Why Hotel Industry Is Scaling Back Development

The hotel industry appears to be the latest victim of a declining U.S. travel industry and inflation.

A new member survey conducted by American Hotel & Lodging Association (AHLA), which represents all segments of the industry, found that “rising costs and uneven demand challenges are placing a significant strain on hotel investment and operations."

The survey, conducted in late August, featured input from nearly 400 hotel property owners and operators nationwide.

According to the survey, development and renovation plans remain under pressure, with 32 percent of respondents now saying that they're delaying investment projects.

Meanwhile, 24 percent of respondents said they are “scaling back” such plans, and 8 percent of survey participants have decided to scrap development or renovation plans altogether.

Just 8 percent of property owners and operators said they intend to move forward with new investments amid the current economic downturn in the United States.

Also noteworthy, nearly half of the AHLA survey respondents (49 percent) reported being understaffed, underscoring ongoing workforce challenges that add to financial uncertainty.

Hotel room demand, meanwhile, continues to slump. Hotel industry respondents indicated that leisure travel continues to soften with 30 percent of hotels seeing declines in completed leisure stays and 26 percent reporting drops in upcoming bookings compared to the same period last year. Business, group, and government travel also showed softness, with 15–17 percent of properties reporting decreases.

The decline in hotel room demand comes at a time when numerous reports have indicated international travelers are increasingly opting to visit other countries in response to the Trump Administration’s policies and rhetoric.

In particular, the number of Canadian travelers, (who were the top source of international tourists to the United States last year) has declined precipitously since January.

The latest figures from Statistics Canada, released last week, show that Canadian return trips from the United States, whether by air or by car, continue to plummet at historic levels.


In August 2025, Canadian-resident return trips by air from abroad stood at 1.6 million. And while the number of returning Canadian-resident trips from overseas countries increased 6.6 percent from August 2024 to 1.2 million in August 2025, the number of returning Canadian-resident trips by air from the United States declined 25.4 percent to just 423,100.

Looking at travel by automobile, the figures are even more revealing: In August 2025, the number of Canadian-resident return trips by automobile from the United States totaled just 1.9 million. That figure represents a 33.9 percent drop from the same month in 2024. Moreover, August 2025 marked the eighth consecutive month of year-over-year declines in Canadians returning by car from the United States.

As has been widely reported, Canadian visitation to the United States began freefalling shortly after President Trump returned to office and rolled-out steep new tariffs on Canada, a longtime, historic ally of the United States. Canadians have also been turned of by Trump's talk of annexing Canada or making it the 51st state.

Our neighbors to the north are not the only ones avoiding the United States this year. A survey conducted by CNBC found that Southeast Asian travelers largely find the United States less appealing then in previous years.

The survey showed that more than half (55 percent) of Singaporeans said that their interest in travel to the U.S. has decreased since January. Meanwhile, just 7 percent of Singaporeans said their interest in visiting the United States has increased this year.

Some of the reasons this particular demographic cited for their decision to avoid the U.S. include concerns about personal safety in the U.S. (+13 percentage points); possible discrimination or poor treatment while in the US (+17 percentage points); actions by the Trump administration (+18 percentage points); gun violence (+20 percentage points) and border detentions (+13 percentage points).

In addition to travelers opting to visit other countries, new policies have been rolled out by the Trump Administration that make it more difficult to visit the United States including changes in visa policies and new costs for international visitors, along with new restrictions around short-term visas.

Amid declining tourism, along with recently renewed inflation that’s impacting costs in the United States, hotels say they are pausing some expenditures.

“Hotels are eager to invest in their properties and communities, but rising costs and uncertain demand are forcing many to put projects on hold,” AHLA President & CEO Rosanna Maietta. “It’s been a tough year for hotel operators, especially our small business owners. As Congress gets back to work, we’ll be focused on advancing policies to spur travel and ease operational pressures, and provide our industry the certainty it needs to grow, create jobs, and strengthen local economies nationwide.”

The survey was conducted between August 21 and August 29, and included input from 387 property owners and operators. Taken together, the results illustrate an industry still grappling with cost pressures and shifting demand patterns while working to maintain operations and plan for the future. 

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