From tariffs to tactics: How hotels can adapt to shifting market sentiment

Tariffs and geopolitical tension have returned to the foreground of global trade, and with them, renewed pressure for the travel and hospitality industry.

But how are they showing up in rate data? Where is sentiment shifting? And which markets are seeing the earliest signs of change?

Lighthouse data points to a few clear patterns:

• Rates are declining in business-heavy and policy-sensitive markets, including Washington D.C., where average daily rates have dropped by as much as 8% over the coming 90-day period.

• Forward-looking search data from Canada – the largest international feeder market to the U.S – shows a drop in U.S.-bound hotel searches from 35% in mid-2024 to 22% in March 2025.

For hoteliers, while this is not yet a crisis, it is an important signal. This article unpacks what the data shows and what hoteliers should be watching as conditions evolve.

Pricing pressure in key US markets

This softening stands in contrast to the broader picture seen at the start of the year. According to Lighthouse’s half-year pricing outlook, most global regions were entering 2025 with cautious optimism. Demand indicators were trending up, wage growth had accelerated in several economies, and travellers, while cost-conscious, were expected to return in larger numbers. North America was among the few regions showing advertised rate growth year-over-year.

That makes the recent price drops more notable; they’re happening even as the broader travel outlook was improving.

Fast forward just a couple of months and Lighthouse data now shows clear declining rates in several major U.S. cities following the most recent tariff announcements.

In Washington D.C., 215 of the remaining 259 days in 2025 have seen hotel rates decline by at least 1% in the two weeks following the announcement. Many of those declines exceed 8%, with rate reductions widely distributed across the calendar year.

Other cities showing similar behavior include:

• Los Angeles: 241 days with a 1%+ rate drop

• New Orleans, San Francisco, Miami, Orlando: each exceeding 150 days

• Atlanta: nearing that same threshold

By contrast, cities like New York (48 days) and Boston (51 days) have seen far fewer instances of 1%+ rate decreases, suggesting more stable pricing for now. And other destinations like Santa Fe (5 days) and Flagstaff (11 days) appear relatively unaffected, indicating that in politically and economically sensitive markets, the link between macro uncertainty and pricing is already visible and influencing forward-looking commercial strategy.

Uncertainty, not just costs, driving early rate adjustments

The rate drops we’re seeing in cities like Washington D.C. and Los Angeles aren’t just the result of operational cost pressures. They’re early signs of a broader behavioural shift, centered around uncertainty. 

Increased tariffs raise the cost of goods, but it’s the uncertainty about how long they’ll last, what they will impact next, and whether there will be further escalation down the line that is influencing sentiment. For corporate and international travellers, uncertainty often leads to caution. And in travel terms, cautious behaviour can put downward pressure on rates.

Shifting sentiment: Canadian search data signals cooling intent

We’ve seen this pattern before. In previous periods of policy tension, such as during the 2018–2019 U.S.–Canada trade dispute, Canadian outbound travel to the U.S. softened. Now, the latest Lighthouse data shows a repeat:

• U.S. destinations represented a quarter of hotel searches from Canada in mid-2024

• By April 2025, that figure had dropped to 14% - the lowest percentage in the last 2 years.

The drop in search share points to a change in traveller intent. It doesn’t confirm behavior, but it’s an early indication that international interest in U.S. destinations may be cooling. 

In other words, this is not just about rising costs. It’s also about consumer confidence and how visitors feel about travel, particularly to the US, right now.

Cost pressure may follow, before demand returns

While much of the tariff conversation has centred on travel sentiment and pricing, the cost side of the equation may soon follow.

Imported goods used throughout hotel operations – F&B, textiles, equipment, and supplies – are expected to rise in price if tariffs remain in place or expand. The timing depends on inventory cycles and supplier contracts, but many hoteliers are already preparing for these increases.

