LONDON — Both U.S. and European travelers are citing a mix of economic, political and perception-based reasons for reducing transatlantic vacations and hotel stays.
U.S. travelers are avoiding Europe due to high travel costs, with tariffs having created inflationary pressure, budget concerns and reduced disposable income; a weaker U.S. dollar; a preference for domestic travel due to time restraints making Europe less attractive, and the perception that Americans are less welcome.
In the other direction, European travelers are avoiding the U.S. for political reasons, including a backlash to U.S. tariffs and other policies; concerns about U.S. border policies and treatment of international visitors; more difficulty in obtaining visas; and high airfares.
On the bright side, U.K. and European guests saved a significant amount of cash during the pandemic. Despite there being robust spend during the so-called “revenge travel” period following the ending of lockdowns, there remains a good amount of personal savings earmarked for travel.
A recent roundtable of 20 hoteliers and lenders co-hosted by Allied Irish Banks and Horwath HTL identified economic uncertainty and taxation as chief concerns for the U.K. hotel industry. Notable among these concerns is the October 2024 decision to raise employer-paid National Insurance contributions as of April 2025.
These higher costs are already being felt by hotel guests, said Cathal O'Connor, AIB's head of corporate banking and asset-based lending for the U.K., in an interview following the roundtable.
O'Connor said the U.K. hotel industry has remained resilient despite “particularly stiff headwinds,” particularly as overall hotel performance is largely flat year over year.
“We are seeing that resilience. Businesses are challenged with input cost inflation, changing tourism patterns — that may not be fully known for another six months — and rate tension,” O'Connor said. “There is a delicate balance in driving cost efficiency and balancing rate inflation for the sector’s end customers, with operators in different parts of the market seeing different price elasticity dynamics.”
Cost management measures and the interest-rate environment are tempering the pace of hotel investment decisions and mergers and acquisitions, O’Connor said.
O’Connor's colleagues at Goodbody London, an AIB subsidiary, acted as key advisors in the recent Pandox and Eiendomsspar acquisition of Ireland-based Dalata Hotel Group.
“There are good opportunities still progressing,” he said.
Definite decline
While group and corporate travel have been making strides to recover to pre-pandemic levels, the swirling political noise might cause a share of this international business to stay in domestic markets on the same side of the Atlantic or lead to trip cancellations.
Dirk Bakker, head of hotels for Europe, Middle East and Africa at Colliers, said there are clear, early signs of a decline in U.S. guests at European hotels, though the picture is mixed.
“Forecasts for U.S. arrivals to Europe in 2025 have been downgraded from 4% to 2.5% [increases], with business travel slowing sharply from 15% to 5%," he said. "Economic pressures from U.S. tariffs and inflation are reducing household incomes, leading Americans, especially in lower-income groups, to cut back on long-haul travel. A weaker U.S. dollar is also making Europe more expensive, contributing to shorter trips and lower overall spending.”
This is important as U.S. travelers accounted for approximately 35% of all non-European arrivals to Europe in 2024, Bakker added.
Paul Mitchell, AIB’s director of corporate hotels team in the Republic of Ireland, said there's clearly less softness among higher-income travelers.
“The U.S. luxury traveler continues to be an important segment for Europe," he said. "While less sensitive to economic headwinds, this group is more attuned to political and social dynamics. Europe’s strong cultural offering and premium experiences still resonate, but destinations need to stay agile to retain that interest."
Ongoing global volatility is influencing travel flows, and the fact the euro is currently stronger against the U.S. dollar than the British pound affects tourist flows.
David Goodger, managing director for Europe, Middle East and Africa at Tourism Economics, said his firm estimates that Western European travel to the U.S. could drop 5% for the year.
“Negative sentiment effects following tariff announcements are offsetting any affordability gains," Goodger said. "Latest monthly arrivals data shows notable falls from France, Germany and Netherlands. There have been falls in some months from the United Kingdom, but the overall trend from that market is for softer growth than we have seen in prior years.”
Countries in Europe that are vulnerable to reduced U.S. arrivals include the U.K. — where 20% of tourism spend typically comes from the U.S. — and Ireland (19%). Italy, Norway, Portugal and Switzerland each see about 10% of tourism spend from the U.S., Bakker said. U.S. spend in France and Spain, two of Europe’s dominant hotel and tourism destinations, contributes between 7% and 8%.
Early indications from 2025 data is those numbers will decrease for the full year, Bakker said.
“The shift is economically and sentiment-driven, with long-haul travel increasingly seen as a luxury for higher-income brackets,” he said.
Luxury hotels in Europe will be more resilient to these changes than other segments, which are vulnerable to adjustments to trip length and accommodation quality in response to cost pressures, Bakker said.
“Transatlantic-focused operators, that is, those concentrated in European gateway cities, are also more exposed, particularly those without strong regional guest bases,” he said.
Currency shifts aren't likely to mean more international travel to the U.S. for the time being either, said Catriona Taylor, AIB’s head of hotels and leisure in the U.K.
“While a weaker dollar technically increases spending power for European travelers heading to the U.S., broader factors like rising living costs, reduced disposable income and geopolitical uncertainty are weighing more heavily on decisions,” she said.
U.S. hoteliers also cannot expect a windfall of Europeans seeking cheaper holidays, Bakker said. In March 2025, arrivals from Western Europe to the U.S. were down 17% year over year, he said. However, there was a 12% rise in April due to the timing of the Easter holidays, which might be a temporary spike, he added.
“May 2025 data showed a renewed drop of 5.5% in visas issued to Western Europeans and a 4.5% drop in total visitors, leaving year-to-date figures 2% below 2024 levels," he said. "While a weaker dollar might typically encourage more inbound travel to the U.S., it has not been sufficient to reverse the decline, which is more strongly influenced by tariffs, stricter border policies and geopolitical sentiment."
Americans also are considering what they think are friendlier European destinations, with Greece and Portugal high on that list, Bakker said.
Emma Young, AIB’s head of syndication finance for the U.K., said in the longer term she expects mixed demand patterns to continue.
"Outbound European travel to the U.S. may remain cautious, while into-Europe travel looks more stable. Overall, demand is there, but affordability and confidence will shape how and where people travel in the months ahead,” she said.