From Global Connections to Domestic Realities: Navigating the USA's Evolving Hotel Landscape

International tourism is inclusive of visitors who cross transnational borders. This segment of the hospitality and tourism industries collectively contribute approximately 10% of the world’s GDP (Robinson & Turner, 2025). This makes tourism a powerful international exchange. Yet even this grandiose figure sells tourism’s role in the global marketplace short. Specifically, tourism is one of the world’s most unusual exports. Tourism as a product is the only export that is consumed within national borders by international visitors. In this model, destinations benefit directly from inbound demand. This includes the United States, which has been long regarded as the world’s most profitable hospitality and tourism market and was identified as the most financially successful global tourism destination as recently as 2024 (Galloway, 2024). This dynamic is shifting.

The U.S. is experiencing a pronounced slowdown in international arrivals. This slowdown in international tourism is forcing a plethora of national stakeholders to reconsider traditional operating models. Hotel owners, asset managers, and operators are engrossed in strategic pivoting in areas such as forecasting, budgeting, revenue management, and sales & marketing. The lodging industry is engaged in a landscape-altering paradigm shift. Domestic tourism, especially through Online Travel Agency (OTA) reservations, is assisting the lodging industry in filling many of the rooms left empty by global travelers. Yet, this means that money is turning over within the national economy. Also, OTAs cut precipitously into lodging industry profits. Collectively, tourism is not serving as a financial boon, as a national export, as it was as recently as 2024.

Recent data points to significant turbulence. International visitor spending in the U.S. is projected to fall from $181 billion in 2024 to approximately $169 billion in 2025 (World Travel and Tourism Council, 2025). This indicates a sharp pullback at a time when many had anticipated a stronger post-pandemic rebound, meaning a $12.5bn decline when an 8% increase was originally projected is actually a loss of $27 billion. Canada, the USA’s largest inbound tourism source market, contributed more than $20 billion in 2024 expenditures (U.S. Travel, 2025).

Border crossings in 2025 are concerning. Land entries are down 28% and air arrivals have declined by 13% (Oxford Economics, 2025). Additional key markets show similar softness. Germany is down 28%, Spain 25%, and the United Kingdom 18% (Oxford Economics, 2025). Figure 1 shows top international markets for USA arrivals and how hindered these markets are in 2025. A shift of this magnitude in international arrivals is historically a strategic recalibration, not a short-term dip.

Properties that serve as gateway cities are particularly impacted by a lack of international arrivals. Figure 2 shows the decline in Canadian tourist arrivals by USA city destination. It should be noted that USA cities projected an overall 8% growth in Canadian arrivals in 2025, meaning that a 12% decline is actually 20% short of the forecast.

There are numerous domestic concerns in the lodging industry that go beyond international tourism arrivals. A lack of international tourism arrivals is driving these concerns though. Some of the largest concerns stemming from a lack of international arrivals are depicted below.

Franchisors & Franchisees

Hotel owners are being squeezed by franchisors. AAHOA, a professional association representing approximately 60% of the nation’s hotel owners, were calling for a rebellion against this squeeze even before the international tourism numbers began to freefall (Patel, 2025). Specifically, AAHOA’s members have banded together to demand greater transparency from franchisors, seek fairer contracts through economies of scale, have greater control when it comes to brand decisions, and overall reshape the power dynamics that exist in franchisor-franchisee relationships (Patel, 2025).

Construction Costs

Hotel owners are merely one lodging industry stakeholder group facing surmounting financial concerns. The lodging industry pipeline (i.e., construction, new builds) is showing cracks. Construction costs are skyrocketing alongside inflation, with 5%-8% annual cost increases in construction costs from 2022 to 2025, culminating in a 19.1% cost increase to build from 2022 to 2025 (Major, 2025).

Online Travel Agencies (OTAs)

Cloudbeds is a tech forward lodging company featuring a PMS, channel manager, booking engine, payment processor, etc. in a single integrated system. This allows Cloudbeds a unique opportunity to collect industry data including about OTAs. According to a recent Cloudbeds (2025) white paper, OTA commissions have continued to cut further into lodging industry revenue, and they are now taking between 15%-30% with an industry average being near 22% per booking. This means that if a guest pays $100 for a hotel room then the property is making only $78.

