The Inbound Report 2017 Outlook for Key Source Markets
First, perhaps the most significant of the three key factors affecting the flow of overseas travelers coming to the United States in 2017 was the decision of the U.S. Federal Reserve less than a month ago, on Dec. 14, to increase the benchmark interest rate (the interest rate at which depository institutions—banks and credit unions—lend reserve balances to other depository institutions overnight) which should result in a stronger dollar because of investors seeking higher yields from bonds and other financial instruments. A stronger dollar on currency exchange markets is certain to make an already weak euro and pound sterling even weaker … and holidays to the U.S. more expensive. And in order to prevent the steadily growing U.S. economy from growing too rapidly, the Fed is expected to increase the benchmark rate several more times in 2017, making the U.S. dollar stronger still.
Second among the key factors is the “Trump Factor,” one which is difficult to measure as it relies primarily on anecdotal accounts suggesting that, due to the negative and sometimes hostile perception of U.S. President-elect Donald Trump in certain key markets, some overseas travelers will forego a visit to the USA in favor of another destination or, at least, they will avoid use of Trump-branded hotels. The only real country market of consequence where the Inbound Report has picked up, and read reports of, travelers avoiding the USA, is Germany—the number four overseas source market.
Third is the cost of fuel—the largest operating cost of airlines worldwide—which is expected to increase as a result of recent decisions made by both OPEC and non-OPEC oil-producing nations to reduce output. While this move will not have immediate impact, as most carriers have hedged price increases through long-term contracts, it could have an effect as the tour and travel industry nears autumn and package prices and brochure rates for 2018 are finalized.
A Preface: In making a forecast for 2017, the first tool that the Inbound Report relies on is the long-term forecast—regularly updated twice a year—of the U.S. Department of Commerce’s National Travel and Tourism Office (NTTO), a small but thorough and efficient operation that occupies a small part of one hallway of the U.S. Department of Commerce building in Washington, D.C., but counts on in-country U.S. Foreign Commercial Service officers and U.S. State Department analysts for input in preparing its forecast. The forecast employs a model that uses such sources as currency exchange rates, the activity of stock markets throughout the world, key economic indicators and measures, as well as industry-specific information such as scheduled increases and/or decreases in flight service between countries. And, usually, NTTO is never far off the mark in its projections.
TABLE OF TOP 15 Overseas Source Markets*
Plus Canada and Mexico
* Note: Overseas includes all countries except Canada & Mexico.
Sources: U.S. Department of Commerce, International Trade Administration, National Travel and Tourism Office; Statistics Canada; Banco de Mexico. October 2016
In addition to the NTTO forecast, what we at the Inbound Report have is a network of connections with international tour operators and U.S.-based receptive tour operators who furnish us with information and insights that are anywhere from a six months to a year from becoming historical data—long before such data can be inputted and configured into the models used by government agencies. The NAJ Group, which publishes the Inbound Report, also produces a half-dozen events each year, with four of them bringing U.S. travel suppliers and DMOs together with receptive operators and other operators that serve or sell all the key international source markets. As well, receptive operators and international tour operators provide clues to new developments when they update their company profiles and product information on NAJ’s TourOperatorLand.com website.
Our First Projection: With the above as preface, and the NTTO long-term forecast as a reference, here is what we see for 2017: Overall, inbound traffic from the Top 15 overseas source markets will increase by one or two percent for 2017. The actual figure will be determined by the extent to which a stronger dollar (and weaker euro and pound sterling) will impact bookings and purchases for USA product in the first and second quarters of the year. Brief profiles of our outlook for the USA’s Top 15 overseas country markets follow.
United Kingdom: At first blush, it would seem that the U.S. travel suppliers and DMOs that promote and sell the USA abroad just might give up on the UK this year. Here’s why:
- First, the British pound sterling has fallen about 18 percent in value vs. the U.S. dollar from a high of $1.49 just prior to the June 23 vote in which Britons voted to leave the European Union (UK);
- Second, one survey last month indicated that the cost of holidays abroad for British travelers could increase 15 to 20 percent;
- Third, the USA is a tired and familiar destination offering little new in terms of travel experiences; and most Brits can’t stand Donald Trump.
And here’s why none of the aforementioned matters:
- Most Brits still like the USA, which shares a common language—families, in particular, consider a visit to Central Florida an once-in-a-lifetime dream; survey after survey indicates that Britons would rather give up one of their own relatives than forego an overseas holiday;
- Nobody really cares that Donald Trump is the new President of the United States;
- The United States is considered a safer holiday choice than other favored destinations, such as northern Africa and continental Europe; and
- Brand USA, regional, state and city tourism offices have been relentless in promoting America as a dream destination while focusing on new itineraries that highlight beyond-the-gateway locations and experiences.
From a statistical perspective in which the market would do well merely to stay at the same level, we see Visit USA traffic increasing by one to two percent in 2017.
Japan: After surpassing the five million mark in the number of visitors it sent each year to the United States for several years in the 1990s, Japan retreated steadily during the first decade of the new century, dropping to 2.9 million in 2009 in the trough of the Global Economic Recession.
- It has settled at a point just above 3.5 million in annual USA visitors and will do well to remain near that point in the future.
- A major reason is a factor that has not changed for the past several years: the aging of Japan’s population, which is, in effect, not replacing its travel-ready population. “Japan Population Decline? Too Many Virgins Fuels Birthrate Crisis” screamed a Sept.19, 2016 article in the International Business Times, which noted that the nation’s population fell from 128 million to 127 million from 2010 to 2015.
So, while surveys of the Japanese travel trade conducted by the Japan Association of Travel Agents through 2016 were mildly optimistic regarding outbound travel to the USA, particularly to Hawaii, any regular observer of the market gets the feeling that it would do well merely to stay in place (zero percent change), which we expect that it will do.
