Background: An acquaintance of ours who was a fairly respectable and competitive distance runner back in the 1980s and 1990s once joked that his strategy for running a race was this: “I start slow, then taper off.” So it was in 2019 for the inbound travel and tourism industry of the United States. It started slow and proceeded to taper off.
In some cases, it did worse than taper off. Some important markers stumbled and fell in key markets, and the travel and tourism industry is now scurrying to recover and to do better than it did in the past year, which inflicted a not-so-healthy dose of woes upon us.
Key points of provocation that kneecapped the industry during the past year—conflicts with the U.S. over trade matters, immigration policies that turned off interest in America, competition from other destinations (most notably in Asia), a consistently strong U.S. dollar on the currency exchanges and suggestions that an economic recession in the U.S. and elsewhere is due near the end of 2020—kept growth of key market arrivals flat, as U.S. share of long-haul international travel declined.
In its final Travel Trends Index report for 2019, with a couple of months of data counts still due for the year, the U.S. Travel Association said, “over the coming months, international inbound travel growth is expected to remain suppressed by economic and policy-based headwinds resulting in a year-over-year decline.”
But, despite the above, there are enough stubbornly optimistic voices in the industry and there have been enough accomplishments on the part of the industry (more on that in a few paragraphs) recently that it is reasonable to forecast that 2020 and 2021 should be appreciably better than the past two years.
Key Metrics and Tools: INBOUND’s annual Outlook issue probably wouldn’t be possible were it not for the long-term Forecast of International Travelers to the United States by Top Origin Countries, which is produced by a U.S. Department of Commerce National Travel & Tourism Office (NTTO) team of professional economists and statisticians. The Forecast (see below) is a valuable resource for so many research or marketing departments of U.S. travel suppliers and serves as a base point for planning budgets and marketing strategies. Oh, it’s also accurate.
The Forecast relies not only a number of data sets—including such obscure counts as airline seat capacity numbers for the year ahead—that can be measured and weighted, or broken down and cross referenced in so many ways; it also relies on reports based on in-country face time between commercial service personnel and businesses that deal directly with travel consumers and industry vendors who know the local pulse of the travel and tourism industry and its key overseas players. You will see the Forecast cited or referred to as this article goes on.
Also below, placed just after NTTO’s Forecast, is a table of some major currencies as their value was set during the opening day of trading for the year in 2017, 2018, 2019 and last week. Veterans of the international travel and tourism industry who have followed exchange rates are well aware of how they have a correlation with marketplace developments, sometimes even seek contracts that are hedges against an anticipated increase or decrease in a rate based on its previous behavior. More important to most people is to know what the tipping point is—i.e., say when an operator knows that he will likely not have enough of a margin in order to pay off in dollars what he sold for in pesos.
Finally, there is a suite of proprietary products—some of it with a predictive component or quality— belonging to Brand USA that has greatly improved the organization’s ability to develop new strategies, or alter and/or amend current strategic objectives. No one in the public can readily access such information, understandably, but if you follow Brand USA’s board meetings, you can see or hear enough references to, or citations of, this material that will help to greatly inform and assist you in developing and pursuing your own strategic objectives. Recorded versions of all board meeting proceedings, as well as their numbers, tables, charts and graphs are available at its website: www.thebrandusa.com.
General Overview: As a competitor on the global travel marketplace, the United States travel and tourism industry and its many components will face the same challenges as the rest of the world, plus some that are peculiar to the USA:
—Number one among these is the global economy. In order for the U.S. to increase its share of global international travel, it will require a healthy economy worldwide—one in which travel consumers will have enough spending power to visit America. Much attention has been focused on economic trouble spots—Venezuela, Argentina, parts of Europe and Australia—the International Monetary Fund’s final Global Economic Outlook issued in 2019 was, while tentative, not dire, projecting a growth in the global economy of more than three percent.
—As for the U.S. economy, the outlook, while not meriting an un-qualified “A,” still gets better-than-passing grades from those who drive it the most.
—In mid-December, a Business Travel Roundtable survey of CEOs of the USA’s largest companies reported that an index which measures the outlook for the economy of the CEOs fell for the seventh quarter in a row. The index dropped slipped 2.5 points to 76.7, a little below its historic average. The index had hit an all-time high of 118.6 in the first quarter of 2018, in the wake of the passage of President Donald Trump’s tax cuts for individuals and businesses.
—However, 2020 is a year in which the U.S. has a presidential election, a process that generally causes businesses to be a bit conservative regarding new investments.
—Of particular interest to international tour operators and U.S.-based receptive tour operators is the general consensus among analysts that hotel room supply will ever-so-slightly outstrip demand growth for the second year in a row. Just how will this impact package prices for the 2020-21 and 2021-22 travel years?
—Despite the fact that British citizens approved a referendum to pull the UK out of the European Union in June 2016, there was still no agreement among British government and EU officials as to how to effect what we call “Brexit.”
—Despite uncertainties elsewhere, Brand USA, as noted elsewhere in this commentary, is now more secure about its long-term existence than ever before, and will have a greater opportunity to develop and execute larger and longer-term marketing programs.
