The Ripple Effect of Reduced U.S. Travel Due to Tariffs on the U.S. Hotel Industry

The Ripple Effect of Reduced U.S. Travel Due to Tariffs on the U.S. Hotel Industry

 

In 2025, the U.S. hotel industry faces a challenging landscape shaped by economic policies, particularly the imposition of sweeping tariffs under the Trump administration. These tariffs, targeting imports from major trading partners like China, Canada, and Mexico, have sparked trade tensions, weakened consumer confidence, and triggered a decline in both international and domestic travel. As travel demand softens, the hospitality sector is grappling with higher operational costs, reduced occupancy rates, and shifting traveler behaviors. This article explores how reduced U.S. travel due to tariffs is affecting the hotel industry, drawing on economic insights, industry trends, and expert analyses.

 

The Tariff Landscape and Its Impact on Travel

 

The Trump administration’s tariff policies, initiated in April 2025, include a 10% baseline tariff on most imported goods, with significantly higher levies on Chinese imports (up to 245%) and targeted duties on Canada and Mexico (25% on some goods). While a 90-day pause on some tariffs was announced in April, the uncertainty and economic fallout continue to reverberate. These trade measures have increased the cost of imported goods, fueled inflation, and prompted retaliatory tariffs from other nations, creating a chilling effect on global tourism.

 

International travel to the U.S. has seen sharp declines, with the National Travel and Tourism Office reporting an 11.6% drop in overseas visitors in March 2025 compared to the previous year. Forecasts from Tourism Economics predict a 9.4% decline in international arrivals for the year, a stark reversal from earlier projections of 9% growth. This downturn is attributed to weakened purchasing power among foreign travelers, heightened political tensions, and boycotts in countries like Canada, where sentiment against U.S. travel has soured.

 

Domestic travel, a cornerstone of the hotel industry’s post-pandemic recovery, is also under pressure. The Conference Board’s consumer confidence index hit a 12-year low in early 2025, reflecting economic uncertainty that has curtailed discretionary spending on travel. Corporate travel budgets are being slashed as businesses navigate stock market volatility and rising costs, with 85% of Canadian small businesses anticipating reduced cross-border travel. The U.S. Tour Operators Association warns that tariffs could reduce consumers’ purchasing power, making vacations less affordable.

 

Rising Operational Costs for Hotels

 

Tariffs have driven up the cost of imported goods critical to hotel operations, from linens and furniture to construction materials and guest amenities. For example, tariffs on Chinese imports have increased prices for electronics, furnishings, and textiles, while duties on Canadian lumber and Mexican concrete have raised construction and renovation costs. Hotels reliant on imported furniture, fixtures, and equipment (FF&E) face procurement challenges, with some shifting to costlier domestic or alternative international suppliers like Vietnam.

These cost increases force hoteliers to make tough choices: absorb the expenses, risking profitability, or pass them on to guests through higher room rates and fees. Blake Reiter, Director of Hospitality Research at Lighthouse, notes, “Higher prices on food, beverages, operating supplies, etc.—those costs have to be absorbed somewhere… frequently, they will be passed onto the consumer.” However, raising rates risks alienating price-sensitive travelers, particularly in a climate of reduced demand.

 

Construction and renovation projects are also being delayed or scaled back. Jan Freitag, national director of hospitality analytics at CoStar Group, highlights that tariffs on Mexican concrete and Canadian lumber will increase costs, “putting downward pressure on the number of hotels breaking ground or getting renovated.” Extended renovation timelines disrupt cash flows, especially for smaller properties, and could lead to outdated facilities that struggle to compete.

 

Declining Occupancy and Revenue

 

The decline in travel demand is hitting hotel occupancy rates and revenue per available room (RevPAR), a key industry metric. International travelers, who often stay longer and spend more, are critical to markets like New York, Los Angeles, and Miami. A 50% drop in international hotel bookings has been reported, with Chinese tourists—a vital market for cities like Las Vegas—cutting back due to higher costs and trade tensions. Canadian visitors, who account for significant bookings in border states and winter destinations like Palm Springs, are boycotting U.S. travel amid retaliatory tariff threats.

 

Domestic leisure and business travel, which have driven recent industry growth, are also faltering. David Sherwyn, a professor at Cornell University, questions whether companies will host large conferences amid economic uncertainty, noting that markets like San Francisco and Portland, still recovering from pandemic-era losses, are particularly vulnerable. Business travel volume is projected to decline by 21% for 29% of global buyers, with a potential $88 billion hit to global business travel spending.

 

Analysts at Bernstein Research estimate that a tariff-induced GDP reduction of 1–1.5% could slash U.S. RevPAR growth to 0.9–1.9%, down from a forecasted 3.1%. If consumer spending continues to weaken, RevPAR growth could stagnate, threatening the industry’s financial stability. The Dow Jones Hotel Index already saw a 6% slump in hotel company shares following the tariff rollout, signaling investor concerns.

 

Regional Impacts and Traveler Sentiment

 

The impact of reduced travel varies by region. Border states and destinations reliant on Canadian visitors, such as Lake George, New York, and Old Orchard Beach, Maine, face disproportionate losses. In Los Angeles, Canadian bookings (770,000 guest nights annually) are at risk, compounded by fears of visa cancellations and deportations. Las Vegas projects a 5% decline in room tax revenue due to fewer visitors from Canada and Mexico, who account for half of its international arrivals.

 

Traveler sentiment is another hurdle. Tariffs and political rhetoric have created an “unwelcoming environment,” deterring international visitors. Adam Sacks of Tourism Economics notes that negative sentiment toward the U.S. will persist, with recovery taking time even if tariffs are eased. Posts on X reflect industry anxiety, with some predicting a $90 billion tourism revenue loss in 2025, particularly affecting border businesses.

 

Adaptation Strategies for Hoteliers

 

Despite these challenges, the hotel industry is adapting. Some chains are sourcing materials locally or investing in sustainable practices to reduce reliance on imports. Technology, such as automated check-in systems and energy-efficient operations, is being leveraged to cut costs. Hoteliers are also targeting domestic travelers through promotions and flexible booking policies, though increased domestic demand could drive up prices if supply remains constrained.

 

Procurement experts urge hoteliers to plan ahead, securing goods and financing before further tariff hikes. CBRE’s analysis suggests a mild demand impact (0.2% drag on room nights), as domestic travel may offset some international losses. However, flexibility and data-driven strategies are critical, with tools like HotelPlanner’s dynamic booking platform helping travelers and hotels navigate price volatility.

 

A Silver Lining?

 

A potential upside is reduced competition in the hotel supply pipeline. Constrained construction due to higher costs could limit new hotel openings, easing pressure on existing properties. A weaker U.S. dollar against some currencies, like the euro or yen, could also make the U.S. more affordable for certain international travelers, though this benefit is speculative and depends on exchange rate trends.

 

A final word

 

The U.S. hotel industry is navigating a perfect storm of reduced travel demand, rising costs, and economic uncertainty driven by tariffs. With international arrivals plummeting and domestic travel softening, hotels face declining occupancy, squeezed margins, and delayed investments. Regional markets reliant on cross-border tourism are particularly vulnerable, while negative traveler sentiment compounds the challenge. Yet, through strategic adaptations—local sourcing, technological innovation, and targeted marketing—the industry can mitigate some impacts. The path forward demands agility and resilience, as hoteliers brace for a prolonged period of trade-driven disruption. The stakes are high, with the potential for a $90 billion tourism revenue loss looming, but the industry’s ability to adapt will determine its recovery in this turbulent economic climate.