This is why America’s travel business is worried
Foreign travelers to the United States bring billions of dollars into the economy each year. But that flow of people and money now appears to be at risk.
Last year set a record for tourism: 78.6 million foreign travelers came to the United States in 2018. But following that banner year, tourism is now in a slump. Travel in early 2019 is in decline, particularly from Canada, Mexico, China and South Korea. That slowdown started taking place in the second half of last year.
The travel industry is worried about how severe, and long lasting, that decline could be.
Tourism is a serious economic driver for the American economy. The United States enjoyed a $69 billion surplus on international travel last year, reducing the country’s overall trade deficit by 11%, according to Tori Barnes, executive vice president of the US Travel Association, the industry trade group. On average, foreign travelers spend $4,000 each on visits to the United States. Chinese tourists spend about $7,000.
“It’s a really significant economic impact,” said Barnes.
Companies that rely on foreign tourism are starting to feel the decline in travel: For example, Tiffany’s reported disappointing sales this week, in part because of a drop in purchases by foreign tourists at its US stores.
Why travel to the United States is down
Experts point to a number of factors working against travelers coming to the United States.
“It’s a relatively strong US dollar. It’s a slowing global economy. And it’s politics. It’s a trifecta of factors all reducing travel to the US,” said Adam Sacks, president of Tourism Economics, a part of Oxford Economics.
The strong dollar makes it more expensive for foreign travelers to spend money in the United States. The dollar has been strong compared to global currencies as the US economy remains robust and other countries are in slowdowns.
Slowing economic activity abroad is a pressing problem for travel, particularly from China, the fifth-largest source of travelers to the United States after Canada, Mexico, the United Kingdom and Japan.
Chinese travel to the United States had been growing rapidly every year since the end of the recession, with the number of visitors more than doubling between 2012 and 2017. But travel from China turned negative in April of 2018, resulting in an overall 6% decline for Chinese travel to the United States last year.
The trade dispute between the United States and China is a major factor in the travel fall-off. Trade has declined, cutting into business travel between the countries. It also has slowed economic activity, resulting in a sharp drop in discretionary purchases by the Chinese.
The Chinese government has issued numerous warnings to its citizens about travel to the United States. Just this week it issued a warning about the threat of gun violence in the United States, and another warning college students that it could become more difficult to get the student visas they’ll need to study at US colleges and universities.
“We’re seeing a significant shift in Chinese attitudes about US travel,” said Sacks. “Recent posting of travel advisories is only one part of it. State run media in China has turned very negative toward the US.”
Meanwhile, the disputes between Mexico and the United States appear to be slowing travel between the two countries. Mexico is the second-largest source of tourists to the United States.
Mexican travel to the United States fell 6% in 2017, President Donald Trump’s first year in office. Although travel bounced back in the beginning of 2018, it was down in the final five months of last year and the first quarter of this year, according to US and Mexican travel data.
Part of that is because of concerns about crossing the border by land. Air travel by Mexicans is up slightly, but that makes up only about 15% of total Mexican travel to the United States.
“We recognize there’s an issue at the southern border. We know folks able to fly here are still coming,” said Barnes, the US Travel Association executive.
Worsening relations between the United States and many other countries is feeding into the slowdown in foreign travelers, Barnes fears.
“We do think we need to have a more welcoming message,” she said. Foreign travel to the United States “is really an economic boon. We should be welcoming all legitimate visitors.”