The Brand USA Factor and a Pan European Market: The whole is greater than the sum of its parts. This clear and simple principle is about to launch as an official strategy of Brand USA, the DMO of the United States newly fortified with a six-year extension of life from the U.S. Congress last month and equipped with more promotional tools than at any time during its history, which began March 4, 2010 when President Barack Obama signed into the law creating the private-public sector organization that is still known official as the Corporation for Travel Promotion.
Pardon the cliché, but ever since then Brand USA had to behave sometimes like a puppy led by its wagging tail—the latter being the many constituencies its serves. Of course, the organization has to have program elements that can help and satisfy all of its partners. Brand USA now seems to have found a strategy that should work for most of its industry partners. It was launched last September when the agency staged a successful Brand USA Travel Week Europe event in London. It was designed to treat Europe and the Eurozone as a single market, not as twenty-something individual entities deserving as many marketing strategies as there are countries. Below are some of the relevant tables on the subject as they were presented by Tom Garzilli, Brand USA’s chief marketing officer during an August 7 meeting of the organization’s board of directors.
And they speak our language. Another note: By our own tally, the countries listed in the One Europe table above have more than 240 million English speakers. No other world region can match that total. While most Europeans will tell you that U.S. travel suppliers would do well to have staff that speak at least one language other than English, there is rarely an occasion in which it is absolutely necessary to conduct business outside of English.
The Shrinking Share: In its zeal to build support for Brand USA, the U.S. Travel Association has been ever-at-the-ready in the past several years to point out that the U.S. share of long-haul travel visitation has shrunk. The logic has been, of course, that we need a national tourism organization to compete effectively on the international marketplace. Otherwise, the United States will not be able to stop the downward slide in its share of the market.
Since 2015, when that percentage was 13.7 percent, U.S. share has fallen to 11.7 percent. With Brand USA now reauthorized through 2027 and its Travel Week already scheduled through 2025, it should have ample opportunity to begin to increase U.S. share.
And now, The Top 15 Plus Canada and Mexico: Following are capsule commentaries on our outlook for the USA’s Top 15 overseas source markets, as well as the international markets of the US’s bordering neighbors—Canada and Mexico.
1. The United Kingdom:
The NTTO forecast projecting an increase of two percent in UK arrivals to the US, year-on-year, vs. 2019, is right on target and, possibly, a little shy. Why? Each year, of late, INBOUND has displayed its own timidity and uncertainty right away by employing all kinds of caveats and conditions in what it has to say about the UK, our number one overseas source market since 2001, when its visitor counts eclipsed those of Japan and have remained there since. And beginning with the latter half of 2016, we hedged our bets by echoing the concerns of those who worried about the impact of Brexit— the impending withdrawal of the UK from the EU; the impact of anti-Trump sentiment among the British; and the effects of a strong US dollar vs. the British pound. (In recent years, the pound peaked at $1.43 on April 17, 2018; after a sharp decline, it has hovered somewhere in the neighborhood of $1.25 to $1.30.) And finally, there was the disruption of the market wrought by the collapse of Thomas Cook, the oldest tour operator in the UK.
Surprise. Whatever impact the above might have had was more than outweighed by a basic fact about UK holidaymakers: Survey after survey tells us that they are going to take that holiday regardless—even if it means taking a pass on something really important, like free tickets to a Liverpool–Manchester United football match! Fortifying the demand for travel to the U.S. have been well-funded and smoothly operated promotions by Brand USA (see the item above on Brand USA’s One Europe strategy, launched with the Brand USA Travel Week last September in London), as well as local and regional DMOs, especially in Florida, which is the favored destination of Brits, particularly British families. The latter will be stronger and more predictable now that the British Supreme Court has ruled that it is OK for school districts to levy fines on those families to take a holiday outside of school term days. Operators and agents will increase their family-oriented promotions now that travel dates are certain. And beyond 2020, the NTTO forecast that the UK will generate more than 5 million visitors to the USA in 2021—it would the first time since the year 2000 that this has happened—is likely.
2. JAPAN
Starting slow and staying slow, or the Japanese slow-growth model: Japan was the last overseas country market to generate more than 5 million visitors a year to the US—in 2000. Then came Sept. 11, 2001 and the terrorist attacks on the United States. Since the beginning of the millennium, then, the total number of visits to the US by Japanese travelers has fallen 27 by percent. However, in the past decade, since 2010, visitation from Japan to the United States has actually increased by 9 percent. While no one who works or studies the Japanese market expects outbound travel to the United States to recover to the extent that it was pre-9/11, there seems to be a quiet confidence that the market can sustain current levels for some time, which would be an achievement in its own. After all, besides China, no other nation is close to sending as many overseas travelers to the USA as does Japan.
In its latest quarterly survey of the travel trade in Japan, the Japan Association of Travel Agents (JATA), tour operators and travel agents indicated in its September 2019 (JATA is not exactly prompt in churning out its survey results in a timely fashion) indicated that tour operators and travel agents had almost exactly the same confidence level when it came to Visit USA travel as it did in September 2017. In other words, the prognosis for business is at a relatively constant level, which (up by 1 percent) is essentially what NTTO forecasts for 2020.
