CBRE Hotels Forecasts Modest RevPAR Growth in 2025 as Northern California’s Urban Locations Outperform Leisure Markets

CBRE forecasts that Northern California revenue per available room (RevPAR) will grow modestly in 2025, driven by increased group and business travel, as well as a projected rise in demand for drive-to and regional leisure destinations.

San Francisco is forecasted to have the greatest RevPAR increase in 2025 out of all the Northern California markets at 8.4%, far outpacing the national average (1.3%). Sacramento is the second largest increase at 4.5%, followed by San Jose (4.4%), Oakland (2.9%), and Napa wine country (2.2%).

"The Bay Area’s urban markets like San Francisco and San Jose are experiencing strong business travel due to the return of industry conventions," said Justin Schlageter, first vice president with CBRE’s Hotels Valuation & Advisory group. “Meanwhile, the exponential demand that Napa wine country has experienced over the last few years have stabilized to pre-pandemic levels, particularly as wine operators navigate market conditions. However, their proximity to the Bay Area makes them among the largest drive-to leisure destinations in Northern California and well-positioned for future growth.”

CBRE’s forecast is predicated on an expected 1.4% increase in GDP growth this year (down from 2.4% annual growth as of the February forecast) and a 2.9% average inflation rate for 2025 (40 bps higher than anticipated in February). While the economy is expected to grow more slowly, growth will be strong enough to support the lodging industry’s performance.

CBRE expects modest supply growth in Northern California due to rising construction and financing costs. Napa wine country is forecasted to have 2.1% supply growth in 2025, while urban markets like San Francisco and San Jose are expected to see growth of -0.1% and 1% growth, respectively. 

Meanwhile, demand across Northern California is forecasted to hold steady between 2.2% to 4.3% in 2025.

California’s Napa wine country and Central Coast are two of 11 new leisure-oriented markets in its latest forecast, including Boulder and Colorado ski markets, the Florida Panhandle, and Utah national parks. These additions reflect recent shifts in travel trends and provide insights into emerging opportunities.

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The May 2025 edition of Hotel Horizons for the U.S. lodging industry, 65 major markets, the six hotel chain scales and six location types can be purchased by visiting: https://pip.cbrehotels.com/hotelhorizons. CBRE’s baseline forecasts do not contemplate an international war or a pervasive recession. CBRE also produces forecasts based on upside and downside scenarios.