Luxury and upper-upscale hotels face diverging paths across southern states

Article originally posted on CoStar on November 17, 2025

Luxury and upper-upscale hotels across the southern United States entered fall with mixed fortunes. Through September, revenue per available room, or RevPAR, trends reveal a bifurcated landscape, with some cities thriving on strong average daily rate growth, while others struggle under occupancy pressure.

Regionally, RevPAR gains outpaced the national average, with top performers such as Chattanooga increasing by 11.3% over the 12-month average, Knoxville by 8.7% and El Paso by 8.5%. All these cities benefited from a combination of rate growth and demand surges. In these areas, transient travelers drove much of the growth, with group segments providing additional lift where event calendars were robust.

Conversely, hotels in several major metropolitan areas faced headwinds. Dallas and Fort Worth-Arlington were essentially flat, as broad occupancy declines offset ADR gains of 2.7% and 0.3%. Segmentation data indicates that both transient and group segments struggled to gain traction, reflecting muted corporate and group travel during midweek as well as competition from new hotels. Phoenix RevPAR edged up 2.3%, driven by higher occupancy rather than rate increases. Hotels largely kept their pricing steady, reflecting a cautious approach in an area challenged by economic uncertainty and declining group demand.

Cities hosting large-scale events or benefiting from premium leisure demand posted strong RevPAR gains, largely fueled by ADR surges and robust group bookings. For example, RevPAR growth in New Orleans was 7.8%, driven by spikes during event weeks. This pattern highlights the importance of current segmentation dynamics; transient travelers, mostly leisure, continue to dominate demand, but group RevPAR has shown resilience, climbing notably in full-service properties with meeting space.

Anecdotally, the story behind these numbers reflects broader economic forces. Affluent travelers, buoyed by stock market gains and wealth, are sustaining luxury demand even as middle-market segments falter. Secondary areas that rely on regional corporate travel face tougher comps and weaker midweek occupancy. Calendar quirks, such as fewer weekends in September, also dampened performance, particularly for leisure-heavy destinations.

In short, RevPAR growth for luxury and upper-upscale hotels in the South and Southwest hinges on pricing power and event-driven demand. Where ADR strength aligns with group recovery, areas are outperforming. Where lower occupancy persists, even premium rates can’t fully offset the drag.