“Factors contributing to sentiment headwinds include Trump administration posturing and policy announcements, such as ‘Liberation Day’ tariffs across long-standing trade partners, as well as media coverage focusing on border security incidents and national travel advisories,” he explains.

Said travel advisories are certainly compounding uncertainty. They have been issued by countries like Canada, Germany and Japan, which cite concerns over safety, immigration enforcement and civil liberties within the United States.

At the same time, Pres. Trump has reinstated and expanded travel bans, barring new visas and entry into the U.S. from 12 countries, including Afghanistan, Iran, Libya, Somalia, Sudan, Yemen and more. Partial restrictions have been imposed on seven others, including Burundi, Cuba, Laos, Sierra Leone, Togo, Turkmenistan and Venezuela, based on national security and visa-overstay concerns.

Meanwhile, protests over renewed U.S. Immigration and Customs Enforcement (ICE) operations have erupted in cities like Los Angeles, prompting National Guard deployments and curfews. They’ve also prompted the UK, China, Japan, the Philippines and Hong Kong to issue travel alerts for Los Angeles.

The blow from these headwinds is already palpable. Tourism Economics projects an 8.7 per cent decline in overall international arrivals to the U.S. this year.

For hotel investors, this shift might represent more than a blip. It could be a point of recalibration. International travellers may account for a mere 7 per cent of total U.S. hotel room demand in a typical year, Sacks notes, but their spend is double that.

“We forecast an $8.5 billion reduction in international visitor spending this year relative to last year,” he says.

A cohort that comprises 14 per cent of all traveller spend in the U.S. shouldn’t be overlooked.

“International visitors tend to stay longer and spend more,” says Allison Handy, executive vice president of commercial at Aimbridge Hospitality. “Some markets are seeing the softening of international business…these are the types of trends that affect RevPAR and NOI.”

The worry is that markets reliant on foreign travellers could see occupancy soften and underwriting assumptions shift if the geopolitical climate worsens – or if international sentiment continues to erode. But how real is the threat? And how long will it last?

Gateway markets at risk

Naturally, markets that traditionally attract more foreign travellers are the ones most at risk with these tariffs and travel advisories.

“U.S. gateway and resort markets, such as New York City, Miami and Los Angeles have been disproportionately exposed,” says Stephen Haase, director of capital markets for Greysteel.

Handy believes this exposure will extend to many core gateway markets along the coasts where inbound international arrivals tend to cluster.

These markets began to feel an impact this past March and April, Haase notes, though he hasn’t seen any long-term fallout materialize. Yet.

“A shift in investor appetite for those markets may result if that impact persists for a longer duration than a few months,” he adds. “[However], there has not been a rise in cap rates in markets that have a disproportionate amount of reliance on international tourism.”

This rise hasn’t occurred because most markets that attract international tourists have a lot going for them (thus, the inherent attraction). They generally benefit from a wide array of demand generators, strong domestic leisure travel rates and a constant evolution of events that drive demand.

“The 2026 World Cup, for example, will more than offset any loss in international travel to hotels this year for the 11 U.S. host cities and some surrounding markets,” Haase continues. “While deal velocity in hospitality product may have slowed slightly in quarter one, that appears more linked to interest rate uncertainty and capital market recalibration than geopolitical events alone.”

What did occur was a widening of spreads on hotel assets immediately following the implementation of tariffs. This was driven by measured lender scrutiny, though Haase says lender terms have largely normalized since the initial reaction.

“The underwriting on hotels that have a large international presence will be impacted mainly as a function of current cash flow and updated forecasts,” he adds. “There will be more conservative underwriting and more stress testing scenarios for properties that have already shown an impact to their performance.”

Pullbacks and pivots

That impact is already surfacing, particularly in key feeder markets. Canada – historically the largest source of inbound travel to the U.S. – is leading the pullback. Tourism Economics projects a 20.2 per cent decline in Canadian visitation this year, which includes the steep 35.2 per cent drop experienced in April alone. Visitors from Western Europe are also expected to dip by 5.8 per cent.

The good news is that other international travellers are, in some cases, stepping in to compensate for this drop in demand.

“Canadian inbound travel certainly pulled back in quarter one, but this was offset by a pickup in international inbound travellers from other countries, mostly from Europe and the Middle East, which made up for these shortfalls,” Haase adds.

