartments are ranked as the most favored property type for CRE investors owing to their solid fundamentals. Many institutions view the current moment as an opportunity to acquire multifamily at cap rates not seen in years – CBRE notes that investors in 2025 have a chance to lock in higher long-term returns thanks to cap rate expansion during the Fed tightening cycle. Cap rates for multifamily rose roughly 100+ basis points over the last 18 months, and while they may compress slightly in late 2025 if the 10-year yield ebbs, buyers can still find better yields than the ultra-low cap environment of 2019–2021. This is driving fresh capital into select deals, especially in markets where fundamentals are turning upward again (e.g. investors are once again looking at Sun Belt apartments now that rent growth is poised to rebound). Marcus & Millichap’s 2025 Multifamily Investment Forecast indeed foresees “abating headwinds” for apartments as record supply peaks wane and fundamentals gain momentum. Early 2025 data backs this up: multifamily investment sales volume was up ~9.7% in Q1 2025 compared to a year prior, reflecting rising deal flow as buyers and sellers narrow the expectations gap.

In hospitality, the investment story is bifurcated by asset class and geography. Coming out of the pandemic, private equity and opportunistic investors had targeted hotels as a recovery play, but the rising debt costs in 2022–2023 made financing acquisitions difficult. By 2024, however, the sector saw a notable uptick in capital interest – global hotel investment volumes jumped (cross-border hotel investments were up 55% year-over-year in 2024), indicating returning confidence in lodging. In 2025, hotel transaction activity remains selective; lenders are more conservative on hospitality loans than on apartments due to hotels’ operating risk. Traditional financing like Commercial Mortgage-Backed Securities (CMBS) for hotels has pulled back significantly – CMBS loan issuance for hotels in May 2025 was only about $0.9B, down from $2.6B a year prior. The average hotel loan size has shrunk (from $55M to $13M), suggesting that large trophy hotel deals are scarce in this environment. Instead, the market is seeing smaller, regional transactions and an influx of alternative lenders (debt funds, etc.) stepping in to finance deals that banks won’t. Hotel cap rates have risen to reflect higher debt costs and risk – investors demand a premium for hotels’ income volatility. Yet, many investors find the yield spread on hotels vs. multifamily attractive now. A stabilized hotel in a strong market might trade at a capitalization rate in the high single digits, whereas multifamily in that same market could be mid-5% – that extra yield tempts investors who believe they can underwrite the operational upside. Institutional capital that traditionally focused on apartments is thus dabbling in hospitality acquisitions or debt, seeking opportunistic returns.

One area where capital flows intersect is property conversions and repurposing. The distress of the hotel sector in 2020–2021 and the ongoing housing shortage have led some investors to convert underperforming hotels into apartments. These hotel-to-multifamily conversions became a notable trend, with dozens of older hotels (especially limited-service or shuttered urban hotels) being acquired for adaptive reuse into affordable or market-rate housing. This not only helps alleviate housing supply constraints but also offers real estate players a creative avenue to deploy capital. The economics can be compelling: converting a hotel can be faster and cheaper than ground-up apartment construction, and it gives a second life to obsolete assets. However, conversions are complex and still relatively niche – as some practitioners note, “not as common as many people think” due to design and financing hurdles. Lenders were initially wary, but by mid-decade more debt providers have warmed up to funding conversion projects as success stories accumulate. Markets like California and New York have even passed incentives (grants, zoning flexibility) to encourage converting hotels to residential use for lower-income housing. For investors, conversions represent a positive interaction of the two sectors: solving a societal housing need while clearing out excess hotel room stock.

Meanwhile, there’s also competition for capital between the sectors. In periods of uncertainty, multifamily is often seen as a “safe haven” asset class (given its stable, lease-based cash flows and government-supported financing), whereas hospitality is viewed as higher risk/reward. In 2025 we see this in the lending sphere: government-sponsored enterprises (Fannie Mae/Freddie Mac) are ensuring liquidity for multifamily loans, even as many banks cut back on commercial real estate exposure. No such backstop exists for hotels. Thus, debt capital is more plentiful for apartments – interest rates on a multifamily refinance or acquisition loan can be materially lower than for a hotel deal of similar leverage. This can tilt investor preference toward apartments. However, on the equity side, some private equity funds are underweight hotels and now actively seeking to increase allocation while pricing is soft. Cross-border investors (like Middle Eastern or European sovereign funds) have also shown renewed appetite for U.S. hospitality assets, drawn by the long-term growth in U.S. travel demand and limited new supply. One statistic exemplifies this: cross-border investment drove much of the hotel deal rebound, more than tripling the overall hotel investment growth rate in 2024. This influx of foreign capital indicates global investors see U.S. hotels as a recovery play with upside, whereas U.S. apartments are closer to stabilization with steady income.