Further, one learns in looking more closely at the data for Japan, the country a mature source market. Its over-60 sub-market is sending a greater share of the overall outbound total than it used to. One reason is that Japan’s low birthrate and absence of immigrants are making its population older. The Japanese Statistics Bureau estimates that the Japanese population will full to just over 100 million by 2050, from around 127 million today.
So, for the long-term—all other factors remaining the same—it will be a true accomplishment simply to maintain visitation levels at the same level. And shoring up the long-term is/will be an aging population that is already familiar with the US as a destination, and more prone to make return visits than, say, millennials.
3. CHINA
One has to be wary of making a forecast of China’s overall outbound travel and, even more so, the number of visitors it will send to the United States. The office shredder has already been filled, then emptied, of forecasts, such as an NTTO prediction that, given the right market conditions, China would be the number one overseas source market by 2021 and that it could be sending 4.2 million visitors to the United States by that time. Obviously, that is not happening. After two consecutive years during which inbound travel from China declined by about 5 percent a year, the long-term forecast is much more sober, and takes into account data that are truly measurable.
Even with visitor counts that are timelier and more accurate—it has taken the Department of Homeland Security several years to correct the flaws and delays in the collection of the data that it sends to NTTO—it will still be a challenge. An example? The travel and tourism industry found out in the past two years that the Chinese government can provoke Chinese travelers, as well as the tour operators, travel agents and OTAs that sell to them to temper its desire to visit or sell the USA. For two years in a row, it issued warnings cautioning its citizens to be aware of anti-Chinese sentiment, etc.
We all tend to forget, sometimes, that China is still building its tourism infrastructure from near scratch while, at the same time, selling product to millions of Chinese who never traveled outside the country until the middle of the last decade. Now, all of a sudden, there are 37,000 travel agencies in China who are selling to consumers who, sometimes, are not aware of such things as securing a visa to travel to the US—hence, the high rate of visa application rejections. There is also WeChat, the multi-purpose messaging, social media and mobile payment app that was launched in 2011 and now has more than a billion regular users who use it for all things travel-related.
Now, a little less than 13 years after China bestowed Approved Destination Status on the U.S., allowing the marketing, promotion and sale of leisure travel groups, there are more data and a better understanding of the channels of distribution and data available. Look for the USA travel trade and DMOs to do a better job at mining the big data on Chinese travelers. Notable in this direction is Brand USA’s China 20 Strategy. As Tom Garzilli, Brand USA’s chief marketing officer explained it, the new strategy will target the market for what U.S. traveler suppliers and DMOs are after—long-haul leisure travelers; that is, the 20 million Chinese who travelers have passports, have U.S. visas and book long-haul travel. Hence, a new China 20 Strategy.
4. KOREA
With a stable, healthy economy and consumer confidence in that economy a key factor in channeling travelers from overseas to the United States, all it really takes to describe the situation in South Korea right now is a random selection of online news headlines from the past several weeks:
— “South Korea Lowers 2020 Economic Growth Forecast” (MarketWatch)
— “South Korean November Exports Plunge as China-U.S. Deal Still in Dark” (Reuters)
— “South Korea Finance Minister Expects December Exports to Drop Significantly Less Than Recent Months” (The Business Times)
—Edward White, a columnist for the Financial Times, summed it up thus in a Nov. 29 article: “The South Korean economy is on track for one of its worst two-year growth periods in more than half a century …”
While there are some positive economic forecasts being posted elsewhere, the above gives one an idea of what the situation is like in South Korea, whose economy is export driven. It also helps to explain why the past year was not the best for the country which, of late, has been sending more than 2 million visitors a year to the USA. South Korea jumped up the charts in 2010, the year after its full integration into the USA’s Visa Waiver Program and after the program had been fully implemented with the Electronic System for Travel Authorization (ESTA) program.
The country had already established its international tourism infrastructure through the construction and later expansion (in 2017) of its airport at Incheon, now one of the busiest in the world, and with connections from many points in Asia to the United States. Incheon can handle 62 million passengers a year. The trip might be long, but it is not a challenge for South Koreans to get to the US.
As the relationship between travelers and the US travel trade matured over the past decade, the data from NTTO’s Market Profile series has shown us that South Korean travelers overwhelmingly prefer US destinations in the Pacific and on the US West Coast. And there is a special fondness for the Los Angeles area, with its Korea Town and, in nearby Riverside the Dosan Ahn Chang-Ho Memorial. A leader of the Korean independence movement, Ahn lived and worked as a teacher in Riverside, California in the early part of the 20th century.
VFR traffic from South Korea is not that large; rather the purpose of a trip is more likely to be for business, technology or education-related. More than 54,000 students from South Korea study at colleges and universities in the United States; only China and India send more. And unique among the language curricula in other parts of the world, South Koreans focus on American English.
Provided the economic challenges the country faces aren’t that daunting, it should continue to be a top source market for US inbound tourism for the foreseeable future.