Labor

Labor expenses are another area that is growing faster than lodging occupancy and rates. In fact, labor costs grew more than 11% in the one year from January 1, 2024, to January 1, 2025 (Graber, 2025). CoStar (2025) recently put labor costs into perspective, offering this industry assessment: 2024 to 2025 saw GOPPAR up 3.2%, TRevPAR up 7.2%, EBITDA PAR up 2.5%, and LPAR (Labor Costs) up disproportionately at an astounding 11.2%.

Lending Conditions

Tighter lending conditions are also making hotel management and ownership more difficult. This actually shows the circular issues facing lodging. Reduced inbound demand is constricting feasibility models. This is leading to a contraction in development pipelines nationwide. Forecasting platforms increasingly adjust downward: modest national projections of 1.6% ADR growth and 1.8% RevPAR growth reflect tepid optimism tempered by real structural limits (Major, 2025; Rauch, 2025).

Inflationary pressures and rising operating costs continue to compress margins (Rauch, 2025). Capital, meanwhile, has grown more conservative, with lenders and investors prioritizing stability over expansion. In this environment, hotel owners are accelerating conversions rather than pursuing ground-up developments, and operators are rethinking market positioning. The combined effect is the emergence of new strategic playbooks, where efficiency, adaptability, and creativity are paramount.

Opportunities in the New Paradigm

The lodging industry is facing concerns. International tourism is down. The International Trade Administration, part of the USA government’s Department of Commerce, projected international tourism arrivals to surpass pre-COVID numbers (79.4 million arrivals) in 2026 for the first time (projected at 85 million arrivals); instead, the USA’s international arrivals in 2025 fall between 2012 and 2013 numbers with slightly more than 70 million arrivals (International Trade Administration, 2025).

The problems with international tourism arrivals are part of the reason that loans are difficult to come by, inflation is up especially in lodging, building and renovation costs are skyrocketing, labor costs are high and reliable team members are difficult to find, OTAs and franchisors are squeezing franchisees, and franchisees are loudly letting the industry largesse know that the modus operandi is not sustainable. Yet, this is not an era defined solely by contraction. There are opportunities.

Seismic disruptions in tourism are known to spur innovation. This has historically occurred through the revelation of new market segments and operational pathways (Hall & Williams, 2019). Today is no different. Renovations, while more expensive than in the past, remain a leading strategy given the cost of new builds. Hoteliers can upgrade guestrooms, modernize including by integrating sustainability features, and flip public spaces into gathering places.

Global eco-tourism and wellness travel continue to surge, particularly among younger travelers. These travelers may be willing to pay more in the future, particularly if sustainability certification programs in the USA can catch up with other developed countries (Taillon, Laurie, & Yhip, 2015). Advanced technologies such as AI forecasting and improved dynamic pricing methods continue to improve operational precision while potentially reducing overhead. Health and wellness amenities remain in demand and continue to differentiate properties in competitive markets, particularly those aiming to attract the domestic traveler who now fills gaps left by international declines.

Group business offers yet another stabilizing force. Some destinations report increased corporate bookings, association gatherings, and social group travel this year (Cvent, 2025). These segments are less sensitive to the fluctuations affecting international leisure arrivals and provide hoteliers with predictable pacing. Combined, these trends form a foundation for resilience. This may enable owners and operators to broaden their revenue mix while actively rebuilding their demand base.

Conclusion

The lodging industry stands at a pivotal moment. There is a marked decline in international tourism driving paradigm changes in the marketplace. There are associated pressures on traditional forecasting assumptions. Yet, this is collectively encouraging invention, creativity, and strategy. The lodging industry will weather the storm with careful planning, positioning, and strategic capital allocation. Which hotels, and hoteliers, emerge in a changed marketplace in the new paradigm is to be decided.

Reprinted from the Hotel Business Review with permission from www.HotelExecutive.com.