Interactions Between the Sectors: Convergence and Divergence

Despite being distinct asset classes, the hospitality and multifamily sectors increasingly influence one another in both competitive and complementary ways. One nexus is the short-term rental (STR) phenomenon. Platforms like Airbnb have blurred the line between residential and hospitality uses: many units that would traditionally be part of the long-term rental supply (condos, single-family homes, even investor-owned apartments) are now used for short-term lodging. This effectively turns portions of the multifamily inventory into de facto hotel stock. In tourist-heavy cities, the proliferation of STRs tightens the long-term housing supply (putting upward pressure on rents) while adding competition for hotels (downward pressure on room rates). Policymakers have started responding – some cities impose STR regulations to protect housing availability and/or hotel occupancy. As noted, New York City’s strict new rules all but outlawing many short-term rentals in 2023 led to a bump in hotel demand and record-high rates in that market. Conversely, in markets that welcome STRs, we often see higher vacancy in traditional rentals and hotels facing pricing competition on busy weekends. The interplay is complex: investors now evaluate how an apartment asset might perform if a certain percentage of units were converted to STR use, and hotel owners track Airbnb supply as a key competitive metric. The sectors may increasingly compete for the same customer at the margins – for example, a traveling nurse might choose an extended-stay hotel or a furnished apartment sublet; a digital nomad might opt between a month-to-month apartment rental or a co-living hotel suite. Both sectors are responding by adapting product offerings (hotels adding kitchenettes and longer-stay options, apartment operators offering flexible lease terms and furnishings) to capture this overlap demand.

Another point of convergence is adaptive reuse development, as discussed with hotel-to-apartment conversions. Not only are older hotels turning into housing, but in some cases the reverse can occur: an oversupplied luxury apartment tower might be partially repurposed as a hotel or short-stay units if market conditions dictate (though this is less common). Post-2020, there’s also been experimentation with hybrid models – properties that combine extended-stay hotel rooms and conventional apartments in one building, or condo-hotels that allow owners to rent out units. These hybrids appeal to developers looking to maximize flexibility and capture multiple demand streams (nightly, monthly, yearly). They underscore the idea that hospitality and multifamily exist on a continuum of residential needs from transient to permanent.

Conversions and redevelopments can be a win-win: they remove excess capacity from one sector and add needed capacity to the other. During the pandemic, dozens of struggling hotels (especially aging economy hotels) were acquired by municipalities or investors for conversion into affordable apartments or homeless housing. This not only addressed community housing shortages but also prevented blight from closed hotels. Going forward, as the office sector suffers high vacancies, some unused office buildings may likewise be converted into either apartments or even hotels (depending on location and structure). The availability of these opportunities means hospitality and multifamily developers are sometimes bidding on the same properties – for instance, an old downtown office tower could be reborn as either a boutique hotel or loft apartments. The choice often depends on which use can secure financing and entitlements more readily, as well as local market gaps (does the city lack hotel rooms or housing units more?). Thus, capital competition can occur not just in acquisitions but in development rights.

From an investment allocation perspective, large real estate investors consider portfolio diversification between hotels and housing. Multifamily is prized for stability, while hotels offer growth and inflation-hedging (through daily repricing of room rates). In periods of strong economic expansion, hotels can outperform with double-digit NOI growth, attracting capital away from apartments. But in uncertain times (like 2023–2025), capital tends to gravitate toward the steady cash yields of multifamily. We see this in relative pricing: even though apartment fundamentals were hit by supply and saw NOI growth stall, cap rates only rose modestly and institutional demand remained, whereas some hotel categories experienced a more pronounced pricing correction until their demand fully recovered. Over the cycle, this push-pull can lead to valuation gaps that clever investors exploit – for example, if high-end hotels in a market are trading at a deep discount to replacement cost while luxury apartment values are rich, a conversion from hotel to residential might pencil out profitably, and vice versa.

