There are any number of broad economic factors that could impact the U.S. hotel industry in 2025, and we've collectively discussed many of them ad nauseam leading into the New Year.
We all have a general sense — if not a strong grasp on the specifics — of where interest rates are going. We have a feeling on how both consumer confidence and investment sentiment are trending. And we've all fixated on the power of inflation so much in recent years that we're all probably tired of it — both in its effect on our wallets, business and mental bandwidth.
But the one thing that we all need to worry about that seems to be clearly heading in the wrong direction is the strength of the U.S. dollar.
Hoteliers in many gateway markets are no doubt keenly aware of the impact a strong U.S. dollar has had on inbound international travel in recent years, and that continues to be a significant headwind along the West Coast and Hawaii, in particular. A weak yen versus a strong dollar has largely kept Japanese travelers, who make up a large part of Hawaiian demand, at home versus on Hawaiian beaches.
And we're starting the year moving in the wrong direction. Just yesterday the U.S. dollar hit a two-year high, coming off a strong 2024 no less, according to news agency Reuters.
This not only keeps international travelers from hitting U.S. shores, but it also makes it more attractive for American travelers to head overseas, as we've seen in the historic waves of travel to Europe and Japan, among other destinations.
Basically, all major international currencies lost ground to the dollar in 2024, making our country increasingly expensive and others less so.
Economists and experts on currency exchange seem to believe this will be an ongoing trend in 2025, and the reasons for that — a strong overall economy and jobs market and continued growth in the stock market — are all positives on the whole, but we can't underestimate how much of a challenge the currency trajectory is.
In years past, hoteliers have often looked at the trajectory of currency as a short-term issue. While the dollar has been strong at some points, it's been weaker at others, which kind of evens out the international demand picture. But if this continues to be a longer-term trend, and if the U.S. loses its status as a favorable international destination because of things such as visa wait times or other bureaucratic challenges, this could turn into a massive dead weight holding back the growth potential of international gateway markets all around our country.
Hopefully, that's not the case.
Let me know what you think on LinkedIn or via email.
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