International inbound travel to the United States has rebounded after several years of slowing growth, but there’s still a long way to go to make up that lost market share.
GLOBAL REPORT—The U.S. Department of Commerce’s revised data on inbound international visitors shows the pace of global travel is back on the upswing.
Two recent webinars, one by the U.S. Travel Association and the other by the American Hotel & Lodging Association in partnership with Tourism Economics, helped shed some light on the biggest takeaways from the latest findings.
The global economy remains strong, said David Huether, SVP of research at USTA. The gross domestic product in the U.S. has grown by about 3% in past years, he said, and it should continue at a similar pace in 2019. There’s also solid growth in Asia, Europe and the rest of the Americas.
“Widespread growth in global GDP supports strong growth in global long-haul travel,” he said, defining it as international trips taken by people around the world outside of their home continent.
The macroeconomic environment defines travel performance, Tourism Economics President Adam Sacks said. The global economy is expanding, and the U.S. is leading that growth. The drivers behind GDP growth in the U.S. in 2018 were tax reform and the omnibus spending bill, he said, but those will disappear by 2020.
Global economic growth has slowed this year, he said, as purchasing manager indices show growth peaked in the early part of 2018. Global trade is softening, and year-over-year data shows trade has weakened because of recent tariffs. In looking at bilateral trade in the U.S., there is close to $400 billion exposed to additional tariffs this year, and there are threats for nearly $800 billion.
“In case you’re wondering, no one wins in a trade war,” he said.
The U.S. is expected to see a drop in GDP growth over the next two years, Sacks said, and China would suffer a bit more at the same time. He noted exporters are unhappy about how trade wars limit sale and consumers are unhappy about increased prices.
Overall international travel to the U.S. decreased by 1.8% in 2016, Huether said, but it grew by 0.7% in 2017. That amount is expected to accelerate to 3.5% in 2018 and 3.7% in 2019 to a level of about 83 million visitors, he said.
When excluding Canada and Mexico, inbound travel is expected to grow by 3.2% in 2018 and by 5.1% in 2019 after a decline of 1.5% in 2016 and an increase of 2% in 2017.
“Comparing overseas visitation to the United States with global long-haul travel, we see after underperforming the world in 2016, 2017 and 2018, inbound travel to the United States will accelerate and match global pace by 2019,” he said.
The U.S. lost a sizeable share over the last several years, Huether said, and to reclaim that 2015 share by 2024, it will need to increase overseas visitation by 7.5% a year for the next five years—the visitation pace achieved seen from 2010 to 2015.
Fifty percent of international travelers visiting the U.S. are long-haul travelers, Sacks said. The total number of long-haul travelers is expected to surpass 350 million in 2019. These travelers account for a quarter of global travel, which is a 77% increase from 2009 through 2019.
From 2010 to 2015, long-haul inbound travel averaged about 8% growth a year, he said, which was faster than most of the United States’ major competitors and faster than overall global long-haul growth, which was about 5% at the time. However, from 2015 to 2017, that growth stalled in the U.S. while it accelerated overall globally.
“The U.S. turned from an overperformer to an underperformer in global travel,” he said. “As a result, the U.S. lost its market share from global long-haul travel for the last several years.”
This has happened before, Sacks said, most recently from 17% growth in 2000 to a low of 11.5% by 2006, driven by the events of 9/11, the war on terror and the overvalued dollar. Starting in 2007, the U.S. began to reclaim its lost share as the dollar lowered in value, Brand USA was born and the government implemented other supportive polices. The growth of inbound long-haul travel reached 13.8% by 2015, he said, but its share has declined to 12.2% growth since and is expected to edge down to just over 11.8% this year.
The cost of the most recent loss in market share is an additional 7.2 million travelers, $31 billion in spending and 100,000 more jobs in the U.S., he said.
While the U.S. has been losing share, Australia, India, Indonesia, Japan, Mexico and Spain have increased theirs.
An international survey by destination analysts found that while the U.S. remains the most desired destination, its lead has slipped since 2015. The strengthening of the dollar has made the U.S. more expensive to visit, Sacks said, the primary reason behind this slide. Others were concerned about their safety while traveling to the U.S., and the third reason is travelers—from Mexico and Germany in particular—were uncomfortable with the political climate.
Mexico and Canada make up 50% of the international visitors to the U.S., Huether said. Canada had dropped, but it rebounded in 2017 and is expected to grow in 2018 and 2019. Mexico saw a sharp drop in 2017, he said, but it’s expected to recover this year and next.
Europe comprises 20% of inbound visitation to the U.S., he said, but the number of European travelers declined 6% in 2016. However, it increased 1% in 2017 and is expected to accelerate to 3% in 2018 and be close to 4.5% growth in 2019. While these are improved numbers, they still fall short of the 5.5% growth seen from 2010 to 2015.
Travelers from Asia make up 16% of inbound visitation, Huether said, and growth is slower than in years past—12% from 2010 to 2015. It increased by a little more than 5% in 2016 and 2017, he said, and it’s supposed to reach 3% this year and increase to 6% next year. There’s evidence inbound travelers from China might be softening, he said, but travel from India might be stronger.
Political issues are having an effect on China, Sacks said. The consulate issued travel warnings over safety on traveling to the U.S., and there are also prospects China will weaponize travel and use it as a tool in the trade war since it ran out of things to put tariffs on, he said.
Latin America represents about 10% of inbound visitation, Huether said, and while it declined by 1% in 2016, it rebounded by 2.6% in 2017. Visitation is expected to grow by 3.5% this year and by more than 5% in 2019.