A month after President Donald Trump returned to office, the ongoing rhetoric around tariffs against Canada has likely affected travel flows from Canada to the United States.
In the submarkets along the Canadian border, hotel room demand has declined between 1% and 12% in the 28 days ended Feb. 22. This stands in sharp contrast to the United States demand increase of 1.9% for the same period.
On the campaign trail, then-candidate Trump had promised his supporters tariffs on Canada to force the government to do more to stem the inflow of drugs to the United States. Via executive order, President Trump announced tariffs on Feb. 1, only to pause them for 30 days on Feb. 3. Last week, the president changed his mind and the tariffs went into effect on March 4.
Many hotels near the Canadian border benefit from cross-border traffic by tourists and corporate transient travelers. However, since tourism spending is discretionary, it is easy to redirect it. That has probably happened over the past four weeks as room demand decelerated.
There are possibly other drivers for the decline, among them the strong U.S. dollar and the winter weather. However, since both factors were already present last year, the change in demand can at least partially be explained by the change in the administration’s rhetoric.
Saturday night hotel demand declines in submarkets with major land border crossings were even more severe. Historically, Saturday demand is driven by leisure travelers, and the online campaigns to “Buy Canadian” likely contributed to the rapid consumer reactions and demand deterioration.
Looking ahead, if tariffs remain in place for the foreseeable future, more Canadian consumers may ”vote with their wallet” and stay within Canada rather than take weekend trips in the United States. It is still too early to tell if there will be an impact on states such as Florida and Arizona, which traditionally welcome Canadians for the winter season. For now, hotel markets with a large Canadian customer base could see continued demand and occupancy declines in the coming quarters.