At the same time, travellers themselves may be feeling the broader effects of inflation and uncertainty. Tariffs can ripple through consumer pricing in more subtle ways, raising the cost of everyday goods, travel expenses, or discretionary spending in general. 

This creates a tense balancing act for hoteliers as they face:

• Rising operating costs

• Reduced rate flexibility, particularly in markets already discounting

• Growing price sensitivity, from guests navigating economic uncertainty

Lighthouse’s H1 2025 outlook showed cautious optimism: strong demand indicators, improving consumer sentiment, and signs that pricing power might return. In that context, the current rate softness in tariff-exposed cities marks a clear departure from expectations.

For many hotels, this isn’t unfamiliar territory. Whether during the 2008 downturn or the COVID-19 recovery, the most resilient properties weren’t the ones that slashed rates or pulled back on marketing. They were the ones who planned carefully, focused on value, and adjusted quickly to changing conditions.

We’re seeing the early signals again now. Tariffs are shifting traveller sentiment, pricing pressure is emerging in specific markets, and uncertainty is back on the table. So what now?

Strategic responses for hoteliers

1) Don’t cut rates, add value

When demand softens, the temptation is to drop prices. But that approach rarely pays off. In fact, Skift found that after the 2008 crisis, it took four years for them to recover to 2007 levels. 

Instead, look for opportunities to add value. Guests will be looking for ways to make their dollars go further. Use real-time rate intelligence to stay competitive without racing to the bottom. Look for opportunities to add tangible value that justifies your price point. 

Consider offering sought-after perks like complimentary breakfast, free parking, guaranteed late check-out, enhanced Wi-Fi or other sought-after amenities.

Smart packaging that bundles room nights with these valuable amenities or local experiences can be highly effective. Combine these offerings with flexible, yet strategic, cancellation policies to build guest confidence.

At the same time, cost savings might need to be considered, but don’t let them erode the guest experience. Focus on efficiencies in the back-of-house before cutting back on anything that guests see and feel.

2) Target demand that still exists

Tariffs may dampen cross-border travel, but domestic and regional demand is still strong in many places. Use forward-looking search data to identify which markets are still active, then tailor your marketing and offers to meet that intent.

3) Tighten up your OTA strategy

If OTAs become a bigger share of bookings, keep your direct channel competitive with:

• Clear benefits for booking direct (late check-out, free Wi-Fi, exclusive offers)

• Accurate rate parity across platforms

• Campaigns aimed at converting OTA bookers into repeat direct guests

4) Keep marketing focused and visible

Focus on the segments that have high intent, like repeat guests or loyalty members and then highlight your appeal, flexibility and most importantly, value, in your messaging. Guests will compare harder in uncertain times. Make sure your website is fast, clear, and shows your best offers.

5) Use the right tech to respond faster to market shifts

In volatile conditions, uncertainty makes long-term planning even harder than it normally is. But these conditions call for agility and the ability to adjust tactics quickly to shore up demand. The markets that are softening now weren’t flagged in last quarter’s forecast - they showed up in week-by-week changes to pricing and demand.

That’s why regular access to local demand signals and competitive pricing data is essential. Whether it’s shifting source markets or quiet rate drops in your compset, these are the early signs that give commercial teams a chance to respond before performance is impacted.

Tools like Market Insight and Rate Insight support that process, helping hoteliers adjust strategy in real time, without overreacting.

Final thoughts

Lighthouse data shows clear shifts in market sentiment and forward-looking pricing. In some cities, that means rates are already adjusting. In others, traveller interest is beginning to soften. What happens next will depend on how hotels respond.

The good news? These aren’t uncharted waters. Hoteliers have navigated inflation, recessions, and rapid change before. What matters now is using data to separate noise from trend, and responding with a strategy built for uncertainty.

With the right insights, timely decisions, and a focus on value, there’s still an opportunity to protect performance and ultimately position your hotel for sustained success, whatever the economic weather.

Discover how Lighthouse can support you in times of uncertainty. Contact our team to find out more