China: Now No. 3 and on way to being No. 1. There is no stopping the growth engine for travel to the USA that is the Chinese market. Here’s why:
- It is it driven by a voracious demand for the Visit USA experience and tied to scores of billions of dollars invested by Chinese partners in America’s tourism infrastructure.
- It is also tied to the U.S. connection fostered in the more than 300,000 Chinese students in the United States who are visited by family and friends from China.
- It is driven, too, by a seemingly inexhaustible supply of first-time visitors to the USA who come first in groups and later as FIT travelers.
- Also, travel—increased travel among Chinese—is also a matter of government policy. We are now in the midst of the Chinese government’s seven-year plan, The Outline for National Tourism and Leisure (2013-2020) that seeks to encourage travel (it is primarily for domestic travel) by encouraging more paid holidays for workers and an improved tourism infrastructure in every part of the travel experience that is sold in China. The reason? The government wants Chinese consumers to spend and create demand at levels that can help fuel the nation’s economic expansion.
- The plan for growth presents some challengers, however: The strain of China’s demand-driven expansion of travel and travel-driven needs are illustrated in that fact that it is estimated that the country will need to hire 100 new pilots a week for 20 years to fly the aircraft built and being built in order to satisfy demand.
Still, aside from some global calamity or some politically driven act that would interrupt it, the succession of years in which the number of visitors from China to the U.S. increases at double-digit percentages will continue through 2021.
Germany: The Lost Year—to be continued. “The travel agency sector has effectively lost a year of growth,” said the Nuremberg-based marketing research firm GfK as it released monthly data on travel agency sales for the year ending Oct. 31, 2016.
- Accordingly, you will see that the long term forecast by NTTO projects the final figure for arrivals from Germany to the USA for 2016 will be off by three percent. And for 2017, the agency is forecasting growth of one percent—even though German operators are already in a bit of a promotional war as they aggressively pursue sales for 2017 product.
- Even with new sales approaches, the German trade is operating midst an environment in which many Germans are wary of traveling internationally because of fears of terrorist activity; a weak euro and, in the case of the United States, a pronounced dislike of President-elect Donald Trump.
- When the Inbound Report surveyed travel industry professionals in the wake of Trump’s Nov. 8 election victory, the reaction was mixed—except on the part of the German trade and the U.S. suppliers and receptive tour operators who sell to Germany. There is a pronounced dislike of the new President among German travelers, trade professionals told us, many of whom are likely to change their holiday plans and forego the USA for another destination in 2017. As well, we learned, travel agents in Germany are less likely to promote the sale of U.S. products to their customers.
Unless time can quickly persuade German holidaymakers to change their attitude, the latter is likely to have a negative impact on bookings during the all-important spring months when many Germans book their travel for the peak travel period of July, August and September. We expect to see a year-over-year decline in arrivals from Germany of one to three percent.
Brazil: Is “The Crisis” over? Perhaps Brazil’s stunning 7-1 defeat by Germany in a World Cup semifinal match on July 8, 2014 (and the match wasn’t even as close as the lopsided score suggests) in Belo Horizonte was an omen of things to come for all of Brazil—in particular its outbound tour and travel industry.
- By the same date in 2015, the nation’s currency, the real, had dropped in value against the U.S. dollar by 31 percent and the second largest tour operator in the country had gone bankrupt.
- In another two months, the real dropped another 16 percent and several more tour operators had shut down.
- Business bankruptcies set a record in 2015.The country’s economy fell into its worst recession in a century.
- Arrivals to the USA for the year fell by two percent and were projected by NTTO to fall another 17 percent by the time the data for 2016 were available. The situation became known simple as “the crisis.”
And that’s not the worst of it. Several monstrous political scandals were uncovered and President Dilma Rousseff was impeached and removed from office last Aug. 31st. At about the same time, however, some receptive tour operators and U.S. travel suppliers, as well as several reliable experts on the Brazilian market told the Inbound Report that the worst was over. In fact, a recovery was already under way, they said.
And some key numbers seem to confirm this judgement:
- The real is up 20 percent vs. the U.S. dollar over its low point of 2015. The National Confederation of Industry (CNI), has said that GDP, which actually contracted for almost two years, should expand by 1.3 percent in 2017.
- The largest travel company in the nation, CVC, has operated as if there never was a recession. Earlier this year, it announced a plan in which it would add 100 new agency locations a year for three years, and it is on target so far.
- While international bookings have suffered during “the crisis,” CVC has sent much of its growing customer base to less expensive destinations that are short-haul or within Brazil itself. CVC will be ready to re-route those who can afford it to their preferred overseas destination, the USA, as the economy recovers.
Remembering that 2016 is supposed to see a 17 percent decline in 2016, we’re anticipating a recovery in which inbound numbers will bounce back to what they were five years ago—just less than 1.8 million visitors.
South Korea: It is probable that this nation’s visitor numbers, based on its population of 52.7 million, are disproportionately larger (to the overall population) than those of most nations. It is likely, too, that visitor counts will continue to grow steadily, probably passing the two-million-visitors-a-year mark this year.
- There are few potential disruptive bumps on the road to this figure for 2017, but there are many factors in its favor:
- First, the nation has been a Visa Waiver Program nation since 2008;
- Second, as a connecting point between Asia and the U.S. West Coast, its international airport at Incheon, South Korea gives the nation and its residents an almost unlimited lift capacity to the USA;
- Third, it has a strong bond with southern California, where Ahn Chang Ho (1878-1938), the leader of the Korean independence movement, lived for 25 years;
- Fourth, it is the number four source of international students attending school in the United States—only China, India and Saudi Arabia send more;
- Fifth, because the U.S. is its number one trade partner, its currency is closely tied to the fortunes of the U.S. dollar and avoids fluctuations in its relationship to the dollar; and sixth, a substantial portion of its traveling population is English-speaking.
