International Travel Softening and the Canadian Pullback: Impacts on U.S. Hotels and the Seattle Market

Summary

International travel to the U.S. recovered substantially by 2024, but multiple indicators show a softening in 2025, especially from Canada, the largest and most proximate international feeder market for many U.S. destinations. Annual international visitor arrivals to the U.S. reached 72.39 million in 2024, about 91% of 2019 levels, according to the International Trade Administration and National Travel and Tourism Office monthly “Total International Travel Volume” data.

What changed in 2025 was less the long-run recovery trajectory than the direction of short-run momentum: many 2025 months registered year-over-year declines in total international arrivals, while Canadian travel specifically showed sharp contractions in land-crossing activity and in Canadian-reported return trips from the U.S., both air and auto depending on the period.

For hotels, this demand softness collided with a cost structure still absorbing multi-year inflation in wages, utilities, and key operating inputs. At the national level, U.S. hotels posted their first full-year declines in occupancy and RevPAR since 2020 in 2025, even as ADR continued edging higher, an important signal that pricing power alone is no longer offsetting volume pressure.

In the Seattle area, Kidder Mathews’ year-end 2025 market report explicitly links a modest demand pullback to steep drops in international travelers particularly from Canada, with the overall market’s trailing twelve-month occupancy down to 69.0% in Q4 2025, from 70.4% a year earlier, and RevPAR down to $124, from $128.

The macro problem is margin math: small occupancy losses can meaningfully erode profitability when labor remains tight, and therefore expensive, and when non-labor inputs such as food, energy, cleaning, and linen services have reset higher. BLS and FRED data show average hourly earnings in leisure and hospitality rising from $17.02 in December 2019 to $23.50 in December 2025, a gain of roughly 38%. AHLA surveys concurrently report persistent staffing shortages, which operators often describe as constraining service levels and revenue opportunity.

International travel trends and the Canada–U.S. cross-border pullback

The U.S. entered 2024 with strengthening inbound travel volumes: total international visitor arrivals, including overseas, Canada, and Mexico, were 72,390,321 for 2024, up 9.1% from 2023 and roughly 91% of 2019 volume per NTTO’s Total International Travel Volume reporting. In that same framework, Canada showed mild softness in 2024, down 1.3% year over year, even as other international markets continued recovering.

By mid-to-late 2025, a sequence of monthly NTTO releases pointed to a broader cooling in inbound international arrivals. For example, total international visitor arrivals were down 6.2% year over year in June 2025, down 8.3% in August 2025, down 11.0% in September 2025, and down 5.7% in October 2025. In several of these months, Canada remained the single largest source market, often exceeding 1.1 to 1.2 million arrivals per month, which means shifts in Canadian decisions disproportionately affect U.S. destinations that depend on Canadian visitation.

Canadian-side official statistics underscore the magnitude of the pullback from another angle. Statistics Canada reported that Canadian-resident trips to the U.S. fell sharply in Q3 2025: down 34.7% year over year to 5.9 million trips, while trips to overseas countries rose 2.7% to 3.6 million. This pattern is consistent with substitution away from U.S. travel rather than a generalized drop in travel propensity.

High-frequency monthly border-related data confirm the decline continued into late 2025. In December 2025, Statistics Canada reported Canadian residents returning from the U.S. by automobile fell to 1.5 million, down 30.2% from December 2024, while air return trips from the U.S. were also lower year over year. In parallel, U.S.-side border statistics show material declines in Canadian land crossings. The U.S. Bureau of Transportation Statistics reported 18.3 million personal vehicle crossings from Canada in 2025, down 18.8% from 2024, and noted that Blaine had the steepest decline among the top 10 ports, about 25%.

These patterns matter for hotel demand because Canadian travel is heavily land-based for border states and short-haul metro areas with large drive markets. For a destination in the Puget Sound region, the Canadian drive shed, especially from British Columbia, is structurally important. When Canadian land crossings fall sharply, the effect is not only fewer day-trippers for retail and dining, but also fewer weekend and event overnights that support hotel occupancy, especially at limited-service and midscale properties.

Cited statistics snapshot for cross-border travel

Hotel performance nationally and in Seattle

At the national level, the U.S. hotel industry has been in a rate-led recovery since 2021 to 2022, but the 2024 to 2025 data show that volume, occupancy, has struggled to re-attain 2019 levels. CoStar Group, using STR data, reported that in 2024 U.S. hotels posted occupancy of 63.0%, flat vs 2023, ADR of $158.67, up 1.7%, and RevPAR of $99.94, up 1.8%.

