Tariff Impact on Hotels: Higher Costs, Delayed Renovations, Less Demand

The hotel sector faced a complex, fast-changing new reality as tariffs announced by President Trump on Wednesday threatened to increase the cost to outfit, renovate, and develop properties — and to potentially reshape travel patterns.

"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," said Jan Freitag, national director, hospitality analytics at CoStar Group.

Estimates of the tariff impact varied. Michael Bellisario, a senior research analyst at RW Baird, noted that internationally sourced materials typically represent between 15% and 20% of a development project's total budget, and much of it is imported from China and Vietnam.

"All else being equal, the cost to build a hotel could be about 5% to 10% higher now," Bellisario wrote.

However, hoteliers may find "a "silver lining" of reduced price competition because of this likely construction slowdown.

"Supply growth, which has been muted for the past three years, will likely remain constrained," Freitag said.

Demand Weakness?

According to a research note by Richard Clarke at Bernstein Research, if a tariff war reduces U.S. GDP by around 1% to 1.5%, that could translate into a reduction of the year-over-year growth in U.S. RevPAR (reven