U.S. Government austerity measures concerning travel becomes a drag on U.S. hotels

According to an analysis by French business travel publication Voyages d’Affaires, the U.S. hotel industry increasingly suffers of budget tightening across federal and local agencies regarding travel. The effects of the recent government shutdown are further amplifying financial pressures already building for months.

In an environment marked by austerity, workforce reductions and political uncertainties, a once-reliable pillar of demand—government travel—is collapsing, analyzes Voyages d’Affaires. It consequently create a ripple effect across local economies and hospitality businesses that traditionally rely on a steady flow of officials on the road.

Hotels’ financial results in Q3 25 demonstrate the austerity effect

Long before the shutdown took effect on October 1, the impact was clear in hotel companies’ third-quarter earnings. IHG, whose Holiday Inn brand is a staple for government travelers, said such travel remains about 20% below last year, according to CFO Michael Glover.

Marriott has seen a 15% year-over-year drop, CEO Anthony Capuano told analysts. Wyndham CEO Geoffrey Ballotti added that weaker demand in the economy and mid-scale segments is closely tied to shrinking government travel budgets.

The fallout is visible in performance metrics: Wyndham’s U.S. RevPAR fell 5% in Q3, while Hilton cited reduced government spending among the drivers of its 2.3% RevPAR decline in the U.S. market.

International tourists shunning the USA add to hotels’ woes

The downturn comes alongside another challenge of fewer international visitors this summer, tells Voyages d’Affaires. Combined, the two trends have pushed STR to forecast a marginal 0.1% decline in U.S. hotel demand for full-year 2025, with average daily rates expected to grow only 0.8%.

STR notes that the shift from early-year optimism to today’s caution stems from instability under the new administration and uncertainty surrounding budget priorities.

U.S. hotel occupancy fell year over year for an eighth consecutive month, according to October 2025 data from CoStar, a global provider of online real estate marketplaces, information, and analytics in the property markets.

Washington, D.C., unsurprisingly, is one of the hardest-hit markets. RevPAR in the capital dropped 6.7% from April to September compared with 2024, and 7.6% in October alone. But other major cities are faring even worse: Atlanta, Houston, Miami, New Orleans and Tampa all reported deeper declines among the top 25 U.S. hotel markets.

Meanwhile, strength in corporate and upscale leisure segments is partly offsetting the losses. Large companies, Marriott’s Capuano noted, are showing “encouraging strength,” even as some smaller firms remain cautious in a volatile economic environment. IHG reports 2% growth in U.S. corporate travel, and CEO Elie Maalouf points to healthy indicators across airlines, Amex’s results and TSA passenger volumes—resilience that has persisted despite the shutdown.

Looking ahead, Hilton CEO Christopher Nassetta is meanwhile upbeat about 2026. He expects a surge in travel tied to midterm elections, a year-long celebration of the United States’ 250th anniversary, and the FIFA World Cup. All three, he said, should deliver “meaningful tailwinds” for the U.S. hotel industry.

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