The global economy has shown significant endurance in the presence of a substantial rise in interest rates in 2023 and 2024. With a controlled GDP growth of 3.1% in 2024, it is expected to slightly accelerate in 2025 and show a minor slowdown in the US offset by an acceleration in Europe, Latin America and Asia. Certainly, the global economic environment is poised for considerable changes in 2025, driven by developing market dynamics, geopolitical adaptations and fundamental transformations across industries.
The global monetary easing cycle is anticipated in 2025, with inflation in most developed economies now within striking distance of central banks’ targets. The high productivity growth and a surge in available labor have propelled the US economy, while other economies have not accomplished it. The potential for these positive supply-side factors to decline is a key risk to the US outlook, though expansionary fiscal policy may cushion any negative impact on growth.
The US economy continued its resistance in 2025, confronting recession predictions and displaying depth despite facing significant challenges. It is expected to remain the global growth leader in 2025, driven by income and productivity growth, holding fiscal policy and enabling monetary policy. The Federal Reserve cut interest rates beginning in September 2024 with a 50-basis point cut and most recently in November 2024 with a 25-basis point cut. These actions of the Federal Reserve, along with moderating inflation levels, brought guarded optimism of a stabilizing economy and indicate potential easing of a restrained financing environment.
More recently, in late February 2025, US stocks dropped, and oil prices fell to their lowest level in the year, as weaker-than-expected economic data deepened investors’ concerns that tariffs from the new administration would push down the US economy.
Despite the continuous growth in business travel, especially meetings and group business and the potential resurgence of international travel to pre-COVID-19 levels, economic challenges are expected to continue to impact leisure travel. Uncertainty in the coming year should continue due to the potential impact of evolving travel patterns and restrictions, the effect of immigration policies, as well as tariffs, among others. Inflation is expected to continue its decline despite factors maintaining inflation evidence, allowing central banks to slowly ease policy.
The hospitality lodging sector in the US is projected to undergo restrained growth in 2025, driven by a moderate increase in average room rates and stable occupancy levels, resulting in an annual increase in average daily room rates of 1.5%. New construction projects are anticipated to be prompted in 2025 after the dormant supply levels over the recent past. These new projects have been motivated by favorable lifts in the overall financing landscape expected to drive increasing construction starts and confidence of a soft landing while easing monetary policies. Yet, other impacts from the current environment might continue to limit demand and occupancy growth in 2025.
Despite navigating a global pandemic, responding to evolving consumer expectations and embracing technological advances in the recent past, the hospitality and tourism industry has proven its resilience. These challenges provided the opportunity to reinvent hospitality as a symbol of innovation and authenticity while fostering human connection. As travelers seek meaningful experiences, the industry has a unique opportunity to meet their demand with creativity and integrate the trends of the future. At the same time, the world’s tourism sector is undergoing a significant transformation fueled by societal changes, technology and economy.
In the restaurant industry, labor shortages have been an issue for several years, which was only further exacerbated by the industry shutdown during the pandemic. However, starting in August 2024, overall restaurant employment reached or surpassed pre-pandemic levels. The restaurant industry in the US is expected to grow by 200,000 net new jobs, resulting in total restaurant and foodservice employment of 15.9 million by the end of 2025.
In the lodging industry, more than three-quarters of surveyed hotels by the American Hotel and Lodging Association (AHLA) are experiencing a staffing shortage, and hotels are increasing pay, benefits and perks to recruit and retain employees. Over the last six months, 86% of respondents have increased wages, 52% have offered greater flexibility with hours and 33% have expanded benefits to cope with the nationwide workforce shortage. Nonetheless, 79% are still unable to fill open positions, indicating that the shortage is affecting the hotel’s ability to operate.
To succeed and thrive, hospitality business leaders need to adopt strategies of flexibility, resilience and innovation. Business leaders in the industry increasingly focus on managing costs using process efficiency and stronger productivity growth while adopting new technologies like generative AI (GenAI).
Indeed, advanced technologies in the hospitality and tourism industries are transforming the industry, redesigning it from booking to guest experience. In the past, booking a hotel room was a restrained process that included navigating complex global distribution systems. In the novel environment, hotels and other hospitality firms must adapt to a new reality by building a strong digital presence and offering user-friendly websites. Accordingly, this process has become more convenient and manageable for all.
At the same time, the likelihood of artificial intelligence (AI) modifying the hospitality industry cannot be understated. A fundamental advantage of AI is its ability to customize content and create highly focused audience segments for marketing campaigns. This enables the firms to go beyond conventional demographics and deliver experiences more precisely. However, concerns about AI’s skill to uncover personal details, write essays and design content and the need for AI to be regulated to ensure reliability remains. A study by the Brookings Institution found that employees who adapted to using AI and automation tools experienced increased productivity and job satisfaction. Consequently, hospitality employees can focus on more meaningful work, which not only enhances their roles but also fosters a sense of purpose and engagement.
For sure, the integration of AI into the hospitality industry represents a significant opportunity for the industry. Whether it’s deploying chatbots, developing tailored experiences for customers or creating innovative business models, as technology evolves, by leveraging AI risks and preserving the human connection, hospitality businesses can maximize the transformative potential of AI to enhance guest experiences and attain new levels of success.
In summary, the hospitality and tourism industry is currently facing many challenges and uncertainty: balancing staffing, rising costs, technological tools, travel patterns and restrictions, tariff wars, immigration issues and evolving consumer demands, among others. Moreover, geopolitical risks including conflicts in the Middle East and other areas might also create threats to global economic stability.
We sincerely hope that you enjoy reading the articles of Volume 39, Issue 1 of the IHR.
Elisa Moncarz
Professor Emeritus Chaplin School of Hospitality and Tourism Management,
Florida International University
Consulting Editor
International Hospitality Review
