The Current State of Interest Rates, Tariffs, and Investments in Hospitality
As 2025 unfolds, the hospitality industry continues to navigate a complex landscape of market changes shaped by fluctuating interest rates, an evolving outlook on possible future tariffs, and shifts in investment trends. Together, these factors are influencing purchasing decisions, project timelines, and overall financial strategies for businesses. For owners, developers, and operators, these dynamics are forcing the industry to become more strategic and agile in managing their projects, particularly when it comes to FF&E and OS&E procurement.
Interest Rates: A Key Challenge for Hospitality Investments
The global economy has experienced an era of rising interest rates in recent years, with central banks aiming to curb inflation and manage economic stability. For the hospitality sector, which is often reliant on financing for hotel development and renovations, these higher rates are a significant hurdle. Investors are have faced higher borrowing costs, which lead to increased capital expenditures and less attractive project returns. The most recent Fed rate cuts over the past few months have sparked a new movement for transactions and investments to move forward.
This tightening of financial conditions means that many projects were being delayed or reevaluated. However, there are still opportunities for long-term investments, especially for those with access to capital or a strategy for mitigating the impact of rising interest rates. Furthermore, hotel owners and developers are increasingly focused on optimizing their existing properties to ensure maximum return on investment, using technology and upgrades to improve operational efficiency and guest experience.
We expect 2025 to be a big year for hospitality transactions, with interest rates showing a decrease from early to mid 2024. Interest rates, while still a big topic of conversation and focus, have largely stabilized.
Tariffs and Global Supply Chain
Another major unknown for the hospitality industry in 2025 is the shifting outlook of future tariffs. A complex and often confusing topic, tariffs could potentially affect project budgets in a big way, specifically impacting the cost of imported goods. Choosing alternative manufacturers that aren’t affected by possible upcoming tariffs is sometimes an option, but that comes with its own limitations and are sometimes not cost-effective.
The unpredictability surrounding tariffs means that procurement teams must be more vigilant and proactive in sourcing materials and planning budgets. Unexpected cost increases due to sudden changes in tariffs can complicate a project’s financial budget or cause delays in procurement. Industry experts are watching these developments closely, understanding that any change in tariff structure could have a direct and significant effect on overall project costs.
Navigating Procurement Challenges: The Role of FF&E and OS&E Professionals
In this environment, the role of procurement specialists has never been more critical. Hospitality businesses must now, more than ever, work with professional FF&E and OS&E procurement agencies that possess the expertise to navigate the confusing and ever-changing landscape of tariffs, interest rates, and global supply chains.
With over 46 years of experience, Beyer Brown can help mitigate risks by offering a comprehensive understanding of market trends and supply chain management, ensuring that purchasing decisions are made with both current and future conditions in mind. We have also spent many years building a network of vetted and trusted suppliers, vendors, and manufacturers that are located across the globe, each fitting different time frame, design, and budgetary needs.
Our procurement expertise can assist in identifying cost-effective alternatives, optimizing product quality, and ensuring timely deliveries even amidst supply chain disruptions. Our network of suppliers and manufacturers provides us with the flexibility to pivot and adapt when necessary, ensuring that your project stays on track despite external pressures.
In addition, we are instrumental in preparing realistic budgets that account for potential price increases due to tariffs or changes in material availability. Our project teams can also help forecast long-term price trends, ensuring that businesses are financially prepared for any sudden shifts in the marketplace. This expertise in navigating uncertainty is a valuable asset for hotel developers, owners, and operators who need to stay agile in an unpredictable environment.
Partner with a Purchasing Agent with Experience
As the hospitality industry faces a mix of market changes, including rising interest rates, tariff uncertainties, and supply chain challenges, the importance of working with knowledgeable FF&E and OS&E procurement experts has never been clearer. Our team helps businesses adapt to market volatility, maintain cost control, and manage long-term investments strategically. In an era where global trade and economic policies are in constant flux, partnering with procurement specialists who can guide your purchasing decisions, forecast potential financial impacts, and offer creative solutions will be crucial in ensuring success and sustainability within the hospitality sector.