Yet, Aimbridge is seeing the opposite trend in some markets. Handy reports an “initial softening” at the company’s East Coast assets that is primarily driven by a dip in European travel. This dip is, however, being partially offset by stronger inbound demand from other cohorts to other regions.

“Travel from Asia is continuing to stabilize faster than it did immediately following the pandemic,” she says. “And we’re seeing growth in inbound travel to our West Coast markets.”

This is promising news, especially as Haase notes that Marriott reported a higher share of international guests in every month of the first quarter compared to the same period last year. This, despite a 5 per cent pullback from Canada.

Domestic demand for the win

While international volatility continues to cast uncertainty over gateway and resort markets, some hotel investors are finding ways to succeed by focusing on domestic demand and minimizing exposure. This strategy is all about smart diversification – by geography, guest mix and demand drivers.

“Look for markets that have a healthy flow of domestic demand to help offset any further pullback in international leisure travel,” Haase recommends. “We also like markets that have uncorrelated demand drivers.”

These might include a port town that has a university, for example.

“This is a way to minimize fluctuations in demand as certain trends move one way or another,” he continues.

This approach is already guiding capital shifts toward secondary and drive-to leisure markets, especially those with steady year-round traffic. Haase likes destinations such as Charleston, S.C.; Santa Fe, N.M.; Lake Tahoe, Calif./Nev.; and parts of Texas Hill Country, Texas, due to their resilience, limited supply, and relatively lower dependence on long-haul or international guests.

Aimbridge is also taking a nimble approach when combating tariffs and travel advisories. The firm aggregates cross-brand, cross-market and cross-vertical performance data to stay attuned to daily trends across major and tertiary U.S. markets.

This data-driven strategy is allowing Aimbridge to target growth opportunities in the current climate.

“When we look at travel segments across the last few years, leisure travel demand and, particularly, upscale leisure travel has performed quite well compared to mid-scale travel, which peaked during and immediately following the pandemic and since then has experienced a lull,” Handy explains.

She confirms momentum is shifting toward secondary markets and drive-in destinations, where a surge in regional demand is fuelling year-over-year occupancy gains in more than half of Aimbridge’s top 120 markets.

“As we continue to monitor trends and adapt our strategies as an operator, we are targeting travel segments that are growing or have great growth potential,” she continues, noting that group business, weekday travel and booking window insights are helping the firm rebalance where needed. “Our ability to quickly identify, react and replace bookings will continue to be important.”

Agility is also needed from a capital strategy standpoint. That’s because the most successful investors in today’s climate are often pairing flexible operations with equally adaptable underwriting.

“From a capital strategy standpoint, our clients finding success have underwritten conservatively but opportunistically, modelled downside international demand scenarios and engaged partners with a proven ability to shift strategies in volatile macro-environments,” Haase adds.

He also advises a little perspective. After all, the U.S. is still a premier destination. And policies change. As do administrations.

“For investors who are heavily exposed to markets that rely on international demand, they are already feeling an impact, and there will likely be a shift in their preferences in terms of continuing to invest in those markets,” he continues. “That being said, there are always risks present within different cycles and, on a long enough investment horizon, mean-reversion tends to play out. For investors who want to bet on international markets today, the World Cup and Olympics in the next several years may pan out to be a good decision.”

Should today’s geopolitical climate turn out to be short lived, Handy believes high-end hotels in gateway markets may be a smart play, particularly in the long-term. On the flip side, a broader economic downturn may position economy and mid-scale extended-stay assets as the winners as they’re historically resilient performers. This is especially true, she adds, in markets with skilled manufacturing labour where long-term construction projects and short-term executive travel are tied to large-scale reshoring projects.

“Even without a clear view of future trends, investors can mitigate risk with a focus on what we call ‘barbell’ hotel portfolios,” Handy adds. “This occurs by balancing hotels with high pricing power or tight labour controls on the one end, and hotels with diverse demand drivers on the other.”

There is certainly no clear view of future trends – or of tariff and travel advisory timelines. But that shouldn’t necessarily quell optimism. As previously stated, everything ends. Eventually.

“International travel can rebound quite quickly after a crisis,” Sacks notes. “However, the great uncertainty relates to the duration of the crisis itself. In our current situation, it’s difficult to predict when sentiment might improve as a function of Trump Administration policy and posturing. But history would provide an indication to expect a solid rebound when the external environment improves.”

For now, patience may be the most profitable position of all.

By Nellie Day