5. BRAZIL
In the very trough of the 2014-2016 economic crisis that devastated Brazil and sent scores of travel and tourism industry businesses into closure, Celyta Jackson, once the vice president of tourism for New York City & Company before finally departing the industry to launch what is now a thriving cat hotel in Miami Beach, told INBOUND that Brazilians, following a particularly disastrous period (in 2016, annual visitation to the US from Brazil dropped by more than 500,000—from 2.264 million to 1.725 million), would recoup and recover because of their “Jogo do Cintura.” Literally translated as “game waist,” the expression suggests more an attitude that, say, a soccer player takes into a challenging match. For Brazilians, Jackson said, it means “having the dexterity and flexibility to overcome obstacles and situations.” By the end of 2018, Brazilian visitor traffic was back above 2 million, a figure it’s likely to register again once the final data for 2019 are posted.
But it wasn’t all “Jogo do Cintura.” In a solid example of how one can take advantage of an economic recession, CVC, the country’s largest tour operator/travel agency, announced while Brazil was still in a state of recession that it was adding 100 travel agencies a year—a goal it has largely kept—with many of them in remote or rural areas. The company also acquired tour operator brands that specialized in online only, trade only and education product. In effect, CVC prepared itself for a true nationwide presence that could (and does) handle outbound international and domestic—in effect, setting up a system that could benefit immediately from an economic upturn. Their customers, in turn, could benefit from a truly integrated company—vertically and horizontally—that offsets weaker performing units through margins based on greater volumes of scale made possible by CVC’s size. Not only that, CVC has acquired companies elsewhere in South America. One company leader intimated that CVC could, at some point, rival TUI.
The country’s political and economic stability is still a bit wobbly as two previous presidents (Luis Inácio Lulu da Silva and his immediate successor Dilma Rouseseff) served/are serving time in jail, and nerves are frayed as a new hard right president, Jair Bolsonaro, now beginning his second year in office, seems to be in equal parts wildly popular and widely unpopular—although his policies have been generally supportive of tourism industry objectives. Despite all of this, when one talks with veterans in the Brazilian travel and tourism industry, or the professionals who work the market, that it will survive and prosper.
6: GERMANY
For statistical purposes, the contribution of the German market to the overall number of overseas visitors to the United States this year, 2020, will be the same—the same as it was in 2019. In fact, as the following table tells us, the total will be essentially the same as it was seven years ago.
A flatline graph that would illustrate the minor blip upward in 2015, a blip that was quickly eliminated the following year as Germany, as did the rest of the Eurozone which uses the euro, experienced a 25 percent drop in the value of the euro and was reflected in the US business that the trade wrote that for the 2016-17 travel season.
Germany’s zero-change outlook for 2020 is not an idle guess, as the nation’s travel trade performance is recorded, reviewed, analyzed and distributed more thoroughly than it is in any country. No surprises.
The one truly surprise development in the industry during the past year—the collapse on September 23, 2019 of Thomas Cook (the UK’s oldest tour operator) and its national brands—triggered a furious burst of activity in which operators added in which TUI, for example, added 2 million extra seats on flights for summer 2020 and 580,000 for short-and-long-haul journeys over for the current winter season. But INBOUND doubts that this will move the overall numbers for Germany, as the business involved is merely being transferred from the defunct Thomas Cook Germany to TUI Germany.
The real challenge to the lucrative German market will be long-term growth, because the country’s population is at a virtual stand-still, as the table below illustrates, and the country’s birth rate is one of the lowest of all developed nations. Were it not for an influx of immigrants to Germany in recent years—roughly one out of every eight residents of Germany is a foreign national, the Federal Statistics Office reported in 2018—the country would likely have a shortage of workers.
The prospect of a no-growth population has concerned labor economists, who wonder how the country is going to fill future job vacancies to replace those who are leaving the workforce. Also, who is going to replace those who are currently paying for social programs, including health care, for retired Germans? All of this begs the question: Will Germany be able to generate enough “replacement” travelers in the key 25-54 age group as Germany’s current population gets older and retires? The same questions are being asked in other European nations who are facing the same issue.
In the interim, 2 million visitors a year is still a healthy number and worth pursuing on the part of U.S. travel suppliers, DMOs and receptive tour operators. As the current numbers suggest, it’s almost guaranteed.
7. FRANCE
France proved in 2019 just how durable it is as an overseas source market for inbound U.S. tourism. By the beginning of last month, its year-to-date (January through November) total for visitation to the US was 1.7 million—an increase of 4.1 percent for the same period the year before. Full-year data probably won’t change the figure as the travel trade in France has adapted to a number of challenges over the past several years—a period in which its annual total of visitors to the USA declined only once.
First, the marketplace had to adjust to the acquisition of Canada-based Transat by TUI of Germany, a move which gave the latter a 20 percent share of the total market in the country. It took the better part of 2016 and 2017 to complete the acquisition, as the company had to settle hundreds of employee severance agreements and integrate Transat into the TUI system. But it has paid off in value to the travel consumer, as TUI has been able to effect lower prices through economies of scale as Europe’s largest tour operator and still have a satisfactory margin. As well, independent travel agency networks and tour operators have been able to respond creatively to the increase in online travel commerce. Second was the disruption of nearly every quarter of the French economy for much of 2019 by nationwide strikes, work stoppages and demonstrations triggered by the “yellow vests” (which all motorists are required to keep in their vehicles and to wear in case of emergency) movement over increased fuel taxes which spread to include workers in every sector. It has had a withering effect on some activities. In fact, The Globe Travel Agency in center-city Bordeaux was completely destroyed and gutted several weeks ago—probably because it was a convenient target in the path of demonstrators.