In 2025, CoStar and STR reported the first full-year declines in both occupancy and RevPAR since 2020: occupancy fell to 62.3%, down 1.2%, ADR rose to $160.54, up 0.9%, and RevPAR slipped to $100.02, down 0.3%. This combination, ADR up and occupancy down, is consistent with demand becoming more price-sensitive and with an inability to fully replace lost international demand with domestic demand at prevailing prices.

A pre-pandemic baseline shows how much of the recovery is price versus volume. STR’s year-end 2019 figures indicate U.S. occupancy at 66.1%, ADR at $131.21, and RevPAR at $86.76. Comparing 2019 to 2025 implies occupancy still about 3.8 percentage points below 2019, while ADR is about 22% higher and RevPAR about 15% higher in nominal terms.

Seattle’s recent performance is best captured through market-specific reports that synthesize STR and CoStar data. Kidder Mathews’ year-end 2025 report estimates that, for the overall Seattle market, trailing twelve-month occupancy was 69.0% in December 2025, down from 70.4% one year earlier; ADR dipped slightly to $180, from $181, and RevPAR declined to $124, from $128.

Crucially, that same report explicitly attributes part of the softening to reduced international travel, particularly from Canada, alongside softer business and leisure travel. This attribution is directionally consistent with the border-crossing and Canadian-trip data described earlier.

Hotel performance comparison table

Examples tying Seattle-area softness to reduced Canadian demand

There is a difference between macro correlation, border crossings down, and operator attribution, hotels explicitly reporting Canadian demand loss as causal. In Seattle’s case, market reporting and local journalism provide several explicit linkages.

Kidder Mathews’ year-end 2025 Seattle hotel report states that occupancy fell modestly in 2025 and lists steep drops in international travelers particularly from Canada among the likely contributing factors, alongside softer business and leisure travel.

Local reporting has echoed the same theme in more operational terms. A KOMO News piece describes a new Seattle economic impact report by Oxford Economics, citing declines in hospitality revenue associated with drops in cross-border travel and international tourism; it also reports hotel management observing cancellations tied to Canadian travelers, for example, sports-fan travel.

Separately, KING 5 has reported that Seattle hotel profits were shrinking as fewer Canadian visitors crossed the border while operational costs rose. While such reporting is not a primary statistical release, it is useful as direct evidence that operators and local stakeholders see Canadian travel loss as an operational headwind.

The border-region impact is even more straightforward. For example, a Bellingham business-focused report describes fewer visits, fewer overnight stays, and reduced spending associated with reduced Canadian travel, conditions that typically translate into softer weekend occupancy and rate pressure for hotels in the immediate border service area.

Rising costs, labor constraints, and why hotels feel stuck

The hotel industry’s post-pandemic challenge is not simply demand weakness; it is the combination of demand weakness with structurally higher input costs. In 2025, that cost reset collided with the first full-year decline in national occupancy and RevPAR since 2020, precisely the scenario that makes fixed-cost businesses feel financially constrained.

Wage inflation and persistent staffing shortages

Labor is the dominant operating input for hotels, and wage pressures have been substantial. Using FRED time-series sourced from the U.S. Bureau of Labor Statistics, average hourly earnings in leisure and hospitality rose from $17.02 in December 2019 to $23.50 in December 2025, about a 38% increase.

At the same time, the industry continues to report difficulty hiring and retaining staff. American Hotel & Lodging Association surveys show that a majority of hotels continue to report staffing shortages, with many stating that shortages affect their ability to operate at full revenue potential.

This matters for service levels and guest experience because staffing gaps commonly concentrate in housekeeping, front desk, and food and beverage, roles that are hard to tech away in full-service operations. The result is often constrained inventory, rooms taken out of service due to housekeeping capacity, or a reduction in service frequency and amenities, which in turn can weaken demand and ratings, reinforcing the cycle.

Food, utilities, and operating supplies

Beyond wages, hotels face inflation in several cost buckets tied to guest services and building operations.

Food and beverage input pressures are visible in consumer-facing price measures that track restaurant and prepared-food pricing. The CPI Food Away from Home index rose from 288.078 in December 2019 to 389.889 in December 2025, about 35%, capturing a large multi-year increase in the restaurant and food-service price environment that hotels operate within and procure from.

Energy costs also moved meaningfully higher over the period. The CPI electricity index increased from 213.571 in December 2019 to 281.742 in December 2024, about 32%, and it continued rising into 2025, reaching 293.388 by September 2025 in the same series.

These input trends are directly relevant to hotels because laundry, HVAC, hot water, and common-area lighting are large and relatively inelastic energy uses, while food-service and banquet operations face compounding labor, ingredient, and utility inflation.