- Finally, while South Korean travelers tend to favor West Coast destinations, the VFR market, which includes visits to students at universities throughout the U.S., has exposed them to second- and third-tier destinations, which are growing in popularity.”
We agree with NTTO’s forecast that visitation from South Korea will exceed 2 million for the first time, and will continue to increase with healthy, single-digit percentage increases through 2021.
France: Battered but Steadfast. After the Nov. 13, 2015 ISIS-sponsored-and-coordinated series of attacks in Paris that killed 130 people and injured another 368 people—it was the worst attack on France since World War II—the reflexive wisdom was that the population of a nation whose psyche was shaken by such an event would be more likely to stay home and avoid international travel.
- As if that alone were not enough to discourage travel to the USA, then a weakened euro should have done so. But these two factors have not. Instead, NTTO projects that—while Visit USA traffic will remain essentially the same in 2017 as it was in 2015 and 2016—arrivals from France will, at the end of this year, have increased by more than 75 percent compared to 10 years ago.
- Unlike other European nations, outbound travel to the USA did not suffer from the Global Economic Recession of 2008-09 (it was down a mere 3 percent in 2009) as French tour operators strengthened their portfolio of products to include MICE product and “authentic” USA product, such as tours in the U.S. Southwest and destinations featuring unique American experiences. (The French have always favored New York City, and that should not change.) The country’s leading travel trade publication and online site, TourMag, regularly features such product.
- If there was any headline event in the industry during the past year, it was the acquisition of Canadian-owned Transat France by TUI. (TF owned the well-known Look Voyages and Vacances Transat brands.) It seems likely that, if it the acquisition will have any kind of impact on travel to the USA, it will be in an increase in numbers. This is due to the synergies created within a unified TUI brand and its economies of scale it creates, as TUI is now the largest tour operator for continental Europe’s two largest country markets—France and Germany. Prior to the acquisition, TUI already had a 16 percent share of business volume in Germany and, following the completion of the Transat purchase, it has a 21 percent market share in France. Prior to the acquisition, reported figures for France gave TUI a 12 percent market share and Transat France 9 percent.
We anticipate that the TUI move could very well push arrivals in the U.S. up by a percent or more this year.
Australia: They’ll still be here. During a studio tour in Los Angeles that the Inbound Report’s editor took last February, he engaged in a brief conversation with an Australian traveler who noted, “the U.S. dollar is really hurting us.” This prompted our editor to wonder quietly “Yes, but you’re still here.” And despite an Australian dollar that has gone from bad to worse and stayed there over the past four years, the Aussies keep coming. True, their numbers might be diminishing in their rate of increase, but they keep coming.
- On April 7, 2013, the Australian dollar stood at $1.03 vs. the U.S. dollar. Three years ago this month (Jan. 16, 2014), it had fallen to $0.88. After a brief recovery, the Australian dollar went into a free fall, bottoming out a year ago this month (Jan. 9, 2016) at $0.69. Since then, it has been near $0.75.
- Shortly before January 2016, Creative Holidays, recognized as the country’s leading tour operator, shut down. But those who cover the industry in Australia attribute the failure to the company’s belated attempt to intersect its traditional, printed brochure way of doing business with digital channels.
- It is not difficult to explain away why the Aussies keep coming. The English-speaking Aussies like the English-speaking U.S.—more than they like any long-haul destination—and are especially fond of the U.S. Southwest and fly-drive packages, although we’ve personally found them in such wide open spaces as Boston and Philadelphia.
- Another measure of how much they like the USA: of the Top 15 Overseas Source Markets, Number 8 Australia has the second smallest population—24.3 million (less than the populations of the states of California and Texas). Compare this with Number 7 France (64.7 million) or Number 9 India (1.263 billion). Only The Netherlands has a smaller population.
Yes, the rate of increase in the number of Australia arrivals to the USA will taper off over the next five years into less impressive single-digit percentages, but … they’ll still be here.
India: The potential for a large and lucrative long-haul market from India, the world’s second most populous country (est. pop. Is 1.33 billion), has been there for some time. According to India’s National Council of Applied Economic Research (NCAER) the country’s middle class (i.e., “travel ready” individuals) comprised about 267 million people in 2016 and is likely to grow to 547 million individuals by 2025-26.
- Other factors aside, it’s always been a matter of sufficient lift capacity, as direct flights from India to the USA are among the longest anywhere.
- Then, beginning about a decade ago, three carriers from the Middle East—Etihad, Emirates and Qatar Airways—started expanding the number of their aircraft and routes, turning their base headquarter airports and the region into the busiest connecting center in the world.
- Etihad and Abu Dhabi International Airport, in particular, have benefited further due to the location of the only U.S. Customs and Border Protection (CBP) preclearance facility in continental Europe or the Middle East. The ease of connecting to the USA from so many flights from Asia and elsewhere has created significant opportunities for Indian tour operators and travel agents, as well as their customers.
Other factors contributing to a favorable outlook for India include:
- The large number of students from India who study in the U.S. (more than 165,000—second only to China) and create a built-in sub-market of VFR traffic to America;
- The fact that India’s English-speaking population make it the second-largest English-speaking country in the world, behind only the United States.
- For suppliers and DMOs from the USA, participation in Brand USA’s autumn sales missions to India and at SATTE (South Asia Travel and Tourism Exchange) have become almost mandatory. The latter takes place next month (Feb. 15-17) in New Delhi.
While there are some obstacles to conducting business smoothly (a reliance on cash payments—although this mostly affects domestic travel—by Indian consumers, as well as a distribution system that is not as well defined as it is in Europe), the favorable factors for doing increased business in India outweigh the disadvantages, meaning the strong percentages in growth of inbound arrivals are certain to continue for the next five years.
