Tariffs hit U.S. hotels: Rising costs and fewer tourists

The U.S. hotel industry is grappling with the ramifications of recent tariff implementations, leading to increased operational costs, postponed renovations, and a downturn in international tourism.

Tariffs are driving up hotel construction and supply costs, delaying renovations, shrinking profit margins, and contributing to a decline in international tourism—forcing the industry to adapt or risk falling behind. Photo: Hans m., Flickr Public domain

The imposition of tariffs on imported goods has significantly inflated the costs of essential hotel supplies. Items such as furniture, linens, electronics, and construction materials, often sourced internationally, now bear higher price tags.

Curtains and carpets by at least 54%

For instance, tariffs on Chinese imports have raised the prices of synthetic fabrics used in curtains and carpets by at least 54%. This surge in expenses pressures hotels to either absorb the costs, thereby reducing profit margins, or pass them on to guests through increased room rates, potentially affecting occupancy.

The U.S. hotel industry is feeling the strain of recent tariffs, with industry leaders voicing concerns over rising costs, disrupted supply chains, and declining international tourism. These challenges are prompting hoteliers to reassess their strategies to maintain profitability and guest satisfaction.​

«This is a negative to the U.S»

Bernstein is a global investment research and asset management firm known for in-depth market analysis and financial insights, particularly for institutional investors. Analysts from the company, led by Richard Clarke, have highlighted significant risks that recent U.S. tariffs pose to the lodging industry. In a note to clients, they emphasized that the imposition of tariffs has led to a tangible decline in international travel to the U.S., with flight bookings from Canada dropping by 70% in March, and decreases from Mexico and France by 11% and 6%, respectively. ​This is reported by Investing.com.

Bernstein's analysis suggests that these tariffs, intended to correct trade imbalances, are inadvertently deterring foreign visitors, thereby negatively impacting the U.S. hospitality sector. They noted, «This is a negative to the U.S.,» pointing out that while inbound travel constitutes 13% of the U.S. market, there is little indication of a slowdown in U.S. outbound travel, which remains up 3-4% year-to-date. ​

The analysts also observed that other markets, such as Canada and Mexico, might benefit from this shift as tourists consider alternative destinations. However, they cautioned that the U.S. lodging industry faces risks from declining consumer confidence and potential backlash against U.S. brands. Companies like Marriott and Hyatt, with significant international exposure, may be particularly affected. ​

Industry leaders speak out

Jon Bortz, CEO of Pebblebrook Hotel Trust, highlighted the broader implications of protectionist trade policies, stating, «Tourism is our biggest export… We’ve not had a welcoming message in the last couple of years. We’re making it difficult for people to come here, and we’re adding… the negatives that surround trade.» This is according to Lighthouse.

Steve Van, CEO of Prism Hotels, expressed concerns about the indirect effects of tariffs, noting, «So far, the effect of the Trump tariffs have been mild and indirect; however, that could change dramatically… The hotel industry rises and falls very quickly in response to GDP growth, and… negative anticipation [is] growing.»

Rosanna Maietta, President and CEO of the American Hotel & Lodging Association (AHLA), emphasized the organization's focus on navigating the evolving landscape, stating that the association is actively assessing the short- and long-term effects of government policy changes on the hotel industry. ​

Stalled renovations and constructions

Tariffs on construction materials like steel and aluminum have led to elevated costs, causing many hotel projects to be delayed or scaled back. In cities with high demand for hotel rooms, such as New York and Los Angeles, developers are reassessing plans due to the inflated budgets. This slowdown in development hampers the industry's ability to meet growing accommodation needs.

Decline in international tourism

The broader economic implications of tariffs extend to international tourism. Trade tensions and retaliatory tariffs from other countries have led to a decline in foreign visitors to the U.S. Notably, visitor numbers from China have dropped by 17%, and arrivals from European countries have decreased by 12%. This reduction in international guests directly impacts hotel occupancy rates and revenue, particularly in major tourist destinations.

Adaptive strategies for resilience

In response to these challenges, hotels are adopting various strategies to mitigate the impact of tariffs. These include diversifying supplier networks to include more domestic sources, investing in energy-efficient technologies to reduce operational costs, and exploring alternative revenue streams such as catering and event hosting. By implementing such measures, the industry aims to enhance resilience and maintain service quality amidst economic uncertainties.