A compact timeline of the demand–cost squeeze

The timeline items above draw from STR and CoStar year-end hotel performance releases, NTTO international visitor arrival totals, Statistics Canada travel estimates, and Seattle market reporting.

Financial impacts and operational responses in the Seattle and border region

The hotel sector’s near-term financial stress tends to show up first in margins and cash flow rather than headline revenue. A property can print a strong ADR and still feel financially squeezed if occupancy softens, wage rates remain elevated, and utilities and service contracts reprice higher.

Seattle illustrates this tension. Even amid strong peak-season demand, local reporting notes Seattle hotels hit record revenue in July 2025, operators still described soaring costs and staff shortages, which is consistent with a margin squeeze rather than a pure demand collapse story.

By year-end, Kidder Mathews data show the market’s trailing 12-month RevPAR slipping from $128 in Q4 2024 to $124 in Q4 2025, with occupancy down and ADR roughly flat to slightly down. Small declines like this can be financially meaningful because hotel P&Ls have high fixed components, building operations, insurance, taxes, and debt service, that do not scale down smoothly with demand.

Border-region dynamics deepen the risk. When Canadian drive markets weaken, hotels closest to the border often respond with discounting and promotions to stabilize occupancy, an approach that can protect room-night volume but further pressures margins when costs are already elevated. Evidence of reduced Canadian visitation affecting overnight stays and spending has been documented in Washington border communities and aligns with the sharp drop in personal vehicle crossings reported at major northern ports, including Blaine.

A more systemic financial impact is visible in transaction data: Kidder Mathews reports that greater Seattle hotel transaction volume fell to $431 million in 2025 from $538 million in 2024, while also noting higher interest rates and reporting average capitalization rates around 8.5%. This combination is consistent with tighter refinancing conditions and lower asset values, pressures that often lead owners to defer renovations, reduce amenities, or, in severe cases, exit the market.

Demand and margin pressure flow

The mechanism above is supported by documented declines in Canadian trips and crossings, documented Seattle-area hotel softening with explicit reference to Canadian travel loss, national data showing occupancy and RevPAR pressure, and BLS-based evidence of multi-year wage and utility price increases.

Data gaps and uncertainties

Several important gaps limit precision, especially for city-level profit dynamics.

Seattle hotel industry metrics are not published as a single, standardized public statistical series the way national hotel KPIs are. Seattle performance is often available through syndicated STR and CoStar benchmarking, broker research, and tourism-board reporting, which may use different hotel sets and different time bases, month vs quarter vs trailing-12-month. This report therefore treats Seattle operating figures as best-available market estimates rather than an audited official series.

Profit margins and closures are difficult to quantify publicly at the metro level. Nationally, STR and CoStar provide comprehensive KPI coverage, occupancy, ADR, and RevPAR, but detailed operating statements such as GOP margin and departmental expense ratios are typically proprietary, and local closure counts can be episodic and not consistently reported. As a result, the analysis relies on top-line KPI direction, documented cost inflation proxies such as wages and CPI categories, and local reporting and market research noting profit compression and operational stress.

Some cost buckets, particularly commercial insurance premiums and hotel-specific property tax burdens, do not have a single universal public index that cleanly maps onto hotel procurement and varies substantially by property, coverage structure, and jurisdiction. Where possible, the report uses publicly available price proxies, such as electricity CPI and food-away-from-home CPI, and industry survey evidence on staffing constraints, but a fully itemized hotel input-cost basket would require proprietary procurement or operating-statement data.

Sources

• International Trade Administration / NTTO – December 2025 International Visitor Spending
• CoStar / STR – U.S. hotels report first full-year occupancy and RevPAR decline since 2020
• Kidder Mathews – Seattle Hotel Market Report, 4Q 2025
• FRED – Average Hourly Earnings of All Employees, Leisure and Hospitality
• AHLA – 2025 State of the Industry: Partner Trends & Insights Report
• Statistics Canada – National Travel Survey and Visitor Travel Survey
• Statistics Canada – Travel between Canada and other countries, December 2025
• U.S. Bureau of Transportation Statistics – Border Crossing Data Annual Release: 2025
• Visit Seattle – 2025 Summer Visitation Data
• Hospitality Net – U.S. hotel performance 2019 baseline reference
• KOMO News – Seattle hotels and international traveler slowdown
• KING 5 – Fewer Canadian tourists shrinking profits for Seattle hotels
• FOX 13 Seattle – Bellingham businesses impacted by lower Canadian tourism