Italy: Not quite “molto bene,” but well enough. Much of the basis for the outlook for Italy in 2017 lies in some key numbers and how they have changed little in the past year(s).
- It is a mature source market—in 2006, the country had a population of 58 million, increasing by 2 million over the next 10 years—with fairly well established preferences and a route network that weds New York City and Rome. Italy’s traveling population and its destination choices have stayed much the same during the past decade.
- As is the case with the other key source markets in Western Europe (Germany, France, Spain and the Netherlands), Italy’s tour operator community now has to deal with a euro that shrunk dramatically vs. the U.S. dollar in recent years: From March 2014 to March 2015, the euro fell from $1.40 to $1.05—a decline of 18 percent. But the Italian travel trade learned to adapt and has held steady for the past year as the euro has fluctuated between or near $1.05 to $1.10 vs. the U.S. dollar.
- New York remains hugely popular among Italian travelers and will continue to be so—it receives about 45 percent of all Italian visitors—as it is the main gateway between Italy and the USA. And its tourism infrastructure and travel experiences (particularly shopping and sightseeing) have what most Italian travelers want to do and see.
U.S. suppliers do not seem to be tinkering with a predictable and successful formula, opting to keep the market performing at steady levels with visitation growth rates this year expected to be about the same as they were in 2015 and are likely to be in 2021.
Colombia: Our expectations a year ago for an uninterrupted expansion of Colombia’s place as the top Spanish-speaking South American market came undone in 2016.
- First, the nation’s economy—a stable and growing economy is a predicate for travel and tourism growth—began to stumble because of a serious shortage of tax revenues due to record low price levels for oil, as well as threats by rating agencies to downgrade the nation’s credit rating.
- Second, the peace agreement between the government and rebel guerrillas (who had been fighting for some 50 years) that was a draft a year ago and finalized in September, was narrowly defeated in a national referendum in early October.
Colombian President Juan Manuel Santos seemed to take both the credit rating threat and referendum defeat personally—he had, after all, been awarded the Nobel Peace Prize for his work on the peace agreement—and took corrective action. On the matter of the peace accord, he worked on a revised measure and secured the agreement of rebels and then, rather than subject it to a referendum, had it approved Nov. 28 by the national legislature, where his ruling party has a comfortable majority. And then, just two days before Christmas, Colombian legislators approved a revenue measure that increased the nation’s value added tax by two percentage points—enough to raise $2 billion in new taxes and satisfy credit rating companies who were threatening a downgrade.
The level of tension was such a factor that a number of people simply stayed home and avoided international travel—even if a flight from Cartagena to Miami is little more than a short-haul hike that is about the same distance as New York to Miami—for many months. It is possible that the NTTO forecast of a 3 percent decline in arrivals to the USA in 2016 might be low.
And since the revenue legislation happened at the very end of the year, and during a holiday period, it is too early gauge what kind of an impact it will have on 2017 traffic. Thus, despite all of the optimism we expressed a year ago, we are leaving the discussion with a “not sure” prediction for Colombia.
Argentina: “Those who want to travel are going to travel” one Argentine told the Inbound Report several years ago when we asked why the figures for outbound travel from (once again) South America’s largest Spanish-speaking country market continued through the Global Economic Recession of 2008-09 and through continued economic troubles such as out-of-control inflation and a lack of direct foreign investment.
- There seems to be no other answer than “Those who want to travel are going to travel” when one considers the economic picture in Argentina this year. Stuck in a recession and faced with a 40 percent rate of inflation, the bookings for travel from Argentina along with a relentlessly upbeat reports in the travel trade news media suggest that the NTTO forecast for healthy increases in the number of arrivals from Argentina—there hasn’t been a decrease since 2003—rings true.
- A little more than year into the job, the country’s new president, Mauricio Macri, is still generally popular with the public, having replaced Cristina Fernández de Kirchner, who left office with extremely low approval ratings. A businessman himself, Macri has taken some steps aimed at kick-starting a recovery, such as recovering undeclared assets held both at home and abroad through a tax amnesty law, and the creation of a business environment that attracts foreign direct investment across industries that are in need of foreign capital.
- In a recent interview, Erasmo Mema, a political analyst at FTI Consulting’s Buenos Aires office, told Forbes: “An economic rebound will be paramount to the electoral prospects of Macri and his party. Without it, the Republican Proposal will likely be defeated and Macri’s chances for reelection in 2019 will be significantly diminished.”
- -Given what we have learned through Argentina’s figures for outbound travel to the USA for the past 14 years during which, year-to-year, the rate of Visit USA traffic never decreased, it might not make a difference. Perhaps it is because Argentina (est. pop. is nearly 44 million) has a healthy middle class that is still able to travel. In fact, the Inter American Development Bank reported in 2015 that 54.5 percent of Argentine households belonged to the middle class, ranking second after Uruguay where the number was 55.8 percent.
Because of what we know about the determination of Argentines to travel abroad—no matter what—as well as a tourism environment and infrastructure that is in sync with what U.S. travel suppliers have to offer, we see NTTO’s robust forecast for arrivals from the country in the near term as credible.
Spain: Well, we were half right a year ago when we wrote, “With the same proviso regarding the euro that is part of the outlook for every European source market—the currency is slowly rebounding from its low-water mark of $1.06—visitation from Spain to the USA should realize modest increases next year and through the end of the current decade.” We were wrong in anticipating an increase in the value of the euro vs. the U.S. dollar. But we still maintain that the USA should realize modest increases in arrivals from Spain in 2016 and through 2020.
