To paraphrase, poorly, Charles Dickens’ great novel A Tale of Two Cities, this is the best of times and the worst of times for the U.S. travel industry.
Just yesterday, Airlines for America, the Washington lobby group for the nation’s big airlines, predicted that a record number of people – 151 million of them – would fly during the two-month period from March 1 through April 30. That includes the spring break season, the Easter holiday, the NCAA Men’s and Women’s Basketball Tournaments and a large number of major business conferences scattered around the nation, all of which generate lots of extra travel demand.
Yet at the very same time, travel industry groups ranging from the American Hotel & Lodging Association to the National Retail Federation, and other organizations ranging from the U.S. Chamber of Commerce to the American Gaming Association, are so worried by a 1.7 percentage point drop in the United States’ share of total international travel that 15 such organizations have banded together to launch an aggressive advertising, information and lobbying campaign. That campaign, being conducted under the banner of the VISIT U.S. Coalition, is aimed at regaining that lost share, which they claim is worth $32.2 billion more annually in retail travel spending by 7.4 million more foreign visitors to this country, plus an estimated 100,000 more U.S. jobs.
Seems incongruous, doesn’t it? How can we be in the midst of a record-setting season for travel while suffering such a large, expensive and worrisome loss of foreign travel demand?
Well, the answer is found in the subtle distinction between who, exactly, is doing the traveling.
For Americans, there’s rarely been a better time to hop on a plane to go someplace, at least within the 50-state domestic market. An abundance of capacity – even an over-abundance in some cases – and fierce competition among airlines, hotels, restaurants, resorts and attractions are keeping prices relatively low, especially in light of a rebounding economy, reduced regulation, surging (if somewhat volatile) stock prices, low unemployment and the early effects of the tax overhaul. Americans have more cash in their pockets, at least relative to recent years. And they’re feeling more positive about the nation’s economic outlook. Therefore, they’re jumping at the opportunity to travel at what seem to be affordable prices.
But across the Pacific and the Atlantic, and north and south of the border, economic conditions are different – very different in some cases. In Europe, Japan and other well-established economies, growth is slower.
In emerging markets throughout Asia, South America and even Africa, the rapid growth of airline service and fast-accelerating economies are making travel more possible and more affordable. Still, the relative immaturity of many such economies means that while people there can afford to travel across borders, often for the first time, traveling to one of the most expensive places on earth – the United States – remains beyond their means.
Despite politically driven claims that the fall-off in foreign travel to the United States over the past two years is evidence of a “Trump Slump,” it’s becoming very clear that the relative strength of the U.S. dollar is what’s actually depressing foreign travel to the United States, not travel and immigration policies proposed a year ago — during President Trump’s first year in office but the second year of the slump.
That’s not to say that some number of foreign tourists haven’t soured on visiting this nation because of their distaste for the braggadocious new president, but that number likely is small. As many observers have noted, tourists visit a destination, not a government
A quick glance at any five-year or 10-year chart of the strength of the U.S. dollar vs. foreign currencies will explain most, if not all, of the two-year decline in the United States’ share of the global international travel market. Beginning in the second half of 2014, the value of the dollar rose sharply against nearly all foreign currencies. It peaked in December 2016 at more than 50% above its early 2014 low point.
Since then, the dollar has given back roughly 50% of that gain in value. Thus, from a foreign traveler’s perspective, the cost of visiting the United States grew by roughly 50% from 2014 to 2016, and although it has moderated somewhat, it’s still about 25% more expensive for foreigners to visit the U.S. today than it was in 2014. Historically, you have to go back to 2003 or earlier to find a period when visiting the U.S. was a more expensive proposition for foreigners than it has been in the last couple of years.
Other factors also play small roles in the drop in foreign visitors. Certainly the slump that’s beset Las Vegas since the Oct. 1 massacre — when 58 people were killed and 851 injured when Stephen Paddock fired 1,100 rounds from his high-powered rifles at concert goers from his 32nd floor suite at the Mandalay Bay hotel — has played a small role. Tense U.S. politics, especially related to issues like immigration, national defense, the environment, race and other hot-button topics, also likely plays a minor role. But clearly, simple economics – plainly visible in the exchange rate – are the primary driver.
Still, the trade groups behind the Visit U.S. Coalition are doing well to bring attention to the decline in the nation’s share of the global international travel market. International tourism plays an outsized role in the U.S. economy because foreign travelers spend, on average, about $4,400 in the U.S. economy. So any decline hurts. A two-year decline – that may well stretch to three years even if the exchange-rate problem continues to dissipate through the rest of the year – is cause for worry.
That’s because foreign travel to the United States, the value of which counts as an “export,” is this nation’s No. 2 export, and the No. 1 service export.
Thus, it can’t hurt when travel industry companies and organizations start addressing the issue publicly. Hopefully they will also put their advertising dollars – individually and perhaps collectively – behind the effort by appealing directly to more Asians, Europeans and South Americans to come visit the United States. They’re also on target in appealing to both the Trump administration and Congress for help in turning around the drop in this nation’s share of the global international travel market.
Most, if not all, of those groups already contribute to Brand USA, a destination marketing organization created by Congress in 2009 to promote America as a travel destination to foreigners. Its budget is supplied by contributions from U.S. travel destinations, travel brands and private-sector organizations plus matching funds collected by the U.S. government from international visitors who visit the United States under the Visa Waiver Program. But an increased focus – and increased giving to make up for the slack in matching funds collected from foreign visitors – could help market America better to overseas audiences.
Granted, it may be getting easier for people from other parts of the world to dismiss America as tourism destination. There’s the “been there, done that” factor since many such people have visited here previously, and there’s the corresponding intrigue of “new” destinations around the world that were previously impossible or too expensive or difficult to visit.
But America remains one of the most diverse and beautiful lands on Earth, with spectacular sights to see in every state and interesting places to visit around nearly every corner. We should have no problem holding our own in the global competition for visitors, all other things being equal.
Alas, all things aren’t equal. The dollar is still expensive, even though it’s not expensive as it was 15 months ago. So America must work a little harder, promote itself more aggressively, and do a better job of attracting foreign travelers. To that end, the VISIT U.S. Coalition is proposing several steps:
Designate a senior official in the Trump administration to focus on international travel and tourism development.
Expand intelligence-sharing partnerships to make the travel security process both more effective and less obtrusive to foreign visitors.
Streamline the secure travel entry process — including finding ways to help more countries meet the criteria for membership in the U.S.’s Visa Waiver Program [and rename that program so that it accurately reflects the program’s security benefits].
Make America’s visa system more secure and accessible to international travelers through methods such as implementing better data-gathering standards, developing criteria for 10-year visa eligibility with qualified countries and increasing the number of visa processing facilities where needed.
Increase security and efficiency in travel screening processes at U.S. ports of entry — by promoting participation in trusted traveler programs like Global Entry, NEXUS, SENTRI and Preclearance, ensuring points of entry are properly staffed and adopting innovative screening technology.
The numbers – 100,000 jobs not created, $32.2 billion not spent in the U.S. economy, and so on – are large, especially that jobs number at a time when the Trump administration has made job creation a top economic priority. And that means a little extra effort to gain back this nation’s long-standing share of the global international travel market.
The payoff could be, as the president likes to say, huge.
By Dan Reed [www.forbes.com]