Finally, it’s worth noting a regional dynamic in this inter-sector relationship: Sun Belt markets that experienced a boom in both population and tourism have seen both sectors expand rapidly (e.g. Florida added thousands of apartments and hotel rooms in recent years). In some of these markets, labor availability and construction capacity became constraints, effectively pitting multifamily and hotel projects against each other for resources. Capital and construction competition meant that not all proposed projects could get built. Now, with higher interest rates, new development is slowing for both – but the competition shifts to absorbing what was built and securing demand. Markets like Orlando exemplify this: it leads the nation in new apartment deliveries and also has massive new tourism developments (a new theme park, etc.) boosting hotel demand. If the tourism materializes strongly, hospitality will thrive and local job growth will support those new apartments; if it doesn’t, both sectors could languish with oversupply. Thus, in certain high-growth metros, hospitality and multifamily demand are positively correlated (both driven by population and economic expansion). In others, particularly some Midwest or Northeast cities, the relationship may be inverse (e.g. a glut of apartments might drive down rents and make short-term rentals more appealing, siphoning hotel customers, or a downtown with weak hotel performance may signal a struggling economy, which also softens rental demand). Investors increasingly analyze these cross-effects when selecting markets and projects.

Regional Dynamics and Segment Variations

Real estate is famously local, and both hospitality and multifamily sectors are exhibiting divergent regional trends in 2025.

Multifamily Regional Trends: The U.S. apartment market can roughly be split into two camps in the mid-2020s: (1) High-supply Sun Belt and Mountain West markets that experienced a construction boom, and (2) Low-supply Coastal, Midwest, and gateway markets that did not add as much inventory relative to demand. In the first camp – places like Austin, Charlotte, Phoenix, and South Florida – vacancy rose above historical averages in 2023–24 due to the wave of new deliveries. Many of these markets even saw modest rent declines in 2024 as new buildings competed for tenants with concessions. However, as noted, most Sun Belt supply waves are cresting. CBRE analysis shows 10 of the 16 most construction-heavy markets hit peak deliveries by late 2024, and the remaining few will peak in 2025. These markets are now positioned for recovery: their occupancy rates have started to tick up and are expected to improve through 2025, turning rent growth positive again. Investors who pulled back from overbuilt cities are tiptoeing back in, anticipating that “the worst is over”. That said, Sun Belt rent growth may remain below the national average until 2026. CBRE projects that markets in the Midwest, Northeast, and select coastal cities – which generally kept vacancies in check – will outperform in 2025 with annual rent growth above 3%, exceeding the ~2.6% national average. These include Chicago, New York, Washington D.C., and many smaller Midwestern cities, where supply was limited yet demand held up. Paradoxically, some of these historically slower-growth regions are seeing very tight apartment conditions now, as migration patterns diversify (e.g. some remote workers returning or moving to affordable Midwestern cities) and because high-cost markets have a built-in demand from those locked out of homeownership.

Within metros, urban vs. suburban submarkets can also diverge. During 2020–2021, suburban garden apartments outperformed urban downtown high-rises as people sought space. But 2022–2025 brought a reversal: young renters flocked back to cities, energizing urban lease-ups. By 2025, many downtowns have rebounded (albeit some, like San Francisco, still lag due to tech layoffs and remote work). Generally, urban core apartments are enjoying low vacancy and solid rent growth again thanks to the return of office workers and students, whereas some outer suburbs with heavy construction (think fringes of Dallas or Nashville) are more oversupplied.

