US policy changes, job cuts threaten growth

Led by the newly created DOGE (Department of Government Efficiency), the Trump administration has vowed to slash some 10% of the federal workforce with government employment falling by 10,000 in February alone. In addition, an executive order now requires government agencies to prohibit travel without written approval and for federal agencies to create a system that records approval for federally funded travel for conferences and other non-essential purposes.

Uncertainty and volatility about government policies, including funding and tariffs, are causing paralysis in the private sector as well as the government sector. That uncertainty is now affecting the market and the ability of businesses to plan causing a broader pause or wait-and-see approach.

Joseph Bojanowski

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Joseph Bojanowski, president, Chevy Chase, Maryland-based PM Hotel Group, insisted that some of these new polices and job cuts are among several factors that will potentially hamper industry performance.

“The executive order will have a negative impact on government transient travel and meeting and event travel. It further adds to the already negative impact to government-related travel, and tourism-related travel, as a result of the large-scale reduction of federal jobs, the decreased support for travel infrastructure, such as national parks and monuments, and the cancellation of conferences and events,” he said.

Larry Cuculic, president and CEO, Phoenix-based BWH Hotels, reinforced the point from the perspective of a large brand company.

“Businesses like stability and predictability and any policies that can impact the way you like to do business are always a challenge. Fortunately, we’re a global company and the global economy continues to show resilience and consumer confidence,” he told Hotel Investment Today.

Mitch Patel, founder/CEO, Vision Hospitality Group—and current chair of the AHLA (American Hotel & Lodging Association)—also acknowledged the influence of some of the policy changes.

“We’ve seen a huge impact at many of our hotels because of these policy initiatives. It’s not across the board, but for those hotels that relied on more government business that has tapered. We will definitely be re-forecasting for lower occupancies and lower revenues,” Patel said.

Providing some tangible examples, Patel noted the Chattanooga, Tennessee-based company’s portfolio includes several hotels outside of Nashville “that were getting a tremendous amount of IRS training business and that has been reduced down to almost zero.”

Patel further pointed out that the company’s Hyatt House Denver/Aurora—located in close proximity to several large area hospitals—has been affected by government grants that have been frozen.

Patel, however, did acknowledge the impact of the federal policies is “very localized,” while estimating that government-related business represents some 3% of the overall travel pie.

Meanwhile, the Washington, D.C. area is the U.S. market likely to feel the greatest impact from the policy changes, according to executives.

“One would think that the net impact of the layoffs will be negative for the D.C. economy, in general, and have a cooling-off effect on the demand growth experienced over the last years, as well as the growth forecasted for 2025,” Bojanowski said.

Cuculic added, “Federal workforce reductions and travel policies will create instability in the travel sector in regions with a high concentration of government employees and contractors.”

Market by market

Jan Freitag, senior vice president of Lodging Insights, STR, also acknowledged the potential impact regionally.

We’re seeing more of a 7- to 14-day booking window when it was a little bit more than that before. That’s not just from the government impact, but in general with corporate travel. So, it’s a little concerning to see that.

Mitch Patel

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“Certainly, on the local level we expect impact in the markets that have a large federal workforce, such as Kansas City, San Diego and Washington, D.C., obviously,” he said, adding it is “way too early to tell” what the impact would be on a national level in terms of overall performance.

A more detailed look at the numbers for the overall U.S. lodging industry reveals that while January showed “really strong” RevPAR growth of 4.5%, that can be somewhat misleading, according to Freitag. He cited a handful of unique circumstances and events, such as the presidential inauguration, the NCAA football finals in Atlanta, hurricane Helene, and the wildfires in Los Angeles, all of which drove hotel demand up in January for a handful of markets.

However, Freitag noted that outside of select markets RevPAR growth was more along the lines of 2%, describing performance as more of a “market-by-market” proposition.

In line with that, and some of the economic headwinds, Patel noted the company’s projections for the year have changed.

“We felt like in ‘25 there was going to be a little bit more certainty, but it’s safe to say now that we’re in March that there’s still a lot of uncertainty,” he said.

That also translates to a change in booking patterns, according to Patel, who further added that the company is “definitely seeing a tighter booking window.”

He added, “We’re seeing more of a 7- to 14-day booking window when it was a little bit more than that before. That’s not just from the government impact, but in general with corporate travel. So, it’s a little concerning to see that.”

“Booking windows have shortened or totally evaporated,” said Bojanowski, adding that many groups have commonly requested the elimination of cancellation fees as “funding is held up or approvals rescinded.”

Bojanowski spoke to the potential larger industry impact of some of these changes.

“Uncertainty and volatility about government policies, including funding and tariffs, are causing paralysis in the private sector as well as the government sector. That uncertainty is now affecting the market and the ability of businesses to plan causing a broader pause or wait-and-see approach,” he concluded.