It’s safe to say that the tariff discussions that defined the first half of 2025 has thrown the global economy a curveball. The travel and hospitality sector, in particular, has recalibrated its outlook for the year, with some global hotel brands lowering their RevPAR guidance as they navigate the current climate with a mix of caution and quiet confidence.
For some hotels in the US, the impact of the negotiations was immediate, felt as early as the first quarter of the year, around the time the US government imposed sweeping tariffs on Canadian imports.
“We certainly felt the impact, especially going into March,” says Christopher Ellison, Vice President of Revenue at Brittain Resorts and Hotels, a full-service hospitality management company based in the Southeast region. “You just saw a kind of trickle down. January was a good month, February declined slightly and then March was significantly off. And that was a direct impact of the Canadian traveller.”
Consumer uncertainty triggered by trade tensions – compounded by a global rise in costs of living, political tensions and stricter travel advisories – may be weighing slightly on hotel demand at the moment. Yet, behind the curtains of a disruptive geopolitical and economic drama is a global travel trend that hotels must equally consider as they steer through the uncertainty.
The accelerating rise of the experience economy
“The overarching story for the travel industry is one of success, accentuated by resilience,” says Sean Morgan, Head of Travel Industry Research at Tourism Economics. “Much of this is being buoyed by a continuation of consumer prioritisation of travel.”
Morgan points to the industry’s remarkable recovery post-pandemic, which continues to resonate across segments such as business travel, where expenditures have exceeded the high-water mark of 2019. Recent data on global tourism arrivals align with this trend. UN Tourism reported at the close of May of this year that over 300 million tourists travelled internationally in the first three months of 2025, three percent above the same period in 2019.
And despite recent disruptions, this positive momentum for global travel looks set to continue. According to Tourism Economics’ latest forecast, 2025 remains on track to achieve over 1.6 billion international tourist arrivals – almost 10% above 2019.
Key to the growing appetite for travel is the rise of the experience economy. While demand for meaningful experiences had already gained momentum pre-pandemic, Morgan notes the acceleration in the years since. Consumers increasingly prioritise interactions with new cultures and communities over material goods – a green light for the hotel industry, especially as one in five travellers globally are likely to return to a hotel for its close connection to its local community, according to SiteMinder’s Changing Traveller Report 2025.
Geopolitical and economic events will no doubt continue to impact the hotel booking landscape, but the rise of the experience economy makes one thing clear: consumer demand for travel isn’t gone, it’s just changing. And amid uncertainty, travel has become a search for meaning, as economic conditions merely prompt some consumers to place more importance on value – and lasting memories – than on luxury.
The shift has been evident in the preferences of travellers in recent years. Ellison shares: “What I think we’re seeing, more than anything, is not so much a shift [on the part of] customers, but a shift in travel patterns… People still want to go on vacation, but they’re having to cater it to their current budget.”
Revisiting revenue strategies amid changing travel demand
As travel demand evolves, hotels are being called to reimagine their revenue strategies more thoughtfully. For example, with international arrivals slowing in key destinations, domestic travel has thrown a much-needed life raft to the industry, sparking creative strategies that seek to engage this segment.
Pablo Torres, hospitality consultant and author of Mastering Hospitality Ancillary Revenue, suggests hotels need to make offerings more appealing to local travellers – citing the US as an example, a market largely driven by domestic demand.
“I’ve seen some companies, for example, offer extra points to loyal customers who travel locally,” says Torres. “It’s about differentiating based on geolocation, targeting people who are driving nearby to stay at the hotel, rather than those flying in. That way, you’re rewarding the domestic traveller by creating tailored packages or bundles specifically for them.”
The changing travel landscape has also prompted hotels to revisit loyalty programs, once built around long-term accumulation. There is now a growing push for instant rewards to allow guests to redeem points during their stay for high-value ancillary services like F&B or spa treatments: “It encourages guests to think, ‘Hey, this company is offering more. I can enjoy extra services for the same spend.’ It’s about delivering more value for the same money,” Torres explains.
