I’m a hospitality revenue management professional with over three decades of experience in the trenches of hotels, resorts, and revenue-generating strategies. As we near the midpoint of the year and look ahead to budgeting for 2026, the current tariff war represents a major inflection point for our industry—and a test of strategic agility for commercial leaders, and specifically revenue managers.
Consumer Behavior & Demand Shifts
Despite upbeat intentions—88% of Americans still plan summer travel—the tariff-driven squeeze is reshaping behavior. According to Expedia/Deloitte data, average spending initially rose 21% YOY in March but cooled to 13% in April once tariffs landed. Consumers are pivoting: shorter trips, road travel, and less expensive lodging. That’s the new reality we must forecast into our models for the foreseeable future.
Cross-border traffic is weakening, too. Canadian inbound searches to U.S. hotels declined from a nearly 25% share in 2024 to just 15% in March. With political backlash spurring a Canadian boycott, leisure and corporate demand from Canada is expected to lag into 2026.
European visitation has also softened, down 7% in early 2025, although hotels are rebounding with aggressive pricing, with some pushing rate cuts of up to 25% to win back bookings.
Squeezed Margins & Rising Costs
Tariffs aren’t limited to cars and other goods—they hit hotels directly. Everything from imported linens to HVAC equipment is more expensive. Skift cited an article on industry-wide renovation delays, noting that materials and furnishing costs are surging.
These inflationary pressures have led retailers and wholesalers to raise prices on tariff-driven goods, with increased costs passed on to buyers. Expect this to manifest in rising F&B, amenities, and other FF&E replacement costs on-property.
Lower Airlift and Intermittent Business Travel
The ripple effects of the tariff war are being felt strongly across domestic U.S. air travel. According to Reuters, U.S. summer flight bookings are down approximately 10% year-over-year, with passengers increasingly hunting for deals, delaying trips, or opting for shorter regional routes. This trend is causing major carriers to withdraw or revise forward guidance, citing “reduced demand and shorter booking windows.”
Forecast Adjustments:
Q3‑Q4 & 2026 Budget Posture
As we cross the midpoint of 2025, here is my outlook for the remainder of the year. Caveat: My crystal ball is not perfect, and not all markets behave the same way. Review your recent trends for specific guidance:
ADR & Occupancy Outlook for Upscale and Luxury
- Expect moderate ADR growth of 2–4% through Q4, reflecting restrained rate increases due to tariff-driven cost pressures and cautious consumer spending.
- Occupancy is expected to remain flat to slightly down (1–3%) year-over-year, particularly in markets heavily reliant on international and cross-border leisure travel. In contrast, domestic demand remains steady but cautious.
- Business travel recovery will be uneven and intermittent, which will limit occupancy gains in this segment.
- Overall, RevPAR growth is expected to be muted but slightly positive, driven primarily by disciplined pricing and targeted value-added offerings, rather than volume growth.
- Factor in approximately 5‑7% volume decline in Canadian/American cross-border travelers, with Europe somewhat offset by value-oriented guests.
Permanent Cost Inflation
- Build a 3–5% lift in both operating and capital expenditures (CapEx)—linens, guestroom tech, F&B supplies, renovation materials.
Safety Nets & Flexible Pricing
- Continue offering flexible rates and booking/canceling policies as occupancy falters. Continue using non-refundable, prepaid rates for further periods to boost your base.
Marketing & Promotion Budget
- Plan compelling promotions now for Q4 and early 2026. Target repeat leisure guests with “Bounce Back” offers. If you rely on Canadian leisure travelers, start offering deals for next summer in Q4. For Canadian “snowbirds” who travel south during the winter months, now is the time to plan your deals for next January through April.
Commercial Collaboration
- Sales, Marketing, and Revenue leaders must align weekly to adjust strategies in real time, especially as booking windows shorten and market signals shift rapidly due to tariff impacts and consumer uncertainty.
- Teams should collaborate around data, leveraging whatever business intelligence tools are available—PMS, RMS, website analytics, commercially available BI products (CoStar, Kalibri, Amadeus360 platforms) —to spot trends, uncover pacing gaps, and shape tactical decisions based on real demand signals, not assumptions.
- Messaging, pricing, and promotional timing should be developed jointly to ensure consistent value communication across channels and to avoid undercutting or misalignment between demand generation and conversion efforts.
Strategic Takeaways for Leadership
- Timely Data Analytics: Weekly reviews of booking pace, forward occupancy assessments from key feeder markets, and market segments are critical, as is monitoring price sensitivity.
- Cost-Control Measures: Monitor labor costs, postpone non-critical capital expenditures, and bulk-buy supplies when feasible.
- Revenue Flexibility: Utilize flexible or targeted promotional rates tailored to the market. Build base with groups or crew to “shrink” hotel inventories and flatten out occupancy valleys.
- Commercial Alignment: Ensure Sales, Marketing, and Revenue teams collaborate closely—sharing data, aligning on messaging and timing, and meeting regularly to respond to short-term market shifts with unified, informed strategies.
Final Word
While I can’t see into the future with any degree of accuracy, I don’t believe the tariff war is a short-term seasonal aberration—it’s a multi-quarter headwind. It will impact costs and demand across markets, especially those fed by cross-border and international travel. For 2026, exercise caution in your forecasts until signs of stabilized trade policies emerge.
