Realignment of travel demand patterns

Across major and secondary hotel markets, we are observing the effects of travel behavior changes prompted by evolving federal regulations. As strategic advisors to the hotel sector, we assess how demand shifts are impacting performance, and what that means for future positioning.

Emerging signals in our market reviews include:

• Lower inbound travel volumes stemming from redefined visa and entry policy frameworks
• Noticeable softening in key international feeder markets, leading to underperformance in select urban hotels
• Group and institutional travel moderation, in part due to budget tightening among public entities and organizations

These changes are prompting reconsideration of location-specific demand forecasts, especially for properties tied to international arrivals or seasonal group activity.

Perception, sentiment, and the flow of capital

Hospitality value isn’t driven by occupancy alone—it is shaped by confidence, forward bookings, and investor sentiment. The current environment has introduced perception risk into U.S. travel markets, particularly among foreign capital sources and long-haul guests.

In our ongoing consulting and valuation engagements, we are seeing:

• Greater scrutiny of revenue assumptions tied to cross-border visitation
• Extended transaction timelines due to hesitancy around near-term cash flow volatility
• Discounted buyer expectations in urban gateway assets and internationally branded portfolios

While these conditions are highly nuanced by geography and segment, they reflect a broader pullback in optimism surrounding top-line performance in certain hotel markets.

Federal spending policy and its ripple effects

Spending policy reforms aimed at cost containment are already affecting federal travel behaviors. For hospitality assets tied to this segment—especially those in capital cities, military-adjacent regions, and transportation hubs—the effects are quantifiable.

From an advisory standpoint, we are assisting clients in:

• Analyzing risk exposure to contract-based and government-issued business
• Forecasting occupancy and ADR impact where weekday demand was historically driven by institutional travel
• Reassessing investment timing in markets reliant on predictable public sector revenue

These scenarios necessitate recalibration of both income-based valuations and underwriting assumptions, particularly for assets where a material percentage of demand is federally linked.

Navigating policy risk in hospitality investment

While the service side of the travel economy is not directly affected by trade policy, the cascading effects of tariffs, inflation potential, and market unpredictability are affecting capital allocation decisions. For many of our clients—developers, operators, and investors—this environment has brought new layers of complexity to feasibility assessments and portfolio strategies.

Horwath HTL’s advisory frameworks now include:

• Stress-testing market forecasts across regions most affected by regulatory change
• Layering scenario analyses into models to better account for policy-induced volatility
• Guiding repositioning strategy for assets with decreased pricing power or diminished competitive advantage

This is not a reactive process—it is proactive repositioning based on emerging economic and policy signals.

Interpreting the investment horizon

Transaction velocity has slowed in several hotel markets, and underwriting standards have tightened. At the same time, the changing policy landscape has not uniformly affected all hospitality segments. In fact, opportunities are emerging in counter-cyclical or domestically focused asset classes.

Among the trends we are highlighting in client engagements:

• Increasing segmentation in value trends, with differentiated risk premiums by region and chain scale
• Shift in investor focus toward drive-to leisure destinations, midscale product, and assets with limited foreign dependency
• Liquidity gap in select urban assets, where buyers and sellers are recalibrating expectations

In our work advising hospitality ownership groups and institutional investors, we are seeing both caution and strategic positioning. Those with a long-term view are beginning to reassess when and how to re-enter at recalibrated pricing.

Outlook on hotel value adjustments

Based on our ongoing reviews and transaction advisory mandates, we are observing evidence of declining values across select hotel markets. These declines are not uniform, but are concentrated in assets and portfolios with exposure to reduced inbound demand, government budget contractions, and diminished group travel activity.

This pattern is not without precedent. In past cycles, we have seen policy-driven slowdowns precede periods of active market realignment—often creating advantageous entry points for disciplined investors. The current situation appears to be following a similar arc.

While volatility remains a near-term reality, the repricing already underway will likely establish a more attractive investment runway. As such, we are advising our clients to remain attentive, flexible, and analytically grounded in their evaluation of timing, risk, and opportunity.