There might be turbulence ahead for U.S. hotels that rely heavily on international travelers. Fueling some of this unease are tariffs and threats of tariffs, which are straining diplomatic relationships. This has created what Adam Sacks, president of Tourism Economics (an Oxford Economics company), calls a "sentiment headwind" for inbound travel.
“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 explained.
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, U.S. Pres. Donald 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 U.K., 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 percent 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 travelers may account for a mere 7 percent of total U.S. hotel room demand in a typical year, Sacks noted, but their spend is double that.
“We forecast an $8.5 billion reduction in international visitor spending this year relative to last year,” he said.
A cohort that comprises 14 percent of all traveler spend in the U.S. shouldn’t be overlooked.
“International visitors tend to stay longer and spend more,” said 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 travelers 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,” said 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 noted, 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 added. “[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 continued. “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 added. “There will be more conservative underwriting and more stress testing scenarios for properties that have already shown an impact to their performance.”
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