Before President Trump on April 9 issued a 90-day pause on sweeping tariffs, the rapid escalation of a tariff war was stoking fears that the hotel industry's post-pandemic recovery would be derailed by choked supply chains and rising costs.
Richie Karaburun
Richie Karaburun, a clinical associate professor at NYU's Jonathan M. Tisch Center of Hospitality, said tariffs threatened to create a "perfect storm" of challenges for hotels.
Combined with shifting visa regulations and safety concerns around entering the U.S. that are already impacting inbound tourism, he said tariffs would "definitely make hoteliers' lives miserable and make it more expensive to operate a hotel."
Karaburun said tariffs would affect both daily operations and future development. Hotels would face rising costs for essential imports, including linens and towels from Vietnam, Cambodia and Indonesia, countries that had been subject to tariffs up to 49%. (Those nations became export hubs after Chinese producers sought to bypass tariffs aimed at China during Trump's first term, he said, with the latest batch of tariffs appearing to target what he called calls the "backdoor option.")
Everything from housekeeping supplies to breakfast buffets would likely become more expensive, as U.S. hotels use few items that are produced domestically, Karaburun said.
New hotel construction would also face steep challenges that could slow pipeline growth.
Baird senior research analyst Michael Bellisario said internationally sourced materials and furniture, fixtures and equipment, which are primarily imported from China and Vietnam, represent approximately 15% to 20% of a development project's total budget. Tariffs could surge construction costs 5% to 10%, he said.
Hotels would have limited options to address these cost increases. Major chains with significant buying power like Marriott and Hilton might pressure suppliers to absorb tariffs, Karaburun said, or properties could absorb a portion of the added cost themselves, reducing profitability and potentially leading to staff cuts. The costs could be passed on to consumers through higher room rates and food prices.
Such reactions could trigger a broader travel industry contraction. Combined with the stock market volatility's impact on retirement accounts, travelers may cut back on travel or downgrade their accommodations, Karaburun said.
Karaburun is cautiously optimistic that some tariffs will disappear via negotiations. The Trump administration did say on April 9 that the U.S. will negotiate trade deals with countries during the 90-day pause.
"Based on the history we've seen, I think many of them will go away," he said, adding that a prolonged trade war would create "a race to the bottom" where "no one wins."