Over the past two months, the U.S. economic outlook has degraded meaningfully and moved into a period of heightened uncertainty. That heightened uncertainty is primarily driven by the current administration’s tariffs and lack of transparency of their ultimate scale and duration. Both potential negotiations and potential retaliation could meaningfully alter the scale and duration of the current tariffs, making it incredibly hard to predict what the implications of these tariffs will be on the lodging industry, moving forward. With that said, we would be remiss if we did not point out how the macro-economic backdrop that drives lodging industry performance has been impacted in recent months. 

So, what has changed over the past couple of months?

• Rhetoric coming out of Washington, D.C. has included disparaging remarks about Canada (largest feeder nation to U.S. hotels) and other nations, repelling foreigners from choosing to visit the U.S.
• President Trump’s inconsistent (and even erratic at times) approach to public tariff negotiation has generated a heightened level of uncertainty.
• The tariffs themselves have come in at elevated levels relative to expectations, and while it is unclear how long they will remain in place, the short-term economic impact is now expected to be more impactful (in a negative way) than previously expected. 

As a result of these policy dynamics, which have had greater negative impact on economic activity than our previous baseline expectations, the following have occurred: 

Moody’s Analytics now expects 2025 GDP growth to be 1.3%, down from 2.3% in February.

• U.S. Consumer Sentiment has declined 23% YTD (through March).
• Through April 8, the S&P 500 index has dropped 15% YTD and 12% since April 2.
• According to OAG, advance bookings between Canada and the U.S. have plummeted by more than 70% for the summer leisure travel season. 

These shifts come following what had felt like the potential for a reacceleration in hotel fundamentals in 2025. Retail sales growth accelerated to 0.7% monthly growth in the back half of 2024, following just 0.1% in the front half of the year. However, in the first two months of 2025 retail sales declined 0.5% on average. Additionally, both the Visa Spending Momentum Index and the Visa Discretionary Spending Index dropped 2% in February. This decline comes after a steady increase from July through January that had led the indices 4% above July’s trough levels by January 2025. The Deloitte Leisure Spending Intentions had turned positive in May 2024 and remained there through February 2025, pointing to the potential for improving leisure travel trends. However, a March decline alters that outlook. 

Perhaps the most telling data set is the sharp change in the University of Michigan Consumer Sentiment Index, which has plummeted in recent months. In 2024, the Consumer Sentiment Index troughed in July. From July through December, it increased 11%, pointing to an improving U.S. consumer in 2025. However, in the first quarter, it declined by a staggering 23%. 

U.S. Consumer Sentiment Index

Source: Lodging Analytics Research & Consulting, Inc

With that backdrop, we believe there is too much uncertainty in the macro-economic environment to issue an updated forecast for the U.S. hotel industry at present. However, given the current environment, we see far more downside risk than upside risk to our current outlook, which was released on March 1, 2025. Our next forecast update remains on schedule for the end of May and hopefully by then, we have a bit more clarity surrounding the implications of the aforementioned tariffs. 

LARC’s industry-leading market intelligence is available to help all industry participants navigate the current environment and position themselves for success. Please contact us to learn more about our services and products, or if there is any other way we may be able to serve you.