U.S. Travel Association CEO Geoff Freeman on the impact of tariffs on U.S. tourism

Key Concepts

• International Travel Decline: A documented drop in visits to the US, particularly in March, from key markets like Canada and Western Europe.
• Travel Trade Deficit: The shift from a significant travel trade surplus ($50 billion in 2015) to a substantial deficit ($50 billion today), representing a $100 billion negative swing.
• Economic Impact: Significant financial implications, including billions in lost spending ($200 billion annually from international visitors) and impact on the US trade balance. Each 1% drop equates to $1.8 billion lost.
• Pre-Pandemic Levels: International visitation has not recovered to 2019 levels (72 million in 2023 vs. 79 million in 2019) and is now decreasing again.
• Regional Variations: Specific declines noted: Asia (down >30% since pre-pandemic, 3% in March), Latin America (down 10% in March), Western Europe (down 17% in March), Canada (combined down 15% in March, drive traffic down nearly 30%).
• Contributing Factors: Post-pandemic recovery issues, currency fluctuations (strong dollar vs. yen), lack of a clear US plan/welcoming message, potential "self-inflicted" issues.
• Upcoming Opportunities: Major events like the World Cup (potential 8 million visitors), America 250, and the LA Olympics present chances to attract visitors.
• Domestic Travel Uncertainty: Signs of potential slowdown in domestic travel (e.g., 2% decline in TSA throughput, shrinking booking windows).

Detailed Summary

Introduction: Decline in International Travel to the US

Based on Commerce Department data, international travel to the United States experienced a decline in March. Jeff Freeman, President and CEO of the US Travel Association, highlighted that visits from key markets like Canada and Western Europe were down year-over-year. This trend is concerning as the US has still not recovered to pre-pandemic international visitation levels (72 million visitors in 2023 compared to 79 million in 2019) and is now seeing a reversal of progress.

Economic Impact and the Travel Trade Deficit

Freeman emphasized the significant economic consequences of this decline, particularly concerning the US trade balance. He explained that foreign visitor spending in the US is classified as an export.

• Shift from Surplus to Deficit: In 2015, the US enjoyed a $50 billion travel trade surplus (foreign travelers spent more in the US than Americans spent abroad). Today, this has reversed into a $50 billion travel trade deficit. This represents a $100 billion negative swing over approximately ten years.
• Lost Spending: International travelers contribute significantly to the US economy, spending around $200 billion annually. Freeman noted this figure is "bigger than all of our agricultural exports combined."
• Quantifiable Loss: Every 1% drop in international visitor spending results in an estimated $1.8 billion lost annually to the US economy.
• Lucrative Segment: While international travelers constitute a smaller portion of the overall $1.3 trillion US travel industry ($200 billion), their spending is highly lucrative. For example, in New York City, international visitors make up 20% of visitors but account for over 50% of all travel spending.

Regional Breakdown of Declines

The decline is not uniform across all markets:

• Asia: Visitation from Asia remains significantly depressed, down more than 30% compared to pre-pandemic levels. While this trend predates recent tariffs, the pandemic exacerbated it. Currency issues, like the strong dollar against the yen (cited at $1.43 to the yen), also make travel to the US expensive for Asians, while encouraging Americans to travel to places like Japan. Asian travel was down 3% in March compared to the previous year.
• Latin America: Experienced a 10% decline in visits in March.
• Western Europe: Saw a significant 17% drop in visits in March.
• Canada: As a leading travel partner, the decline is notable. Overall Canadian visitation was down about 15% in March.
  • Air Travel: Down, but less severely.
  • Drive Traffic/Day Trips: Experienced the most significant hit, down nearly 30% in March. This primarily affects border states.

Impact on Specific US Regions

The drop in Canadian drive traffic particularly affects northern border states:

• Michigan: Areas near the Windsor-Detroit crossing are impacted.
• New York State: Areas like Buffalo feel the brunt of the decline in Canadian cross-border travel.
• The impact on "snowbird" travel (Canadians wintering in the US) from December-February was somewhat mitigated as much of it concluded before peak frustration levels, but future trends remain uncertain.

Causes and Need for a Strategy

Freeman pointed to several contributing factors and stressed the need for a proactive approach:

• Lack of a Plan: A key issue identified is the absence of a clear strategy or plan from the US to attract international visitors and reverse the decline.
• Messaging: There's a need to combine necessary trade actions and border security measures with a clear message that legitimate international visitors are welcome. Discouraging these travelers exacerbates the trade deficit.
• "Self-Inflicted" Issues: While acknowledging external factors like the pandemic, Freeman suggested there's a degree of "self-inflicted" problems contributing to the situation, implying policy or messaging could be improved.
• Global Competition: International travelers are choosing to spend their money elsewhere.

Future Opportunities and Outlook

Despite the current negative trend, Freeman highlighted upcoming opportunities:

• Major Events: The US is hosting significant global events:
  • FIFA World Cup (in 14 months): Potential to attract 8 million travelers.
  • America 250 (next year).
  • Los Angeles Olympics.
• Pent-up Demand: Post-pandemic, there is a strong desire to travel, with people valuing experiences over goods.
• Urgency: It's "not too late" to develop a plan to unlock the potential of these events and capture the global demand for travel.

Domestic Travel Context

Briefly touching on domestic travel, Freeman noted signs of uncertainty:

• A roughly 2% decline in TSA throughput was observed recently.
• Booking windows are shrinking, indicating traveler uncertainty about the future.

Conclusion: Urgent Need for Action

The decline in international travel to the US presents a significant economic challenge, marked by a $100 billion negative swing in the travel trade balance over the past decade and billions in lost annual revenue. Specific drops from key regions like Canada, Western Europe, and Asia highlight a worrying trend that reverses post-pandemic recovery efforts. While factors like currency fluctuations play a role, the lack of a cohesive national strategy and welcoming message is seen as a critical deficiency. With major global events on the horizon, there is an urgent need for the US to implement a plan to attract international visitors, capitalize on the demand for travel experiences, and reverse the growing travel trade deficit. Failure to do so means losing out on substantial economic benefits and allowing competitors to capture valuable tourism spending.