U.S. President Donald Trump's second term has been defined in part by his back-and-forth plans for tariffs, and the hotel industry has been left to grapple with what these new taxes will do to construction and furniture, fixtures and equipment for upcoming and ongoing hotel projects.
On this year's first-quarter earnings calls, many hotel executives weighed in on how they've been affected and plan to account for tariffs should they be enforced. From cautious optimism to post-pandemic supply chain preparedness, here's what they had to say on the subject.
“There's no doubt that owners are evaluating what's going on with their construction costs and how they're thinking about kind of the elements of kind of raw materials, et cetera. But we haven't seen the pace of construction starts drop. Are they still below 2019 levels? Absolutely. Marriott had the most new-construction starts in the U.S. and Canada in 2024 in the U.S. And we're pleased with what we see, but there is no doubt, to your question, quite a bit of watching to see what looks to be the impact on construction costs. But for the moment, it's steady as she goes in the U.S. and Canada for new constructions.”
— Leeny Oberg, executive vice president and chief financial officer
“There's no doubt [tariffs are] going to have an impact on new construction, on renovation projects. Most FF&E is made outside of the country. Almost all lighting, electrical is made outside of the country, outside of the U.S., so we certainly would expect some impacts in those categories.“
— Jon Bortz, chairman and CEO
“Tariffs, supply-chain stability on those fronts [are] certainly top of mind, but our teams are doing a great job shifting sourcing, bringing production closer to home and negotiating with suppliers to share in the increased costs. There's always been a concern, and you read a lot about the cost of steel and aluminum in the industry, but with us in our type of construction, we're a lot less [worried] about steel and aluminum, much more so focused on lumber, which is a huge driver of cost. Most of our new construction is stick construction, as opposed to steel and aluminum construction. And happily, the administration exempted Canadian lumber from the new tariffs, given I think it knew its impact would be on new construction.
“Then the concern shifts to imported fixtures, furniture, equipment, technology, electronics. But we're optimistic, and I think our franchisees are as well, that the uncertainty that's out there could be relatively short-lived. We've worked through supply-chain disruptions before, and they are increasingly looking to us for help, and our teams are increasingly sourcing domestically wherever possible.”
—Geoff Ballotti, president and CEO
High construction costs resulting from tariffs “was the fear, … and a lot of that has settled down. We came into the year in the U.S. with construction costs kind of trending up kind of mid-single digits, and it hasn't really realized yet. And I think you have to take a little bit of a wait-and-see approach depending on how this all plays out.”
—Kevin Jacobs, CFO and president of global development
Some of the developers working on Hyatt Studios "said that they are putting contingencies in their cost estimations right now that range as high as 20% in terms of cost to build. ... [Some] have identified case-good manufacturers in the United States that they are now working with on an accelerated basis to limit any impact of tariffs with respect to imported case goods.
"A lot of the other materials, as you can imagine, building materials don't ship well in terms of cost, given the weight meaning drywall, lumber, steel, et cetera, and certainly, ready-mix concrete is a hyperlocal business. ... Building cost factors that are not impacted by tariffs at all.
"I was really taken by the ingenuity and the creativity of the group that I talked to. And I think we're going to see more and more of that — discovering and standing up onshore providers of case goods, which historically has been almost entirely coming out of China carpeting, and other hardware is largely sourced from U.S. manufacturers — again, I think a lot of that has to do with shipping costs and so forth. ...
"Necessity is the mother of invention, and our developers are really showing some great ingenuity in how they're approaching this."
—Mark Hoplamazian, CEO and president
“I think it's a little too early to tell exactly how tariff policy is going to play out. We are maintaining our CapEx guidance as we've discussed today. It's the same numbers that we gave you on the fourth-quarter call in February, and we have a diverse group of suppliers for our products. Obviously, the tariff risk is greatest probably whenever you're doing a guestroom given the FF&E that's involved, and it becomes less impactful on other spaces in the hotel."
—Jim Risoleo, president and CEO
"On tariffs specifically, we've got a great in-house design and construction team that's been actively managing through the impact. It's worth noting the tariffs situation is dynamic, because we haven't had a final resolution announcement in countries. But that being said, our team has done a line-by-line assessment of what the impact would be, assuming that whatever was announced comes into place.
"And so we have a team that really drills down a little further, FF&E is the only part of the CapEx that would be impacted by the tariffs. That's roughly historically 40% of renovation costs.
"As part of COVID, we diversified away from countries that would be impacted by the tariffs, not because of tariffs, but because we wanted to diversify our distribution channels.
"Today, only about 10% of our FF&E comes from China. That's down from 40% pre-COVID. So I think we've done a good job through our in-house design and construction team of diversifying away from the risks."
—Sean Mahoney, chief financial officer
"It's a bit of a difficult answer because it really depends on which types of renovations you're talking about.
"I think — and this kind of goes to complexity — that most people are in leadership positions and buying stuff from overseas or making decisions about it.
"I'll give you an example. We were renovating our hotel in Phoenix. We went very quickly from trying to understand what storage options were for a large order of FF&E that was being made in Vietnam to getting it on a boat as fast as possible when the tariffs were pushed back for 90 days so that we could get that FF&E in before the tariffs were reinstituted. So I think we're trying to be pragmatic without understanding exactly what the future is going to look [like]."
"I think for the summer window, the stuff that we have on order is likely all going to come in before the tariffs are imposed again. For the stuff that we have slated to start in November, we're at a bit of a pause trying to understand what the landscape is going to look like."
—Jeff Donnelly, CEO and director
“We are closely monitoring the potential impact of tariffs, which may result in increased costs and delays for some of our planned projects, though there are no known delays at this time.”
“Historically, we've spent between 5% and 6% of revenues, fairly consistently, on CapEx. The $80 million to $90 million is roughly in that range that we anticipate spending this year …
"When we look at that and we look at our exposure to tariffs, it's a fraction of the total amount that we intend to spend. And in today's environment, there is a tremendous amount of noise. … I think relative to our peers, we have a meaningfully stronger balance sheet and feel absent a massive pullback, which we do not currently anticipate in the broader macroeconomic environment. It's prudent for us to proceed and to perform the renovations as we currently intend. We're certainly mindful of watching tariffs and the potential impact on both the timing and delivery of goods and the overall cost and have an ability and flexibility to make adjustments to our total spend by pushing projects or pulling projects forward. But as of today, where we sit, we feel very comfortable with our expected spend for this year. And I should highlight also that to the extent we're renovating and our peers are not, we see that as putting us in a competitive advantage where we own assets in the same market.”
—Justin Knight, CEO, Apple Hospitality REIT
“Look, we've got tremendous uncertainty right now for all the reasons that we all know, geopolitical — obviously, the tariffs, obviously leading to trade wars. Uncertainty is the enemy of decision-making, so I think for many business leaders, men and women, they're probably hesitant. They're probably pausing in many situations and certainly being cautious. No difference in what certainly we're seeing and probably a lot of our peers, hence the reason that I think everybody's been sort of a little more cautious on forward guidance.”
— Thomas Baltimore Jr., chairman and CEO
