The Impact of Uncertainty: Geopolitical Dynamics and U.S. Travel Industry Trends

Uncertainty is undeniably pressuring pricing

Four major forces are contributing to a volatile travel environment:

• Tariffs and trade disputes, especially those involving China, create confusion in the market.

• Border controls and immigration policy changes have added friction for international travelers.

• Political polarization has altered the perception of the U.S. abroad.

• Economic uncertainty and decline in traveler confidence has softened both business and leisure travel.

Together, these forces are causing international travelers (especially from Canada) to rethink their plans.

Canadian travel to the U.S. takes a dive

Canadian outbound search data reveals a dramatic shift. Searches for travel to the U.S. have dropped 9.3 percentage points year over year. Meanwhile, domestic Canadian travel and alternative destinations like France and Mexico are seeing increases.

In fact, data shows that Canadian bookings to the U.S. dropped by nearly 30% in Q1 2025. By contrast, Mexican travel patterns to the U.S. have remained relatively steady, suggesting that the Canadian pullback is more politically and socially driven than economically rooted.

Pricing patterns reflect uncertainty

Here’s where things get real for revenue managers.

• U.S. hotel pricing fell across all 245 days measured from May to year-end, with an average 2% decline month-over-month from March to April.

• Canada, on the other hand, saw price increases, as travelers opted to keep their dollars in Canada and travel domestically, leading to an uptick in hotel demand (and in turn, prices)

This divergence highlights a golden rule: understand your demand sources. Markets that rely heavily on international travel are most at risk in the current environment for losing pricing power.

Drive-to markets thrive, gateway cities struggle

In contrast, secondary and tertiary markets (those with less international exposure) are showing much smaller pricing declines, under 1% in some cases.

Take for example Sedona, Arizona, which is a case study in resilience. With > 80% of its visitors arriving by car, it's largely shielded from international fluctuations. Hotels there have successfully pushed rates higher across more than two-thirds of dates measured.

Destinations like Washington, D.C., Los Angeles, Miami, and Las Vegas are experiencing significant price corrections (up to nearly 6% drops in D.C. alone). These cities rely heavily on international demand, especially from long-haul travelers. When that demand dips, the pricing strategy has to adapt quickly.

Looking ahead: Cautious optimism for 2026

While the Summer of 2025 is expected to remain soft, there's a glimmer of hope.

• Q4 2025 pricing starts to stabilize, with December showing signs of year-over-year growth.

• Early 2026 looks promising, with forward-looking data indicating a return to rate increases in January through March.

Still, as Blake and Daniel pointed out, this optimism comes with a caveat: “for now.” In a climate as dynamic as this one, flexibility and vigilance will be key.

Final takeaways for hoteliers

1. Know your market’s dependency on international travel. The more reliant you are, the more exposed you are to geopolitical fluctuations.

2. Use forward-looking search data to your advantage. Changes in traveler interest are leading indicators of where demand (and pricing opportunity) will land.

3. Drive-to and domestic-heavy markets are more insulated in the current environment. If you’re in one of these, lean into pricing opportunities.

4. 2026 planning starts now. Use current data to inform your commercial strategy for the next year, but stay agile as conditions evolve.

In an era defined by volatility, clarity is a competitive advantage. That’s where Lighthouse shines, helping hospitality professionals understand, adapt, and optimize in real time.