Hospitality Regional Trends: The hotel sector also shows clear geographic and segment stratifications. Urban gateway markets – New York, San Francisco, Boston, Chicago – were hit hardest by the pandemic loss of business travel and international tourists, but they are now on a recovery upswing. CBRE expects urban hotels to lead RevPAR growth in 2025 (~2.8% YoY), benefiting from renewed business/group travel and a weaker dollar making U.S. cities more appealing to foreigners. Still, urban occupancy levels in 2025 remain a bit below their 2019 highs, so there is further upside beyond this year. At the other end, small-town and highway hotels that performed well during the pandemic (serving drive-by travelers and “work from anywhere” nomads) are seeing slower growth now – forecast RevPAR gains of only ~1.3–1.8%. Regionally, Florida and the Southwest boomed early (Florida had record tourism in 2022–23), and those markets are now stabilizing at high performance levels rather than growing dramatically. The Mountain West and national park gateway markets – which saw a surge of tourists seeking outdoor vacations – are holding onto much of their demand, and new supply in those areas is minimal. CBRE even added several such leisure destinations (Utah parks, Colorado ski towns, Napa Valley, etc.) to its forecast to highlight emerging opportunities in regional resort markets. These outdoor/leisure markets should continue to see steady visitation, though not the explosive growth of 2021.

Coastal resort destinations (Hawaii, Caribbean, Southern California) are benefitting from the return of international and cruise travel, which brings more global tourists. A unique case is Las Vegas, which in 2025 is enjoying a boom in convention and event demand (plus anticipation of the 2024 Formula 1 race and 2028 Super Bowl). It exemplifies how cities with marquee events will outperform: looking ahead, North America will host the FIFA World Cup in 2026 across multiple U.S. cities and the Summer Olympics in Los Angeles in 2028. Markets tied to those events (and others like the 250th U.S. Independence celebrations in 2026) are already seeing investment and expansion in their hotel sectors. In the late 2020s, these events are expected to create regional spikes in demand – e.g. East Coast cities in 2026 for the semiquincentennial celebrations, and a prolonged boost for Los Angeles 2028.

By hotel chain scale segments, luxury and upper-upscale hotels are currently outpacing economy and midscale. As PwC notes, through early 2025 luxury hotels posted RevPAR growth around +7%, whereas economy hotels barely managed +1%. Affluent travelers are undeterred by inflation (and may even be spending more on high-end experiences), while lower-income guests have cut back some travel due to tighter budgets, affecting budget hotel occupancy. This demand bifurcation is likely to persist in the near term – upscale hotels in prime markets have more pricing power, whereas economy hotels (often in commodity locations) face margin pressure from rising costs and any dip in budget-conscious travelers. Notably, new hotel development in 2025–2026 is skewing toward upscale segments despite the slowdown; brands are pursuing high-end projects in anticipation of future demand, while very few developers are adding new supply at the economy end. This could mean the economy segment’s recovery might lag if it doesn’t get the benefit of fresh product or substantial demand events.

Regional Economic Health: It’s also important to tie the regional real estate outcomes to regional economic fortunes. Regions like the Southeast (Carolinas, Georgia) are seeing positive feedback loops – strong population inflows drive apartment absorption, which in turn supports retail and service jobs, boosting hotel stays from business travelers and relocating families. Regions dependent on one industry (e.g. tech-heavy West Coast cities or energy-centric metros) have more volatile real estate demand. For example, San Francisco’s multifamily market has higher vacancy now due to tech layoffs and remote work; its hotel market also lags given reduced business travel and convention activity, though tourism is recovering. In contrast, New York City’s multifamily sector is very tight (vacancy under 3% in many submarkets) and its hotel sector is rebounding strongly, thanks to diversified demand drivers and strict limits on Airbnb supply. Regional policy differences also play a role: cities with aggressive housing initiatives (zoning reform, subsidies) might see more apartment supply growth, potentially tempering long-term rent growth, whereas cities that constrain development will keep supply tight but could push more people to relocate (a double-edged sword for housing demand). On the hotel side, states or countries that maintained travel restrictions longer (like certain Asia-Pacific markets) only fully reopened in 2023, so their inbound/outbound travel volumes in 2025 have more catch-up growth potential compared to, say, Europe or the Americas which reopened earlier. For U.S. investors, this global factor means gateway hotels serving Asian travelers (West Coast cities, Hawaii, etc.) could see an outsized rebound as Chinese and other Asia-Pacific tourists return in late 2025–2026, assuming no new geopolitical frictions.

