Canadian dollar's decline amid U.S. tariff threats raises concerns for hotel industry

While this development introduces economic uncertainty, its potential implications for Canada’s hotel industry are wide-ranging.

Pressure on operational costs

A weaker Canadian dollar raises the cost of imported goods, a challenge for hotels that rely on foreign suppliers. Everything from imported food and beverages to maintenance supplies and technology could see price increases. This puts pressure on hotels to control costs without overburdening guests with higher prices.

Opportunities to attract U.S. travellers

On the other hand, the currency depreciation makes Canada more affordable for international travellers, particularly Americans. The more favourable exchange rate could boost inbound tourism, increasing occupancy rates and revenue for hotels catering to cross-border visitors.

Navigating the tariff threat

Trump’s proposed tariffs add potential complications to the tourism and hospitality sectors. Jon Love, executive chair and founder of KingSett Capital, emphasized the need for strategic action to address this challenge in a comment he posted to LinkedIn about the tariffs. We reached out to Love about his thoughts on Trump raising the spectre of tariffs.

Love characterizes Trump’s tariff threat as a clear and transactional ultimatum tied to addressing issues such as fentanyl trafficking and border migration. Love suggests that Canadian leaders focus on understanding the specific measures needed to avert these tariffs and act decisively.

He emphasizes the importance of fostering open communication, advising that the prime minister meet with Trump to directly discuss actionable steps that Canada could take to align with U.S. priorities. Such an approach, Love argues, would not only mitigate the tariff risk but also strengthen bilateral security and trade relationships. This transactional approach to policy could impact the broader economic landscape, including sectors reliant on trade with the United States, such as hospitality.

Strategic considerations for hoteliers

Canadian hoteliers should prepare for both the immediate and long-term effects of the current economic situation by adopting strategies such as:

• Diversifying suppliers: Sourcing from domestic or alternative international markets to reduce dependency on U.S. imports.
• Marketing strategically: Emphasizing the affordability of Canadian destinations to attract U.S. and international travellers.
• Streamlining operations: Identifying areas where costs can be reduced to maintain profitability amid rising expenses.
• Checking in with industry groups such as the Hotel Association of Canada (HAC) for the latest news and guidance about current advocacy efforts regarding the issue of tariffs on Canadian goods.

Uncertainty and opportunity

While the tariff threat creates uncertainty, the hotel industry may have an opportunity to position itself as a key player in Canada’s economic recovery by leveraging the benefits of a weaker dollar and addressing operational challenges head-on. For now, the industry's ability to navigate these dynamics will depend on both governmental action and its own adaptability in an evolving economic and political landscape.