Research Update: Tourism Revenue on the Rise: Lodging Industry Sees Strong Growth

Friday, June 06, 2025 Research

Puerto Rico leads in lodging revenue growth in the Caribbean

Puerto Rico’s lodging industry is pacing towards another record year. Early estimates from the Puerto Rico Tourism Company account for $62.8 million in room tax collections year-to-date through April, a year-over-year increase of 8% and 110% more than in 2019.

Hotels without casinos contributed the largest share of taxes, amounting to 43% or $27 million. In contrast, hotels with casinos, which are taxed at 11%, accounted for 24% of the total taxes collected, or $15.1 million.

Lodging platforms that house rental booking tools, such as Airbnb and VRBO, increased their overall room tax share from 23% to 25% of the total, reaching $15.8 million, and above taxes generated by hotels with casinos.

Since the inception of Discover Puerto Rico, year-to-date room tax collections have doubled. The industry continues to thrive due to strategic marketing efforts, an expanding local rental market, and healthy hotel rate growth heading into mid-2025. However, despite considerable growth in demand, future lodging tax collections growth could be limited by shifts in market supply and demand from hotels to rentals, which are taxed at a lower rate than hotels (7%).

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Latest Lodging Insights Show Rental Strength and Hotel Adjustments

The lodging sector continues its positive pace this year, with current May estimates showing a 3% increase in total accommodation demand compared to the same month last year.

Overall hotel occupancy reached 69%, down 4-points from 2024, or a 3% decrease in booked hotel nights. Overall average hotel rates were $263, a -4% decrease from last year, with all hotel regions and segments adjusting rates except for Puerto Rico regional (or outside the Metro Area) mid and upper-class hotels.

Further hotel data analysis provided by TravelClick’s pace report (as of May 25th) shows May group and business transient segments pacing -7 % to -9 % below last year, while the leisure market continues to pace ahead of last year (+6%).

Over 300,000 rental room nights were booked across Puerto Rico in May, an increase of 11% and accounting for 47% of the total accommodation demand for this month, a 3-point increase from last year. Year-to-date, accommodation demand has increased by 8%, mostly attributed to the growth in demand for short-term rental accommodations as hotel demand remains flat (+0.4%), but ahead of the national forecast.

At the National level, CoStar (STR) and Tourism Economics downgraded their 2025 growth projections for the U.S. hotel industry in their revised forecast introduced at the NYU International Hospitality Investment Forum. They now expect demand to drop to range from -0.6% to -0.3%, ADR to range from a decline of -0.3% to an increase of 1.3%, and for RevPAR to be anywhere from a drop of -0.8% to an increase of +1%.

American travelers adjust their habits amid potential economic challenges

According to the May issue of the “State of American Traveler,” signs of weakening are evident. Travelers are bracing for economic trouble, as 57% of American travelers now expect a recession in the next six months, a 20-point increase since the beginning of the year.

Travel budgets, although higher than the same time last year, have decreased from a high of $5,900 in January to $5,400. 70% of travelers are adjusting their approach by choosing more affordable destinations, (27%) traveling less frequently (27%), reducing spending on activities and attractions (23%), or shortening the lengths of trips (20%), among others.

Americans will prioritize budget-friendly behaviors during summer travel, including using rewards programs (43%), booking budget-friendly accommodations (40%), sticking to a travel budget (37%), driving instead of flying (36%), and focusing on free or low-cost activities (35%).

According to the Discover Puerto Rico visitor profile intercepts collected during the first quarter of this year, the average trip spend was $2,275, a decrease of 8% compared to last year, but aligned within the budget of many travelers considering a trip this year. Visitors spent more on lodging but less on shopping, dining, and car rentals.

No significant changes in the length of stay of visitors are evident in the Visitor Profile so far. However, trends in shorter lengths of stay or spending less on car rentals may point to visitors remaining within a resort compound or near the Metro area, where public transportation, organized excursions, and ride sharing are more accessible.

Sticking to a budget, but many still traveling

San Juan Outpaces Key U.S. Coastal Markets in Summer Rental Booking Pace

Booked rental listings nights are pacing ahead of last year overall. As of June 2, 2025, there are 5% more booked rental nights in June, 17% more in July, and 99% more in August than last year.

All regions currently have more rental nights booked than in 2024, except for the West region, which has 5% fewer rental nights booked for June than in 2024.

Pacing for the San Juan area is significant, including 249% more August rental nights on the books than last year, aligned with the Bad Bunny concert weekend (Friday to Sunday) residency dates. Meanwhile, the East (46%) and North (78%) regions also show considerable growth in August.

According to AirDNA’s “Summer 2025 Coast Markets and Forecast” report, presented on May 28th, demand for accommodations in San Juan is outpacing at twice the rate all other U.S. coastal markets for summer travel, including competitors like Kauai, Miami, the U.S. Virgin Islands, and Cape Cod.

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