Outlook to 2030: Risks and Opportunities

Looking beyond the current year, both sectors face notable shifts by 2030. For hospitality, one overarching theme is that the 2020s recovery will give way to a new growth cycle later in the decade – but not without risks. Travel demand globally is projected to grow steadily through the decade (the UNWTO forecasts international tourism will likely exceed 2019 levels by late 2020s), fueled by rising middle classes in emerging markets and the enduring human preference for experiences. The U.S. hotel industry specifically may benefit from major events and infrastructure like new theme parks (e.g. Universal’s Epic Universe in Orlando launching 2025) and possibly casino resort expansions in new markets. However, downside risks are significant: another global shock (pandemic or geopolitical conflict) is a perennial threat to travel. Climate change is an emerging risk too – extreme weather and regulatory responses could impact hospitality on multiple fronts. Coastal resorts and hotels in hurricane or wildfire-prone areas face skyrocketing insurance costs and physical vulnerability (as seen by double-digit insurance inflation in recent years for hotels). By 2030, some properties in high-risk zones might become financially unviable due to insurance or climate-related damages, forcing sales or closures. Sustainability mandates may also require hotels to invest in greener operations, raising CapEx needs but also creating opportunities in retrofit and ESG-focused investment.

Another risk is the changing nature of business travel. While 2025 shows a partial comeback, many companies have structurally reduced travel budgets thanks to virtual meeting tech and tighter ROI scrutiny. By 2030, business travel might never fully return to the per-employee volumes of 2015. Hotels that rely on bread-and-butter corporate travel (think airport hotels, suburban conference hotels) will need to diversify their customer base (perhaps targeting bleisure travelers or local staycationers) to maintain revenues. Conversely, leisure travel could remain strong; younger generations prioritize travel and social media drives destination discovery. We might also see new travel segments emerge: for instance, extended “work-from-resort” arrangements if hybrid work persists, where people work remotely from a resort location for weeks, effectively merging multifamily and hospitality usage. Hotels catering to these “digital nomads” with co-working spaces and long-stay packages could thrive.

For multifamily housing, demographics and housing economics will shape demand through 2030. The U.S. is expected to add millions of new households, many of whom will rent. By 2030, the youngest millennials will be nearing 40 and a good portion will transition to homeownership if mortgage rates normalize lower and if more starter homes get built. But current trends suggest homeownership attainment will be delayed and lower than previous generations, meaning a larger renter population for longer. Gen Z will be a prime renter cohort through the 2020s, and Gen Alpha will start entering the market by 2030. All told, rental housing demand should remain structurally high. Supply, however, may not keep up in the late 2020s. The construction pullback of 2024–2026 will show its effects by 2027–2028 in very low delivery numbers (some forecasts show annual completions falling to ~300k units by 2027, far below needed levels). This raises the prospect of a return to housing shortages and rapid rent escalation by the end of the decade if no corrective action is taken. For investors, that scenario portends opportunity: tighter markets mean stronger rent growth (CBRE projects average rent growth ~3.1% annually over the next five years, above the pre-pandemic norm). But it also brings political risk – soaring rents could trigger more aggressive rent control policies and tenant protections, which would cap investment returns and potentially discourage new development further. Affordability will thus remain the central challenge: the industry may lean more into public-private partnerships, modular construction, and adaptive reuse to deliver cheaper housing. Cities encouraging office-to-residential conversions might create thousands of new apartments, albeit often with hefty subsidies.

Regionally, migration trends through 2030 will continue to rearrange the map of demand. The pandemic acceleration of Sun Belt migration is likely to moderate but not reverse – states with business-friendly policies, job growth and lower cost of living (Texas, Florida, Arizona, etc.) should keep attracting residents, fueling both apartment demand and ancillary hotel demand. Secondary and tertiary metros (e.g. Columbus, Raleigh, Boise) are on investors’ radar as the next growth nodes, offering lower entry prices and solid demographic gains. Coastal gateway cities may regain some lost luster if international immigration picks up (which is plausible if federal policy shifts to increase work visas or green cards for skilled workers, as has been discussed). Indeed, immigration is a swing factor for housing: net immigration into the U.S. dropped in late 2010s and plunged in 2020, but is gradually recovering. Should the U.S. embrace higher immigration by 2030 to fill labor force gaps, that would significantly boost rental demand, especially in urban centers where immigrants often settle and in university towns (also affecting student housing).