But France (and its travel and tourism industry) still has to respond to another long-term reality, and that is the impact on its population of its birth rate, a challenge that is also affecting neighboring Germany as well. (See the above item on Germany). It was announced at the beginning of 2019 that the birth rate in France had fallen for the fourth consecutive year. Its population is a little more than 65 million; it was about 60.5 million in 2000. Economists and demographers wonder about the impact of a smaller work force in the long-term: that is, will there be enough workers and tax revenue in key demographic sectors to pay for the needs of a larger population of elderly? And, in the case of the travel and tourism industry: How will a larger senior population, with its propensity for more inexpensive travel products, impact the financial health of travel suppliers and travel destinations?
But there is one tip regarding the outbound travel market in France that seems to have remained constant for years, and that is: New York is by far the favorite USA destination of French international travelers, so if you’re looking to tap into the market, try partnering with a receptive tour operator in the New York City area.
8: INDIA
As close to a sure thing as there is: If there is any country market that is receiving unqualified interest from the U.S. travel and tourism professionals who market and promote Visit USA product, it is India. In reviewing the developments of the past year in order to present this brief outlook, INBOUND found little to discourage the intentions of those who are thinking about committing part of their budget to making this, the world’s second-largest nation in population (China is first, but India is expected to surpass China in several years) a part of your marketing mix.
The major cautions we emphasize are these: One should be willing to invest a considerable sum of financial resources upfront; follow that up by having in-country representation—another commitment of resources; and, finally, by increasing, or reallocating your budget to invest in regular visits or trade shows at which one conducts the face-to-face meetings that are crucial to the travel and tourism industry. And an addendum—be prepared for longer-than-usual times for your travels. It’s a long way to Mumbai. Also, be prepared for something bordering on anarchy when you try to make sense of the travel trade in India. It is hardly regulated.
With the caveats thus stated, here are some factors to consider about what awaits the first-timer and rewards the veteran who is selling the USA to India:
—It is the world’s largest English-speaking market outside the US. An estimated 125 million Indians speak English with some degree of competence. INBOUND found out when accompanying a group tour of Indians who were visiting the U.S. Northeast several years ago that, unless a group is pre-formed, a busload of Indians might speak a wide range of languages among themselves, but those who travel usually speak English—even to one another.
—The long-term numbers for visitation are better for India than they area for any other overseas market. NTTO is forecasting a Combined Annual Growth Rate of 5.4 percent in Indian visitation to the USA through 2024. No other market even reaches 4.0 percent.
—Education-related travel, with some VFR travel attached, is important, as there are just under 200,000 Indians studying at U.S. colleges and universities. These are students who might visit back home once a year, or have family come to visit them at Harvard, Illinois University or UCLA.
—Airline lift capacity has increased regularly over the past decade. Thought direct service is rare, long and costly, flight schedules are full of ways to get to India that keep the cost down. This is made possible through flights that connect in Europe, but mostly in the Middle East, to US-bound service. Three major carriers from the Middle East serve destinations in India: Emirates (9 cities), Etihad and (5) Qatar Airways (5). The three carriers are located about 250 miles from one another. Dubai is an especial favorite of passengers transferring from a flight headed out of India, as there is a U.S. Customs and Border Protection (CBP) pre-clearance facility for those flying on the United States.
—Finally, Brand USA is putting more of its own resources into marketing to India, while concluding its 9th Annual Sales Mission to India last fall, it also announced that it will launch a Brand USA Travel Week India trade show October 5-9 in Delhi.
9. AUSTRALIA
A return to steady, if modest, growth in visitation to the USA from Australia in 2020 is expected following a mildly disappointing 2019. Disappointing, yes, but not unexpected. The Reserve Bank of Australia indicated early last year that GDP growth had slowed beyond forecast levels and the overall performance of the country’s economy was sluggish. This was a result, in part, of the tangled mess that US-China economic relations had become. Australia is a major purchaser of Chinese goods, and the impact of the trade-and-tariff war between China and the US hurt the Australian economy. For Aussies, it became more expensive to visit either country.
And then, there was the challenge of the strong U.S. dollar. The Australian dollar, after hitting of $0.81 in January of 2018, slid all the way down to $0.70 in October 2018, just as tour operators were closing their purchases for the coming year. The slide continued, by the way, till the Australian dollar bottomed out at $0.67 this past August. Since then, it has been hovering at or near $0.70. Still, it could have been worse, were it not for the fact that the USA remains the aspirational long-haul destination of choice for vacationing Australians.
As a result of this mix of factors, NTTO’s forecast for 2019 projected a one-percent decline in inbound traffic for inbound traffic from Aussies. And it looks like that just might be the case from this point once the data are final. And any cessation of trade hostilities between China and the United States will help improve the outlook. However, even if the two countries had not made some kind of trade agreement, the Reserve Bank of Australia’s most recent statement (in November) on the nation’s economic forecast was, well, meh—in other words, not much for concern. Translation: the inbound tourism business with the USA should be back to normal.