The shift from discounting to hotel ancillary
Indeed, value has become the name of the game for the guests tightening their budgets, but still in search of a meaningful experience. For hotels, however, that doesn’t have to mean lowering room rates, which can be a perilous road to take. As Torres notes, discounting often sets off a vicious cycle: one property lowers its rates, prompting others to do the same, risking a downward spiral of price cuts that are hard to recover from.
Discounts, once the default, no longer hold the same appeal. According to Ellison, the focus has shifted – not on spending less, but on getting more for what guests are already willing to spend. “Everyone became so accustomed to seeing a discount that people are now less concerned about the percentage and more focused on the total value. What’s the total cost of the room? What am I getting? Is it just a room, or does it include breakfast? Is it a better view?” says Ellison.
Enter: ancillary services. In today’s experience economy, these non-room offerings are increasingly stepping out of the shadows as revenue management moves towards profitability. The growing appeal of hotel F&B among younger generations – perhaps the main attraction of hotel ancillary – is a clear example, owing to social media’s influence. As Torres explains, “Younger people tend to… dedicate more of their budget to enjoying [life]. They might not own a house. They might not own a car. But they go on holidays three, four times a year and they spend heavily on F&B because they want to enjoy… It’s an Instagrammable experience.”
Torres adds that relying too heavily on room revenue, particularly when occupancy is moderate, limits a hotel’s potential. “If you offer different experiences throughout the day, it can add extra revenue to your business,” he says.
Hotel ancillary is becoming an experimental space for adopting new revenue streams as guest expectations change. Ellison suggests that these offerings can include even basic hotel services, which no longer need to be built into the room rate. Instead, they should be reimagined as flexible components of the guest journey – still tailored to what travellers value, but offered as optional based on their preferences – whether it’s opting out of daily housekeeping or introducing a flexible cancellation add-on.
Looking after the bottom line
Hotels still have their work cut out for them, despite various value-add opportunities. With the tempered RevPAR outlook from major hotel chains, a hotel’s bottom line has become more relevant than revenue alone.
Some properties have turned to managing costs, specifically fixed expenses like labour, property taxes and long-term service contracts, to sustain profitability. However, Ellison mentions that these fixed costs are usually the hardest things to shift, and properties who don’t evaluate these costs as they forecast demand are likely to struggle the most.
“It’s not about how much revenue you can generate at the top line… It’s protecting that bottom line, and you have to evaluate every cost, particularly those fixed costs,” he says.
Herein lies the case for revenue managers to work more closely with hotel operations. While the revenue department focuses on driving bookings and top-line performance, an awareness of how that revenue flows through to profit, managed on the operations side, offers a smarter path through volatile periods.
“Just because you’re in a down market or a down economy, that doesn’t mean your bottom line is going to be down, if you can manage those costs effectively,” Ellison adds.
‘Within the blood of the hospitality industry’
Uncertainty may be hanging over the hotel industry at the moment, but it’s just as important to take stock of its track record. As Torres observes, the pandemic was proof of the industry’s ability to adapt quickly. “[Hotels] did very good on… how to create new packages, new deals, new offers, play with the rates and the bundles that were created to make them attractive to any customer that was able to travel,” he says.
That adaptability has only strengthened the industry’s resilience in a market now defined by constant change.
“I think resilience is just within the blood of the hospitality industry… and linked to that, innovation,” Morgan shares. “It’s innovation that comes from being a people business. It’s about understanding people’s needs and responding to them.”
In today’s climate, however, resilience has taken on a different shape. Beyond simply bouncing back, it’s about staying alert to where new opportunities may be emerging. Just as travellers now seek meaning in their experiences, hotels, too, must find meaning in the quiet signals of demand picking up.
And this, perhaps, is why Ellison is optimistic.
“We’re seeing encouraging indicators across several of our properties, small surges in demand, particularly around key leisure periods. Spring Break performed exceptionally well, and historically, that tends to signal a strong summer travel season. Early bookings and forward-looking pace reports are starting to reflect that same momentum. While broader economic stability is still a factor, we feel confident saying the industry has likely bottomed out, and the current uptick in demand suggests we’re turning a corner,” he says.