- Following the Global Economic Recession of 2008-09, the leadership of Viajes El Corte Inglés decided to make a change in its operations—no small change for the travel division of El Corte Inglés (“The English Cut”) the Madrid-based department store group which is the largest in Europe and ranks fourth worldwide, employing more than 93,000 people. The recession hit Spain’s economy harder than it did other EU countries and management made a strategic decision to strengthen its diverse and component parts, such as its travel business, Viajes El Corte Inglés (English Cut Travel).
- The company reached an agreement with Orlando-based Tourico Holidays for the latter to serve as its booking engine, which overnight increased the range of its hotel inventory and attractions exponentially. English Cut Travel is probably more powerful than any of Spain’s tour operators—a few specialists have gone out of business in recent years because of chaotic and/or dangerous conditions in the destinations they sold to Spaniards—and this benefits the USA, which is featured prominently on the company’s website and at the chain’s retail locations throughout Spain.
As other travel companies follow the example of Viajes El Cortes Inglés and diversify in the products they sell, it will benefit the USA through increased arrivals from Spain this year and in the foreseeable future.
Netherlands: Of the top 15 overseas source markets, this country has the smallest population of any, and if intellectual curiosity could be ranked as a quality among visitors, the Dutch would probably rank number one. One reason is that, according to EF (English First)—it is a company based in Lucerne, Switzerland, that specializes in international education and travel—The Netherlands ranks first in English speaking proficiency among nations where English is not the native language. (The 2016 ranking was based on a review of tests taken by 950,000 adults in 72 countries in 2015.) In fact, more than 90 percent of the Dutch population can converse in English and are quite comfortable with American English—possibly because of the popularity of U.S. movies and television programs, which are broadcast with subtitles and are not voiced-over.
- And no other market is likely, as the Dutch are, to name sightseeing (79 percent), visits to national parks and monuments (46 percent), traveling to historical locations (37 percent) and visits to art galleries and museums (35 percent) as top activities when visiting the U.S., as they did when visiting the USA in 2015, according to NTTO.
- For such reasons, U.S. receptive tour operators, travel suppliers and urban DMOs have a relatively easy time marketing to The Netherlands, which has a population that is 90 percent urban.
- There are just two negatives for this market, except two: the weak euro, which might diminish those visitors for whom cost is paramount; and a small population base that can send only so many of its numbers abroad.
But that limit doesn’t seem to be an issue for the foreseeable future. In the interim, it is safe to expect arrivals from The Netherlands to grown at reliable, single-digit percentage increases for the next five years.
Venezuela: This is likely the last year for some time in which Venezuela, by virtue of 2015 data—the latest year for which full year numbers are available from NTTO—will be spoken of as a Top 15 Overseas Source Market. Our prediction last January of an 8-plus percent decline in arrivals from the country is almost identical to what NTTO is projecting as the final 2016 figure for Venezuela. And NTTO forecasts no increase through the next five years.
The Inbound Report will leave it to others to catalog the litany of things that have gone wrong as the Venezuelan market has proceeded along its road to perdition, but several factors stand out: the worst rate of inflation of any major national economy; the decision by some airlines not to serve Venezuela because the government would not repatriate the funds owed them; and limits on what travelers abroad could spend.
And, as of this writing, one should not rule out the possibility of a civil war. By next January, we will probably be writing about Sweden as the new No. 15 Overseas Source Market.
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Canada and Mexico: The other half. Fifty percent of all international inbound travelers to the USA come from the short-haul country markets of Canada and Mexico, both of which border the United States. Until 2015, Canada was the dominant source market of the two.
- Then, in the wake of a decline in the value of the Canadian dollar (the loon, or “loonie”) starting in 2013, visits to the USA will have declined/are projected by NTTO to decline, by a total of nearly 4.5 million through 2017.
- The fall-off in Canadian visitors has been severe enough that it has thrown into question whether Brand USA will be able to achieve its stated goal of 100 million international visitors a year by 2021.
- Just about everyone agrees that the drop in arrivals is directly related to the weakened loonie, which traded at about $1.03 in 2012, sunk to less than $0.70 near the end of 2015 and is still trading at about $0.75.
- The decline has been especially hard on the hundreds of businesses near the U.S.-Canadian border who have relied on day trips and overnight visits for shopping and sightseeing. (An estimated 75 percent of Canadians live within 100 miles of the United States.)
- At the same time, the weak loonie/strong U.S. dollar has been a boon to Canada’s inbound tour and travel industry. From the latest data available for 2016 (through September), about 1.4 million overnight visitors to Canada arrived from the U.S. in September 2016, up 11.5 percent over September 2015, bringing total U.S. arrivals in the first three quarters of 2016 up to 11.2 million (+9.7 percent over the same period of 2015). This was the best September for U.S. arrivals since 2005, and the best January-September performance since 2006.
- Whatever damage the strong dollar-weak loonie has done to inbound tourism from Canada is offset somewhat by the fact that many tourism brands operate in both the U.S. and Canada and depend on a healthy level of activity on both sides of the border. This perspective will have to provide what solace there is to Canadian tour operators because, as was noted at the beginning of this article, the U.S. Federal Reserve plans on increasing prime interest rates for borrowing in order to keep the U.S. economy and its dollar strong.
NTTO sees Canadian inbound totals recouping about 3 million of the visitors it has lost since 2013 by the year 2021, but the Inbound Report is not that optimistic, believing that such a level is at least another year after that.
Mexico, on the other hand, is positioned as strong as it’s ever been to be the number one international source market for the U.S. Here are some reasons for its strength:
- The nation’s “travel ready” population has grown in recent years. Ever since the North American Free Trade Agreement (NAFTA) came into being in 1994, Mexico’s middle class has been growing steadily—to the point that, in 2015, it comprised 47 percent, or 14.6 million of the country’s households. The country’s total population is nearing 130 million.
- It is safe to say that everyone in Mexico has family or friends in the United States that they can visit. According to the U.S. Census Bureau, as of July 2015, Mexican Americans made up 11.1 percent of the United States’ population, as 35.8 million U.S. residents identified as being of full or partial Mexican ancestry.