10. ITALY
One wonders how Italy could fall into its third economic recession within a decade, as it did in the final quarter of 2018, and still care enough about taking a holiday that it remains the 10th largest overseas source markets for visitors to the United States. One reason is that the people of Italy, not unlike several other countries in Europe, have certain priorities. And one of them is making sure to enjoy their holidays.
A brief look at NTTO’s most recent market profile of Italian visitors to the United States tells us that, in 2018, more than 70 percent of Italian visitors to the USA had selected “vacation” or “holiday” as a purpose of their trip. Only 15.1 percent said that “business” was the purpose of their trip. Maybe this is the right way to do. It just might make it easier to forget about recessions or the turnovers in government; Italy has had 10 prime ministers since 2000. Such things are just not as meaningful as a vacation.
Seriously, it does DMOs and travel suppliers in the US well to know what the attitude of the Italian visitor to the United States is. An itinerary ought to include components that emphasize elements that are truly a vacation experience. Just about everyone in the travel and tourism industry in New York City area knows the above. This is because they also know that half of all Italian travelers to the USA visit New York City. Suppliers and DMOs who would like to tap into the Italian market ought to check Connect Travel’sTourOperatorLand.com website and click on “Receptive Finder,” and you’ll be able to make contact with receptive tour operators in New York who deal with the market. Also, check out Connect’s upcoming RTO Summit East on April 15-16 in NYC (https://www.rtosummit.com/east/). It’s a boutique trade show that brings together more than 50 receptive tour operators with about 100 suppliers.
In the meantime, don’t worry too much about the inbound visitor numbers: Italian travelers have weathered three recessions in the past decade and 10 prime ministers in the past 20 years. Understand this, and they’ll be happy to be your guest.
11: ARGENTINA
The essence of the sad situation in Argentina was crisply illustrated in a two-sentence narrative in the September 25, 2019 issue of the Wall Street Journal: “It was a familiar scene for Argentines. As a financial crisis engulfing the country entered its fourth week in early September, residents were lining up at banks to withdraw dollars from their accounts, hoping to keep their savings safe.”
If the above is a little too general and not specific enough to the travel and tourism industry that it would make you more concerned—how about what happened about three months later, just before Christmas. The Argentine Senate passed legislation that, among other things, imposed a 30 percent tax on purchases made with credit and debit cards abroad, purchases through sites that invoice in dollars, and the purchase of services and tickets abroad.
It did not help the overall economic environment in Argentina to have an election for president taking place at the same time. Reflexively, all kinds of economic activity (and travel abroad) slows down during a presidential campaign in Argentina, like an American crowd at a baseball game waits for a new batter, hoping that a change will help the team their rooting for, but is behind at the moment. As we well know, that doesn’t happen with national economies that are overextended, whose currency borders on being worthless, whose rate of inflation if off the charts and who is in an intractable slide into a major recession.
In such an atmosphere, Former Cabinet Chief Alberto Fernández, the candidate of the Justicialist Party won the presidency on October 27th, and incumbent president Mauricio Macri lost his re-election bid for a second term. Fernández was inaugurated on December 10th. Macri became the first incumbent president in Argentine history to be defeated in his reelection bid. The new vice president under Fernández is Christina Fernández Kirchner (no relation), a former president of Argentina herself. She served as president from 2007-2015, succeeding her late husband, Néstor, who served as president from 2003-2007.
It is hard to project just how long the slide in the economy of Argentina will be. Its impact on the travel and tourism industry and, in particular, the US inbound tourism industry, is clear and direct. One can only imagine how much the tax on spending abroad and the restriction on the use of dollars will make life miserable for tour operators in Argentina. One clue: It already has. Inbound traffic from Argentina in 2018 was down 2.4 percent vs. 2017. And NTTO forecast that the total for 2019, once data are complete, will show a decline of 16 percent over 2018. (Year-to-date numbers for January through November 2019 nearly mirrored the NTTO forecast; they were down 14.4 percent vs. the same period the year before.)
It is beyond difficult when one reviews the economic data concerning Argentina. We can say, however, with some degree of confidence, this: The outlook for Argentine visitation to the USA in 2020 is bad, very bad. Conduct business at your peril.
12: COLOMBIA
By the time most readers of INBOUND read this particular item, Colombia should have become Number 11, trading places on the Top 15 Overseas Markets with Argentina. Regardless of the circumstances, any upward movement by Colombia is reason to applaud the country’s efforts make the USA a favored destination. It seemed as if the nation’s people were going to increase their outbound travel following a peace agreement in late 2016 with FARC (Revolutionary Armed Forces of Colombia), ending a state of guerrilla war that had gone on for more than 50 years. So significant was the achievement that Colombia’s president, Juan Manuel Santos, was awarded the Nobel Peace Prize in the month following the signing of the agreement.
All would have gone smoothly, most agree, were it not for the influx of an estimated 1.4 million people who have fled neighboring Venezuela because of what can only be called a state of deprivation and perdition. To some, the influx of Venezuelans seems to have spiked, but not before it placed a huge burden on the government and people of Colombia. If that were not enough, there was an announcement this past September by a group of FARC holdovers/leftovers who said it was going to re-start the fight against the government. So far, it has not appeared to pick up traction. Because of all this conflicting action, the number of arrivals to the USA from Colombia floundered, finally backing bounce in 2018 and 2019. NTTO has projected that, this year, Colombia will be the first of the ACC countries of South America (Argentina, Chile and Colombia) to exceed one million USA visitors in a year. In addition, Colombia might move up to Number 10 on the list of Top 15 Overseas Source Markets by surpassing Italy.
