- Tourism demand outpacing hotel supply in some cities.
- The shortage leads to missed revenue.
- Key West, FL, has 110 hotels but 500,000 annual visitors.
HOTEL SUPPLY ISN’T keeping up with demand in several mid-sized U.S. cities, according to a study from upholstery supplier Top Fabric. This could lead to missed opportunities for significant tourism revenue as visitor demand grows.
This supply shortage can lead to “tourism leakage” in which travelers either shorten stays, book outside city centers or face availability challenges during peak periods, according to Top Fabric.
“When hotel supply doesn’t grow in step with visitor interest, the impact is felt across the local economy,” said Ellie E.K., Top Fabric managing director. “Travelers may still visit, but constrained availability can reduce length of stay or shift spending elsewhere, meaning destinations don’t fully capture the value of the demand they’re attracting.”
Top Fabric’s analysis identified the five cities most likely to lose tourism dollars:
- 1.Hot Springs, Arkansas
- 2.Key West, Florida
- 3.Myrtle Beach, South Carolina
- 4.Sandusky, Ohio
- 5.Florence, South Carolina
The study found that Key West receives more than 500,000 visitors annually, yet has a relatively limited hotel base of around 110 properties. Hot Springs records high visitor volumes relative to its population, but operates with fewer than 100 hotels.
The company said the supply and demand imbalance can place pressure on pricing during peak periods and reduce the overall economic benefit destinations are able to capture from tourism activity.
“From our work across hospitality projects in the U.S., we’re seeing increasing focus on how cities and hotel operators can better align capacity with evolving travel patterns in these high-demand markets," Ellie E.K. said.
A recent report from Colliers found that lodging demand in the top 50 U.S. markets is projected to increase 1.3 percent this year, below the pre-pandemic average of 2 percent. Occupancy in those markets is forecast to remain at 64.1 percent in 2026, unchanged from 2025 and below the 2019 level of 69.5 percent, according to Colliers’ “2026 U.S. Hospitality Outlook Report.”
The report projects occupancy to reach 65.3 percent by 2029, supported by slower hotel supply growth. Growth is expected to return to its historical trend by 2027.