- The United States is language friendly. Because there are so many Spanish-speaking Mexican Americans, as well as transplanted South Americans and Central Americans in the USA who speak Spanish, the U.S. is second worldwide to Mexico in the number of people who speak Spanish. According to a 2015 report from Instituto Cervantes, which is based in Spain, the United States is home to 41 million native Spanish speakers, with an additional 11.6 million who are bilingual. Spain itself has a population of 47 million.
- Since Mexico’s upstart low-fare Volaris airlines began expanding its international routes to include nearly 20 U.S. destinations—including some second-tier cities such as Fresno, Sacramento, Reno-Tahoe, as well as some cities in the U.S. Southeast and Northeast—travel to U.S. interior is an affordable option for many Mexicans who used to rely on buses to reach such destinations. And additional low-fare airlines are making new connections to the U.S. via Mexico.
- Whatever animus President-elect Donald Trump might have generated among Mexicans because of remarks that have been widely criticized as being insensitive or racist, it is directed at Trump, not Americans. The attitude seems to suggest that not even a new wall could keep Mexicans from visiting their neighbor to the north.
So, it looks to us like NTTO’s estimate of strong, single-digit percentage increases in arrivals from Mexico each year for the next five years are on target.
Our Ten Most-Read Articles of 2016
It is challenging for us to make broad generalizations about what the tour and travel industry professionals who subscribe to the Inbound Report are most interested in reading. We do know, however, after taking a look at the results on the number of readers of each article for the past year, that they were most interested in the sale/acquisition of units of two major European tour operators. We show two articles on the subjects as being No.1 and No. 2. Actually, there were a half dozen articles on the same two subjects, in total, that could have qualified for Top 10 status. So, we stretched the base of articles a little to include some others in the list, which follows.
- “Kuoni up for Sale—Carlyle Group among Those Interested”—This was the headline article in the first issue of the Inbound Report for2016. It remained an item of intense interest for a month. Then, in February, it was announced that Swedish private equity firm EQT Partners had acquired the Zurich-based Kuoni, one of the oldest tour operators in Europe.
https://www.inboundreport.com/2016/01/06/kuoni-up-for-sale-carlyle-group-among-those-interested/
- “Out of Left Field Department: And Now, Word is that Booking.com is after Hotelbeds”—Published in early April, this was one of a series of articles in the months-long saga that generated a high level of interest as TUI, Europe’s largest travel company, moved at a deliberate pace in reviewing offers for its Hotelbeds unit. A UK private equity firm, Cinven, and the Canada Pension Plan Investment Board, combined forces to make the acquisition in late April.
- “Caps on Visitor Numbers, Higher Fees Loom for U.S. National Parks”—Tour operators were especially concerned upon reading this item, published in June, as the U.S. National Park Service announced that it was seeking solutions to overcrowded conditions at some of America’s popular national parks.
- When Jerry DiPetro—a long-time receptive tour operator who had transitioned into semi-retirement—passed away suddenly last September with a heart attack during a routine meeting with senior sales executives at Blair Hotels in Wyoming, it generated an outpouring of heartfelt comments and reactions—more than for any other industry figure we lost during the year.
https://www.inboundreport.com/2016/09/14/in-memoriam-2/
- “NAJ’s RTO Summit West, Feb. 17-18 at the Marina Del Rey Ritz-Carlton: a Visual Log”—We want to believe that most people read the Inbound Report for its editorial content, but they said otherwise via the large number of readers who apparently turned to this photo log instead.
- “Brand USA Goes through Third CMO in Just over 3½ Years”—Tour and travel industry professionals were stunned to learn (the Inbound Report was the first to report it) of the departure of David Whitaker from the top marketing job at Brand USA in order to become president and CEO of Choose Chicago. Whitaker had held the BUSA job for a year.
- “Tourico Strikes Deal to Book Hotels for Virgin Holidays”—Orlando-based Tourico Holidays, which seems to be a step or two ahead of the curve in developing new product and new technology, made other operators everywhere take notice when it announced an agreement to partner with the well-known UK tour operator.
https://www.inboundreport.com/2016/03/02/tourico-strikes-deal-to-power-virgin-holidays-inventory/
- “Heads Roll at Visit Florida. CEO Ousted after $1 Million Pitbull Deal is Revealed.”—A combination of indignation on the part of public officials over a “Sexy Beaches” video and a million-dollar contract with a world famous rapper was enough to cause the firing of Visit Florida’s top three officials … just a week before Christmas.
- “Aniseh Dalju Launches Own Receptive Tour Operator Company”—The Inbound Report was the first to notify tour and travel industry professionals that Aniseh Dalju had left a major West Coast receptive tour operator after a long tenure in order to launch her own tour operator business.
https://www.inboundreport.com/2016/01/27/aniseh-dalju-launches-own-receptive-tour-operator-company/
- “Travel Industry Speaks Out about the Election of Trump”—A week after the Nov. 8 general election in the U.S., the Inbound Report set out to find out what our readers thought about the result and the prospect of a President Donald Trump. Reactions ranged from “I don’t expect much of a change in international visitor-ship” to “Devastated. I believe America went 1,000 steps back in all aspects.”
https://www.inboundreport.com/2016/11/16/travel-industry-speaks-out-about-the-election-of-trump/
New 2016 Arrival Data Indicate German Traffic to USA Will be Down at Least 10 Percent
Were it not for the fact that up-to-date numbers will not be available for months, the latest arrivals figures seem to confirm what the tour and travel industry’s receptive tour operators had suspected early on in 2016: it was not going to be a good year for inbound traffic from Germany. Then, on Dec. 27, the U.S. Department of Commerce’s National Travel and Tourism Office (NTTO) released arrivals data from the first half of the year showing that 2016 could end up being even worse than anticipated. We took the latest information from NTTO and compared it to the same period last year; the numbers speak for themselves:
Then, on Dec. 29, the German travel trade publication, FVW, credited cruise product as the principal reason “the German tour operator market just managed to remain on the growth path this year.”
Customer numbers dropped by 1.9 percent to 31.4 million, according to an FVW survey of 52 tour operators, although tour operator revenues rose by “a fractional 0.9 percent” to €21.2 billion ($22.3 billion). Cruise holiday sales increased by 14.7 percent. The 52 operators surveyed account for 80 percent of the total German market.
The operator industry’s Top 10 performed as follows, according to FVW:TUI Germany remained clear market leader despite a 2 percent decline to turnover of €4.4 billion ($4.63 billion) and a 5 percent decline fall in customers to 6 million.
- TUI Germany remained clear market leader despite a 2 percent decline to turnover of €4.4 billion ($4.63 billion) and a 5 percent decline fall in customers to 6 million.
- Thomas Cook had stable revenues of €3.5 billion ($3.68 billion) and 6.1 million customers in Germany thanks to its Condor brand’s seat-only sales.
- DER Touristik’s revenues fell 4 percent to €2.8 billion ($2.95 billion) and customer numbers were down nearly 7 percent at 5.4 million.
- FTI revenues grew by 3 percent to €2.2 billion ($2.3 billion) and customer numbers increased by 1.3 percent to 3.9 million.
- Aida Cruises took over fifth place, with 14 percent revenue growth to €1.5bn and a 10 percent increase in passengers to just over 900,000 after launching a new ship, the Aida Prima.
- Alltours dropped to sixth after revenues slumped 11.5 percent to €1.33 billion ($1.4 billion) and customer numbers fell 13 percent to 1.6 million.
- Schauinsland-Reisen held revenues stable at €1.1 billion ($1.16 billion) and customer numbers at 1.4 million.
- 9., 10. Three cruise firms (TUI Cruises, Phoenix Reisen and Hapag-Lloyd Cruises) completed the top ten tour operator ranking.
Looking ahead to 2017, FVW reported German tour operators were generally optimistic about improving sales, although market leaders did not comment on their expectations. Among the 35 firms who commented on their revenue expectations, one third predicted up to 5 percent growth and one third up to 10 percent growth.
Yes, Post-Brexit Dents UK Travel to North America
While Britons actually increased their overall travel abroad (+7 percent) in the third quarter of 2016—the full quarter following the June 23 Brexit vote in which Britons voted to leave the European Union—there was a slight slip (-1.3 percent), year-over-year in the number of UK residents who traveled to North America in the third quarter. Generally, visits to the USA comprise 85 to 90 percent of UK travelers’ visits to North America.
This is just one our findings drawn for the most recent report on overseas travel by Britons released just before Christmas by the UK’s Office for National Statistics (ONS) and containing data for travel to and from the UK through October.
Another: For the most current calendar quarter (August, September and October) there is, effectively, no change, year-over-year vs. the same period in 2015. And for the year to-date (through October), traffic to North America from the UK is up 5 percent; overall outbound travel by Britons is up 5 percent. The following table compares figures from 2013 through 2016.
RTO Summit West Sold Out; eTourism International Day Slots Still Available
The two-day RTO Summit West, February 8-9 at the Ritz Carlton Marina del Rey, has completely sold out, however, a limited number of tickets to eTourism International, a one day version of NAJ’s most in-demand event, eTourism Summit, are still available. This event is designed to provide international sales professionals with digital skills to complement their relationship marketing activity.
The objectives of eTourism International are:
- To provide digital tactics for the tour and travel industry’s international sales professionals; and
- To providing one-on-one executive coaching from experts who will help them to better understand international strategy, WeChat and other platforms effectively.
“The re-branding of the first day of the RTO Summits as eTourism International is designed to level up the value of the event by equipping travel industry sales people with digital tactics that can help advance their careers.” explained Jake Steinman, CEO of the NAJ Group, which stages the RTO Summits. “Of course, day two will feature business appointments that bring together travel suppliers in face-to-face meetings with receptive operators.”
The program will include presentations, including two “Power Panels,” that cover a range of subjects, including the following:
- The Best Performing Digital Channels that drive International Sales in the leading source markets of UK, Mexico, Brazil, Japan, Germany, China and India.
- Five Key Things You Need to Know about Google.
- Five Things You Need to Know about International Facebook Marketing.
- SMARKETING: How SMARKETING (Sales & Marketing) can support one another in developing a cohesive international sales strategy.
- How to evaluate digital marketing campaigns proposed by in-country reps
- “Yes, Even You Can Afford it!” Examples of low cost Digital Marketing Campaigns that have proven successful.
- Utah’s Cafeteria Coop program … How the state of Utah created an international off season coop program that worked for suppliers at different budget levels
- Visit Houston’s Influencer campaign in Mexico … How Houston built a content marketing program around two influencers in Mexico that yielded over 1.5 views and impressions.
- National Park DMO’s influencer campaigns in Germany … Posts, Translations, Videos.
- Examples of International Digital marketing Campaigns at different budget levels:
- Key Travel Trends from UK, Germany and France … TripAdvisor will be releasing the most recent version of its European Travel Monitor research including how inbound hotel bookings have been affected by Brexit and decline in the Euro, and Donald Trump’s presidency
- Five Things You Need to Know about Digital Marketing to reach Chinese FITs:
- Power Panel No.1: Find the Best Online Media Channel that will Boost Activity in Low Season. Learn from key company officials how Expedia Media, Travelzoo, and TripAdvisor can be used for coop programs to that target international visitors before they arrive.
- Power Panel No. 2: A prestigious panel of leading receptive tour operators discuss their outlook on 2017 bookings, where they see opportunities and challenges. Companies participating are: AlliedTPro; New World Travel; American Tours International; DTE; and the Japanese Tour Operator Association.
To register for eTourism International, and for other information, visit: goo.gl/pk2gRV.
(For the 6th Consecutive year, NAJ will host the Japanese Tour Operator Association luncheon during the RTO Summit.)
Will There be a “Trump Slump” in UK Traffic to the USA?
Britons traveling overseas may very will forego their planned stateside visit this year—this according to the mavens at Cheapflights in the company’s “Top Travel Trends for 2017.” You’ll find this projection halfway down the list, which was released just before the start of the new year. The list of trends follows.
1. What a carry on! Hand luggage only please
With British Airways announcing charges for food on board this year, the beginning of the end for all-inclusive airlines has officially arrived. The majority of carriers are adopting the no frills model of charging for anything they can, and the consumer has voted with their luggage with stats showing already 22% are willing to travel hand luggage only. This number will increase in 2017 as savvy travelers pack light to take flight.
2. Buy before you fly—BYO on board
Whilst in 2016 eating healthily was ‘pie in the sky’, with less than a fifth of Brits taking their own food on board, new EU legislation just enforced (Dec. 13, 2016) will undoubtedly increase awareness of the high sugar and salt levels in airline food. This, and the continued health food revolution – and unfaltering rise of food stars such as Deliciously Ella and the Hemsley Sisters—means travelers may well make better informed food choices and avoid airline food.
3. The Platt Effect
The High Court victory of father Jon Platt, who refused to pay a £120 (appr. $150) fine for taking his daughter on holiday during school term-time, sparked a surge in demand for term-time travel. Analysis of flight searches to popular family holiday destinations including Lanzarote, Malaga, Gran Canaria and Florida showed demand for travel during the spring and autumn term-time periods jumped by as much as 50 percent once the ruling was announced. Perhaps emboldened by news of the case, family travelers on trips that see savings of over one thousand pounds by travelling in term time – skiing or Disney World – may weigh up the cost benefits of a statutory fine. Cheapflights has pinpointed a variety of money saving tips that can bring down the cost of travel, without the risk of incurring a fine. (For more on this subject, read this Inbound Report article: goo.gl/TeSQs6.
4. The “Bleisure” Boom
“Have lap top, will travel” is the modern mantra and the line between leisure and business travel is blurring further. In 2017, look for more people exploring the world by working business hours at their day job and then exploring in their time off. Top destinations include New York, Paris and Brussels although in theory, where there’s Wi-Fi there’s a way.
5. U.S. Tourism—The Trump Slump?
That “special relationship” will endure. However, it’s fair to say that uncertainty around which restrictive policies will be implemented by the new government could trigger a Trump Slump to this traditional favorite and perhaps mean Brits delay booking their Stateside holidays or even consider switching to an alternative destination, such as Canada.
6. Heir Heir—A Royally good New Year
Royal visits can give destinations a boost in the public consciousness: think Princess Diana at the Taj Mahal and more recently, how Canada enjoyed the limelight when it rolled out the red carpet for the Cambridges. Searches leapt 40 percent year on year after Wills, Kate, George and Charlotte touched down in Canada for their first overseas Royal Tour as a family. Top destinations destined to benefit in 2017 include Toronto, where HRH Prince Harry will open the Invictus Games in September.
7. Green Tourism
Protecting the planet and eco-tourism may well continue to inspire travel choices but the other kind of green will prove popular in 2017. The spread of the legalization of cannabis means ‘bud’ and breakfast will see destinations such as Alaska, Colorado, Jamaica and Uruguay capitalize on cannabis.
HODGE PODGE: Shifts, Shakeups and Occasional Shaftings in the Tour and Travel Industry
Welcome back: Jessica Banchs has left her position as sales director for Globo International Tours in Orlando to take over as destination sales manager, corporate and international, for the Arlington (Va.) CVB as the latter prepares to be part of the host region for the 2017 ipw. Prior to her tenure at Globo, Banchs was manager of international sales for JetBlue Airways.
Jodi DiSalle has been named vice president of communications for Experience Kissimmee. A PR veteran of more than 12 years, DiSalle was most recently director of marketing and public relations for the Gaylord Palms Resort & Convention Center in Kissimmee. Prior to Gaylord, DiSalle was executive director of area communications for March of Dimes for a 28-county region.
Luis Tonicha (left) the founder of the global B2B platform Abreu Group, has left his post as managing director of Abreu Online after 35 years in the Abreu Group. Diogo Julião (right) has been appointed as the new director responsible for the Brazilian market.
Monika Proctor, long-time product manager South, East Region, at Meeting Point North America—it is FTI’s USA-based receptive tour operator located in Melbourne, Fla.—has notified friends that the company is going through a restructuring and she is no longer with the company, as it has had to eliminate some positions. She had been with FTI/Meeting Point for 12 years. Before that, she was general manager at American Tours International, where she served for 12 years. She can be reached at Cocoamoni@cfl.rr.com.
Caesars Entertainment Corporation has announced that Ruben Sigala has been appointed chief marketing officer; Sigala had been serving as the company’s interim CMO since the end of May 2016, and the CMO appointment is subject to regulatory approval. Sigala joined Caesars in 2005 and was the company’s chief analytics officer immediately prior to being named interim CMO. Prior to joining the company, he worked in the cruise line industry and as a consultant in Ernst & Young’s National Cash Management Practice.
Ana Paula Kuba is back in Grupo Trend. She left the company in 2014 for a two-year tenure at Hertz, where she served as marketing director. A veteran of nearly 20 years in the tour and travel industry, Kuba, had previously served with such companies as Philip Morris, GVT and F/Nazca Saatchi & Saatchi.