There is no doubt from any quarter that Colombia can handle both inbound and outbound air service from the United States. The country added to its capacity several years ago with service by Viva Colombia airlines, which connects almost 20 cities in the country with major points of departure that can reach Miami International. And there are a number of legacy carriers that serve points in the US from points in Colombia. Closest to the USA is Cartagena, which is about a three-hour flight from Miami.
INBOUND will be able to pick up on the most current condition of the Colombian market when we attend and cover Connect Travel’s Travel Marketplace (Feb. 19-21) in Orlando and report on any news developments or observations from the delegation of Colombian tour operators who attend the event. (For more on the Marketplace, visit https://connecttravel.com/events/marketplace/).
13. SPAIN
As the world travel and tourism industry enters a new decade, the industry’s health in Spain is at the peak of its game—for both outbound and inbound. Spain is the second most popular destination in the world (83 million annual visitors), behind only France (89 million visitors). It is also home to a number of well-known hotel brands, as well as Hotelbeds, the world’s largest bedbank. As far as its outbound profile, Spain has outperformed most overseas source markets, percentage-wise, over the past decade. Since the 2008-2009 Great Recession, Spain’s outbound visitor traffic to the USA has increased every year thereafter, except for 2013, when the country pulled out of a two-year recession. Also, during this period, the country significantly increased its lift capacity with the launch of a new low-cost carrier, Level, that serves Boston, Las Vegas, Los Angeles, Newark, JFK, Oakland and San Francisco. Level is based in Barcelona, which serves as a point of connection for flights from throughout Europe carrying passengers who will eventually visit the US, which also has American, Delta, US Airways flying between Spain and the USA. Also based in Barcelona, another low-cost carrier that connects the city to destinations throughout Europe. The rate of increase of visitation to the USA by Spaniards will slow a little over the next five years. But—because of troubles now being experienced in Argentina—Spain will move up, from No. 13 to No. 12 among the Top 15 Overseas Source Markets once the final data for 2019 confirm such.
14. THE NETHERLANDS
The 2020-21 outlook is a wholesome one. Why? One factor that we are reminded of when we discuss the presence of the Netherlands on our Top 15 Overseas Source Markets is that the geographically small country is also one of the less populated nations (17.2 million) on the list. Its geographic positioning in Europe, however, has made it a steady and reliable generator of visitors to the USA. Additionally, its strategic location—it is a short flight from Berlin, Paris and London—makes it a convenient connecting point to other air service to the United States besides the six carriers who have direct flights from Amsterdam to the US: Delta, KLM, United, American, Norwegian and TUI.
And then there is the Dutch language that the residents of the Netherlands speak. While they would no doubt prefer to speak Dutch, the people of the Netherlands seem more comfortable in English (American English for that matter) than the residents of any other country in the world. According to EF First, a Swiss-based company that teaches English at locations throughout the world, and which has a portfolio of travel-related products as well, the Netherlands ranked first this year (2019) in EF’s measure and ranking of English language proficiency. It is generally acknowledged that a major reason the Dutch speak English (more than 90 percent of its people do) better than anyone else is their historic dependence on international trade, as well as the use of subtitles for foreign languages on television rather than audio dubbing. And American television programming is quite popular in the Netherlands.
The many ways in which the Dutch can accommodate the interests of its tour operators and US-based receptive tour operators in selling Visit USA product is evident in the steady growth in the number of visitors it sends to America. As the table below indicates, visitation from the Netherlands to the United States has increased each year during the past decade, except for 2016—that’s when outbound travel from nearly every country in the Eurozone felt the effects of a dramatic drop in the value of the euro vs. the U.S. dollar. It went from a high of nearly $1.40 in 2014 to about $1.05—a decline in value of 24 percent, which was well beyond the capability of many wholesalers to absorb. Operators across western Europe took a financial hit.
15. IRELAND
For some time, the Republic of Ireland has hovered at or near the Number 15 slot for sending visitors to the United States. As 2019 came to a close, NTT0’s forecast for the year had it at Number 15 again. Statistically speaking, it doesn’t seem possible for a nation with such a small population (4.9 million) to be able to generate more than a half-million (531 thousand) people to visit the USA. But the data do not lie. Yet, how, or why, could so many—10.8 percent, or more than one out of ten—of its residents do so? Some have joked that most Irish travel is VFR (visiting friends and revenues) and there might be some substance to the joke, as some 33 million Americans are of Irish ancestry and, according to the Survey of International Air Travelers, 31.5 percent of Irish visitors to the United States listed VFR as a purpose of their trip.
