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'Confusion, chaos and uncertainty' of current administration weigh on US hotel industry, economist says

Bernard Baumohl of The Economic Outlook Group outlines short- and long-term worries and opportunities
The Economic Outlook Group's Bernard Baumohl talked tariffs, Trump and the ways politics and the economy are linked. (Stephanie Ricca)
The Economic Outlook Group's Bernard Baumohl talked tariffs, Trump and the ways politics and the economy are linked. (Stephanie Ricca)
CoStar News
October 9, 2025 | 2:21 P.M.

PHOENIX — The U.S. has reached a point where “it’s really difficult to disentangle the politics from the economics,” and the results aren’t positive for the hotel industry, said Bernard Baumohl, chief global economist for The Economic Outlook Group.

Addressing The Lodging Conference in Phoenix this week, Baumohl laid out a picture of substantiated uncertainty, calling it “truly one of the more bizarre moments in U.S. economic history we’re dealing with.” 

“With President Trump, we’re jumping into the unknown,” he said. “It’s causing a lot of confusion, chaos and uncertainty.”

"Over the last nine months, we have strayed so far away from the norms of economics, politics and the law, that it’s virtually impossible to predetermine the course of the economy with any degree of confidence or accuracy beyond the next couple of months," he said.

The major factors contributing to the cloud of uncertainty — tariffs, high inflation, cross-border alienation, the current government shutdown — have short- and longer-term consequences for the hotel industry, he said.

“In the last 24 to 36 hours, we've been hearing more stories about air traffic controllers. These are federal employees who are paid by the government — but not now. Air traffic controllers are calling in sick,” Baumohl said. “And if this escalates with air traffic controllers and TSA employees, this is going to shut down travel.” 

He also worries hoteliers are giving up pricing power. According to the U.S. Bureau of Economic Analysis, traveler spend on lodging away from home fell drastically this year beginning in March, but hotel occupancy didn’t fall as much. 

“That raises the question whether the industry has given up too much pricing power,” he said, adding that it’s happening at a time of record low hotel supply, alongside data from TSA and airlines showing more people flying and paying higher prices for plane tickets. 

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4 Min Read
October 08, 2025 09:19 AM
Hotel executives and analysts speaking at The Lodging Conference warn the uncertainty that has persisted this year is likely to continue in 2026.
Trevor Simpson
Trevor Simpson

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But despite the negatives, Baumohl pointed out the U.S. stock market strength, historically tight credit spreads, relatively low unemployment rates and data showing Americans continuing to spend money on everything from eating out to travel to washing machines — factors that can benefit parts of the lodging sector. 

“I don’t see any evidence of recession,” he said.

Calling recessions more psychological than economic, Baumohl said the true breakdown comes “when Americans have a complete loss of confidence in the vitality and the progress in the economy.”

“I think there's just a lot of confusion and uncertainty acting as a drag on economic growth,” he said.

Some of the harder factors at play such as tariffs and interest rates will have an effect on the business of operating hotels: budgeting, capital expenditures planning and the ability to finance hotel transactions.

But what about the willingness of people to spend money on travel? Deciphering consumer confidence in today’s environment is tricky, Baumohl said.

“Consumers are carrying a record amount of debt and interest rates are still fairly high, … but we’ve seen household net worth increase to record high levels,” he said.

Retail and restaurant sales are climbing, too, all leading Baumohl to remind the audience that all consumer behavior is not the same and definitions of “discretionary spending” vary wildly.

“It could very well be that households are carefully making distinctions when it comes to discretionary spending,” he said. “Maybe we don’t need a TV, but boy, I want to maintain my lifestyle, because there are too many stressors and too many pressures in life right now.

“That’s the kind of psychology I think is happening right now,” he said.

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