Tariff Impact on the Global Hospitality Industry: Part 1

President Trump’s April 2025 tariff implementation has fundamentally shifted the global economic landscape, with a baseline 10% tariff on all countries and significantly higher rates for major trade partners—reaching 145% for Chinese imports. While this policy shift affects all sectors through increased costs and supply chain disruptions, the hospitality industry faces unique challenges that require specialized strategies for adaptation and resilience.

Global Context: Economic Impact on Hospitality Supply Chains

The recent tariff implementations represent a significant departure from previous trade policies, creating immediate cost pressures across global supply chains. According to a Goldman Sachs analysis (March 2025), these tariffs could add 8-12% to development costs across industries, with hospitality particularly vulnerable due to its heavy reliance on imported fixtures, equipment, and construction materials.

While the administration has paused some higher tariff implementations for 90 days for most countries, the baseline 10% remains in effect, and markets continue to adjust to this new reality. The Penn Wharton Budget Model projects significant broader economic impacts if tariffs are fully implemented as originally announced, creating a challenging macroeconomic environment for hospitality businesses already managing thin margins.[^1]

European and UK Markets: Declining U.S. Tourism and Adaptation Strategies

European hospitality markets are experiencing declining U.S. tourism interest, with the share of American travelers planning European vacations falling from 45% to 37% in 2025—potentially reducing U.S. tourism to Europe by half a million visitors this summer. This decline comes at a critical time for European hotels still recovering from previous disruptions, creating revenue pressure particularly for luxury properties traditionally dependent on American guests.[^2]

For UK hospitality businesses, the combination of Brexit adjustments and these new tariff tensions creates a particularly challenging environment. Many hotels and resorts are in the midst of refurbishment cycles that now face higher costs for imported materials and equipment, while also managing labor market disruptions.

Asian Hospitality: Higher Tariff Burden and Supply Chain Disruption

Asian hospitality markets face even greater challenges due to substantially higher tariffs targeted at this region. With rates as high as 145% on Chinese imports, sourcing furniture, fixtures, and equipment (FF&E) now carries major cost and risk for hoteliers globally. Industry experts suggest the hospitality sector is entering a new era of cost expectations after decades of relatively low-cost products from China, with some projects facing 20% budget increases due to tariff-related inflation.[^3]

The 90-day tariff pause has created a procurement race, with many hotels expediting orders to beat potential implementation deadlines. This short-term surge masks longer-term concerns about supply chain reliability and cost stability, particularly for renovation cycles and new development projects.

Shifting Travel Patterns and Regional Performance Metrics

Travel patterns are evolving in response to these economic pressures. Intra-regional tourism is growing in importance, with European, Asian, and Middle Eastern markets all showing strong internal travel recovery. According to the European Travel Commission, intra-European travel now exceeds 2019 benchmark levels by 3%, even as long-haul travel remains below historical norms.

Hotel performance metrics reveal divergent regional trajectories. The Middle East shows the strongest RevPAR growth at 15.3% year-over-year, while Asia-Pacific markets have reached 7.3% above 2019 levels. European markets demonstrate more modest but stable recovery, with southern European destinations exceeding 2019 figures by 7-9%.

For hotel operators, success will require balancing higher procurement costs with strategic pricing, focusing on regional and domestic market segments, and accelerating digital transformation to enhance operational efficiency. Properties with strong local appeal, technological adaptability, and sustainable practices appear best positioned to navigate the challenges of this new tariff landscape.

Our next article examines how these trade tensions are transforming the broader operational real estate sector, where development costs, investment flows, and asset valuations are being fundamentally reshaped across global markets—creating both immediate challenges and strategic opportunities for investors and developers.