Still another reason for visiting America for the Irish is that it is a more “user-friendly” process than it is at just about any other overseas source market. Ireland’s Dublin and Shannon airports are just two of 15 airports worldwide—there are no others in Europe, South America or Asia—that have on-site U.S. Customs and Border Protection (CBP) preclearance facilities. Through Preclearance, CBP officers conduct the same immigration, customs, and agriculture inspections of international air travelers typically performed upon arrival in the United States before departure from foreign airports. Finally, Ireland is a relatively short distance from the eastern U.S.—Dublin is less than 3,200 miles from New York City—close enough that there are several airlines that offer long “day-trip” shopping excursions from Dublin to Stewart International Airport, N.Y., about 15 miles from the Woodbury Commons, an outlet mall/shopping center which is less than 60 miles north of Manhattan. There is more, and it all seems to buttress NTTO’s forecast that Irish visitation to the USA will increase by 2 or 3 percent a year for the next five years.
CANADA
Follow the dollar: For those DMOs and US travel suppliers who work the market of the USA’s neighbor, Canada, it’s always been about the value of the dollar—the value of the Canadian dollar against the U.S. dollar on the currency exchanges of the world. Perhaps it is an oversimplification to say so, but a change of five percentage points in the value of the Canadian traveler will determine whether or not the travelers in the cities that are close to the Canada-US border (Ninety percent of Canadians live within 100 miles of the border) will go across the border for a weekend shopping trip, or how much the Canadian snowbirds who live in the warmer climes of the United States during the winter will budget for their stay. Or whether those flying to different parts of America will choose a less expensive package tour.
The owner of an American tourism business in northwest New York State who thrives on the traffic of
Canadian day-trippers and overnighters was quoted in a news item five years ago as saying something like this: “When it gets down to 75 cents, we worry, because if it gets below that, it’s bad news.” Whether one chooses to consider it mere correlation or the less forgiving causation, the fellow who said this was right.
First, take a look at the total number of visitors to the United States from Canada, as posted by the U.S. Department of Commerce’s National Travel and Tourism Office. (Figures are rounded.)
Second, keeping in mind that currency fluctuations sometimes take a year to a year-and-a-half to have an impact, as prices for group packages are set for the following year, consider this:
—The Canadian dollar peaked $1.05 in July 2011.
—The Canadian dollar bottomed out at $0.687 in January 2016.
—The Canadian dollar recouped to $0.82½ in September 2017.
—The Canadian dollar fell back to about $0.75 in September 2018 and has stayed at or near that price since then.
The point in bringing up the exchange rate data is to respond to those who believe that Canadian dislike of U.S. President Donald Trump was causing many Canadians not to visit the United States. While it is true that President Trump’s popularity numbers in Canada are low, it is the currency exchange numbers that have an impact on Canadian travel to America. Yes, there are other factors, but none have as much impact as the value of the Canadian dollar vs. the US dollar.
MEXICO
Perhaps the best news report on Mexico and its travel and tourism activity that INBOUND came across since our last Outlook was this, from a Washington Post article this past spring: “A new poll suggests that Mexicans may be doing the impossible: ignoring Trump’s remarks.” For the past couple of years, there has been much attention given to U.S. President Donald Trump’s harsh and critical remarks about the country and its people, causing his approval rating among Mexicans to plummet into single digit territory and Mexicans’ attitude toward Mexico to sink below 50 percent. While the latter poll was quiet on Trump’s numbers, it pointed out that a majority of Mexicans are back to liking the United States—very important to US travel suppliers who are marketing and promoting the Visit USA travel experience.
The change in attitude is welcome, because other news affecting the industry in the past year was not. The country fell into an economic recession in the first two quarters of 2019. It shouldn’t be too long before we will find out from the statisticians whether or not the country has completed two consecutive quarters of economic expansion required for the recession to be over. That would be good news, because according to the numbers in the NTTO’s long-term forecast posted near the beginning of this article, the number of visitors from Mexico to the United States dropped by 741 thousand last year. But that should be, one hopes, a “one-and-done” occurrence in a year resulting from last year’s recession. The forecast suggests that the industry should stabilize this year and, by 2022, inbound traffic from Mexico to the USA should exceed 2018’s total by more than a half-million.
Remember, Mexico has a population of about 130 million people and, of that, the potential traveling population one would expect to find in the nation’s middle class (a little less than half of the nation’s households are considered middle class, according to the most recent number we could find) makes one wonder if we have really tapped the potential in this market.
The Bond between us: Built into the model for marketing and promoting the Visit USA travel experience are some daunting numbers that are hard to ignore—they are numbers that are stronger than one will find between the United States and any other country market:
—Around 11 percent of the US population is identified as being of full or partial Mexican ancestry, according to the U.S. Census Bureau.
—While estimates vary, the consensus seems to be that at least 40 million US residents speak Spanish—the language of Mexicans; this number would make the United States the fifth-largest Spanish speaking country in the world—behind Mexico, Spain, Colombia and Argentina.
—According to the most recent study on the subject that we could find, international money transfers made by migrant workers and immigrants sending a portion of their earnings to their families in their country of origin are known as remittances; Mexico receives an estimated $25.2 billion, making the U.S.-Mexico remittance corridor one of the largest in the world. —The latest NTTO market profile of Mexico notes that, in listing their purposes of a trip, more than one-third (34 percent) of Mexicans traveling by air into the United States cite VFR as a purpose.
To access the pdf version of the report click on the following:
