Tariffs And Travel Restrictions 'Kneecap' Hospitality Recovery In Chicago And Beyond

Chicago’s hotels came roaring back in 2024, with record-setting revenue fueled by major events like the Democratic National Convention, Lollapalooza and other major draws. 

But just months later, a flurry of federal policy shifts, including steep tariffs and immigration crackdowns at airports, borders and other tourist waypoints, has clouded the outlook for the remainder of the year.

International tourism, an important segment for hoteliers in Chicago and other cities, is already experiencing meaningful declines. Now, industry figures warn geopolitical uncertainty is likely to further undercut momentum operators worked years to rebuild in the wake of the pandemic.

“It's going to drop tourism, period,” said Richard Mandigo, Midwest advisory leader for CBRE hotels advisory. “Originally, and as recently as last month, we were assuming that we were going to have more international tourists.”

Since then, “a lot of the policies that came out have really thrown a monkey wrench into those [projections],” Mandigo said. ”People don't feel safe coming to America, and so they're just not going to visit.”

Even last month, when Mandigo and others were still predicting tourism increases, total overseas travel to the U.S. was already down 11.6% year-over-year, excluding figures from Mexico and Canada, according to a preliminary March report from the International Trade Administration. 

Analysts from Goldman Sachs told clients in a recent note that under a worst-case scenario, the country could lose as much as $90B in combined revenue this year from the dual impact of a decline in visits and canceled purchases of American goods.

Some of the world is voting with their wallets. On April 2, or “Liberation Day,” President Donald Trump unveiled sweeping tariffs on nearly every country in the world, angering many would-be international visitors. Those consumers are deciding to travel elsewhere, increasing research shows.

Others are staying away due to fear. Reports of tourists getting detained for weeks at U.S. borders, in airports and elsewhere have further chilled international sentiment.

“In a market like this, it's very difficult to see too far into the future,” said Robert Habeeb, CEO of Maverick Hotels and Restaurants. “We're revising our operating plans very consistently.”

Illinois is among the states to profit from a travel turnaround that was gathering pace as of late last year.

The state saw almost 2.2 million international visitors in 2023, the most recent year statewide data is available, and international visitors injected nearly $2.7B into the state's economy that year. Canada was the leading market for international visitation, with 627,000 tourists visiting the Land of Lincoln. Mexico, India, the UK and Germany rounded out the top five countries of origin for international travelers. 

International visitors have historically made up between 10% and 12% of Chicago’s overall hotel revenue, a meaningful metric. Foreign visitors tend to stay longer and spend more than their domestic counterparts, Habeeb said.

At the moment, broader international sentiment includes negative feelings toward the U.S. over tariffs, immigration and other policies. But Habeeb thinks that could dissipate over time, even if the short-term hit is sharp and fast.

“There are people who believe that inbound travel will probably — for the next 12 months anyway — be weak,” he said. “In general, we see a weakness.” 

A downturn might take time to materialize in the data. 

So far, demand from international tourists outside of Canadians isn’t meaningfully declining, Amber Ritter, chief commercial officer at the Chicago Department of Aviation, said at an industry event last week.

Still, Ritter said the department is “concerned about the future of international travel in this climate,” according to WBEZ Chicago.

International numbers in Chicago are at “record highs,” she said. But while most airlines haven’t changed their routes,  she said some aren’t sure if they want to add service in the current climate. 

Chicago’s hotel revenue and hotel tax revenue reached all-time records in the central business district in 2024, potentially signaling the city had moved past the worst of the pandemic lows. Hotel revenue eclipsed $2.8B in the CBD last year, while tax revenue was about $157M, according to a January 2025 hotel CBD report from Choose Chicago. 

Revenue projections earlier this year suggested a “small but upward movement” across a lot of markets, Mandigo said.

Now, the industry is struggling to revise its forecasts for the remainder of the year as it absorbs another black swan event, he said.

Those take a long time to properly untangle. 

A Choose Chicago report, released before the flurry of federal action that has shaken up the international travel landscape, forecast demand levels exceeding 2019 records in 2026.

“It kneecaps the city and their ongoing efforts,” Mandigo said. 

“It is not the same market that it was a month ago,” he added. 

Habeeb said his company projects that there will be a slight revenue per available room decline in 2025 compared to 2024.

Even though the city has seen revenue gains back to prepandemic levels, profitability hasn't really moved because of cost escalation, he said. That has put everyone in “cost contingency mode.” 

“Everyone is looking at that as our new normal, and saying, ‘OK, what can I do to reduce costs?’” Habeeb said.  

The service industry finds it harder than others to cut workforce because there is often a direct correlation to the guest experience, he said. Instead, operators are running tighter schedules with fewer managers and keeping a closer eye on their acquisitions and property inventories. Wage increases may be less generous, too.  

Habeeb sees a return to a functioning business environment — eventually.

But it will come after a “constant gyration of headlines in both directions that's going to leave things unsettled.”

“I'm an optimist,” Habeeb said. “The administration is doing some things that are out of the box. And out-of-the-box things — some of them go well, some of them blow up. But at some point, you have to settle back to the business of doing business. And when that happens, you're in a new environment.”