Technological change is another theme. Proptech and automation could improve operating efficiency in both sectors – e.g. AI-driven pricing yielding, self-service check-in at hotels, or smart home tech in apartments reducing management costs. If such efficiencies take hold, they could support margins even if labor remains tight. Labor shortages are indeed a concern for both construction and operations. The hospitality sector in particular has struggled to rehire to pre-COVID staffing levels, and by 2030 the aging workforce may constrain service industries further. This opens opportunities for automation (robotics) in hotels (already we see automated room service robots, AI concierges, etc.), which can mitigate labor cost issues. Multifamily management might likewise use AI for leasing and maintenance diagnostics, reducing staffing needs and enhancing tenant experience.

In terms of capital markets outlook, by 2030 we may be in a very different interest rate environment. Many economists expect that once inflation is tamed, rates could settle lower in the long run given structural forces (aging demographics, tech productivity). If so, the cap rate decompression of 2022–2024 might partially reverse – meaning real estate values could rise again, benefiting today’s investors. However, if persistent inflation or debt issuance keeps rates elevated, cap rates might remain higher, putting emphasis on income growth as the driver of returns. Multifamily, with its relatively steady income, and hotels, with their inflation-linked daily repricing, both have arguments as inflation hedges, so institutional allocations to real assets are likely to remain high. In fact, many institutions have been under-allocated to real estate and are using periods of dislocation to increase exposure. Private equity dry powder for real estate is near record levels globally, which suggests that any significant dip in either sector (say, due to a recession) would be met with eager capital ready to buy the dip.

Finally, an overarching opportunity area is the convergence of hospitality and residential in mixed-use and lifestyle-oriented developments. By 2030, we expect to see more projects that incorporate a hospitality component within residential complexes (e.g. condo towers offering hotel-like amenities and short-term rental pools) and vice versa (hotels with branded residences or extended-stay wings). This caters to an experiential lifestyle trend – younger generations may want living spaces that offer community, services, and flexibility akin to a hotel, while travelers increasingly seek the comfort and authenticity of a home. Real estate developers and brands that can straddle both worlds stand to capture a larger share of demand. We already see large hotel brands launching “apartment hotel” concepts and multifamily operators partnering with hospitality companies to run amenity spaces. By 2030, the line between a high-end apartment building and a hotel may blur in many city centers, delivering synergies to investors and choices to consumers.

Conclusion

In summary, 2025 finds the hospitality and multifamily sectors at intriguing junctures. Hotels are charting a course of gradual recovery – buoyed by returning business travel and resilient leisure demand, yet tempered by economic cross-currents and competition from new lodging alternatives. Multifamily, on the other hand, is navigating an unprecedented supply influx with remarkable demand strength – a testament to the enduring need for housing and the affordability trap pushing many toward renting. Each sector is influenced by the broader macro and policy environment: interest rates and political shifts are shaping development and investment in real time. Importantly, the two sectors do not exist in isolation. They interplay through capital allocation decisions, conversion projects, and even at the consumer choice level. Positive feedback loops (like vibrant regional growth) can lift both, while conflicts (like short-term rentals siphoning demand) pose challenges.

Looking toward the horizon of 2030, investors should prepare for evolution in both arenas. Demographic tailwinds, technological advancement, and perhaps a more favorable financial climate could present tremendous opportunities – from revitalizing urban cores with new hospitality-residential hybrids, to capitalizing on undersupplied housing markets with targeted development. Key risks will need to be diligently managed: regulatory changes, climate impacts, and cyclical downturns remain ever-present threats. Regional strategy will be paramount, as not all markets will follow the same script.

Yet, the fundamental appeal of both sectors endures. People will always need places to live, and people will always yearn to travel. For institutional stakeholders with a long-term view, the challenge and reward lie in balancing these complementary investments – leveraging the stable income of housing and the growth bursts of hospitality – to generate portfolio resiliency and alpha. As 2025 unfolds, the data and trends suggest a cautious optimism: multifamily and hospitality demand are broadly healthy, albeit growing in new ways and at different speeds. By understanding their unique drivers and intersection points, investors and developers can position themselves to not just react to change, but to capitalize on it in the years ahead.

Sources: 

• CBRE Research;

• Marcus & Millichap;

• Avison Young;

• Hotel Dive/STR;

• PwC Hospitality Outlook;

• Cushman & Wakefield Research.

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