Everything from linen and textiles imported from China, to timber from Canada and breakfast buffet avocados from Mexico, will be hit as the Trump import tariffs cover a wide range of essential goods critical to the operations, construction and fitout of hotels.
Higher costs and lower demand
As costs on consumers products imported from around the world rise due to the new global tariffs, discretionary spending – particularly on travel and dining out – will go down. This means that as hotel stays in the US get potentially more expensive to cover the running costs, demand for such hotels is likely to decrease.
Truist Securities said that assuming this is another demand slowdown for the hotel/travel industry, what they are calling the ‘Trump Slump’ could create a stagflation environment which could have a distinct impact on the hotel sector.
Delays to construction
Another concern is the potential delaying of hotel constructions and refurbishments. The hotel industry is fuelled by expansion, and tariffs are going to throw a wrench into the new-build pipeline.
CoStar Group national director Hospitality Analytics Jan Freitag said, “All that concrete coming from Mexico and all that lumber from Canada will now be more expensive, putting downward pressure on the number of hotels breaking ground or getting renovated”.
Among the biggest hotel brands – Marriott, Hyatt and Hilton – new construction represents about 70 per cent of annual gross openings. Baird said they expect tariffs and higher development costs will negatively impact new construction signings and starts domestically for the hotel brands. They expect projects already under development to finish but could have delayed openings.
RW Baird senior research analyst Michael Bellisario wrote in response to Trump’s ‘Liberation Day’ tariffs on Thursday 3 April that internationally sourced materials typically represent between 15% and 20% of a development project’s total budget, and the majority of it is imported from China and Vietnam.
“All else equal, the cost to build a hotel could be 5 per cent to 10 per cent higher now (on top of the 20 per cent tariff that was already in place for goods sourced from China),” he wrote.
“Also, transaction activity has remained slow, which could negatively impact conversion,” continued Bellisario. “Construction costs will be higher as a result of the bigger-than-expected reciprocal tariffs, and the ROI on development (and renovation) projects, which already had been under pressure, will be lower.”
Negative sentiment
Meanwhile, a more immediate concern for hoteliers in the US is the tense and negative feelings towards the country reducing international travel to the States.
Meet Boston president and CEO Martha Sheridan told NBC Boston that although impacts of the tariffs on the pricing in the tourism sector remain to be seen, they’re more concerned about the perception of the US right now, and whether this trade war is impacting their relationships with people from across the globe.
“We don’t know tomorrow what’s going to happen to the travel industry,” she said. “We do have to make sure that international relations are front and centre. and we try and repair those on the national front.”
US hotels along the Canadian border are already experiencing declines with fewer Canadians crossing over to the US after Trump announced heavy trade tariffs on the country in February.
According to data from the British Columbia Ministry of Transportation and Washington state’s Department of Transportation, border crossings between Canada and Washington state have declined by half. The Vancouver Sun reported that crossings have dropped from 216,000 in March 2024 to 121,000 vehicles last month.
Edited by Staff Writers
