A Sneak Attack on Brand USA is Buried in the Fine Print of Tax Bill
When the U.S. Senate passed the wide-ranging tax bill early on the morning of Dec. 2, it opened the door to the automatic implementation of previous legislation that, in effect, would require the de-funding of Brand USA (officially, the Corporation for Travel Promotion) and deep cuts in the programs of U.S. Customs and Border Protection (CBP).
While awaiting word from the U.S. Travel Association as to what it thinks about the possibility of the elimination of Brand USA’s funding, here’s what we found out from various sources.
In February 2010, Congress passed and President Barack Obama signed into law The Pay-As-You-Go Act of 2010 (Title I of Public Law 111-139)—also called Paygo—which reinstated a law enacted in 1990 under President George H.W. Bush and was effective until 2002. The act is designed to ensure that most new spending is offset by spending cuts or added revenue elsewhere (with several major policy exemptions). The tax cut bill will cost the U.S., by most estimates, some $1.5 trillion. Hence, the Paygo cuts.
As explained by the New York Times, with the exception of Social Security, the U.S. Postal Service and some income-based programs such as unemployment benefits and food stamps, most mandatory spending programs are subject to Paygo. For 2018, the law would take away $14 billion in some farm aid programs, $1.7 billion for Social Security block grants, Meals on Wheels and millions here and there for scores of federal programs.
The Times lists 228 programs whose funding would be claimed as a result of Paygo (see the list here: https://www.nytimes.com/interactive/2017/11/29/upshot/paygo-medicare-cuts-tax-bill.html). Number 223 on the list is a $100 million for the Corporation for Travel Promotion (DBA Brand USA). The $100 million is the amount of funds that is collected of visitors to the U.S. from Visa Waiver Program counties via a fee when they register for their travel through the Electronic System for Travel Authorization (ESTA). Through a one-to-one match of contributions from the private sector, Brand USA can received up to $100 million in funds.
Equally startling is Number 94 on the list, which identifies $1.344 billion in funds for operations and support for U.S. Customs and Border Protection. There is no specific indication as to what operations and support will be cut.
Can It Be Reversed? “Congress has found a way to slip around the rule in the past by including an exception in legislation from the Paygo cuts,” notes the Times. “But because of the special budget process Republicans are using for tax overhaul this year, the tax bill itself can’t include such an exception.”
Jonathan Grella, executive vice president of public affairs for the U.S. Travel Association, told us: “Brand USA is one of hundreds of programs in the bucket of mandatory spending items which could be affected by the rules required for spending offsets. We don’t believe that Brand USA is being singled out in anyway.
Added Grella, “In the hunt for revenue, cutting Brand USA would be a big step in the wrong direction. Brand USA is critical to helping maximize the economic benefits of travel. Last year, Brand USA’s activities generated $615 million in incremental federal taxes—more than four times its budget—and another $552 million in state and local taxes.”
Wake-Up Call: Preliminary Numbers Show Weakest First Half in Years
The latest preliminary monthly arrivals data for the first six months of 2017 by the U.S. National Travel and Tourism Office (NTTO) presented a discouraging picture of the performance on the USA’s inbound tourism industry with few encouraging statistical notes—except for an apparent recovery in the market from Canada a strong performance by South Korea and a glimmer of hope for top producing European markets as the Euro’s modest increase in value vs. the U.S. dollar this year seems to have stanched the red ink that characterize the overall numbers: Total international arrivals to the USA dropped 3.9 percent, year-on-year, vs. 2016; and overseas arrivals declined even further, by 5.7 percent. Not since the 2008-2009 Great Recession and its wake has such a tumble in arrivals numbers been so pronounced.
To Illustrate the Impact: Were the first-half year-on-year decline for the UK alone to continue for the remainder of 2017, the 6.2 percent drop-off would—if one translated to arrivals, travel receipts and airfare passengers—result in the following:
The release of the first-half arrivals numbers for 2017 and their potential economic impact prompted an uncharacteristically blunt assessment from Roger Dow, president and CEO of the U.S. Travel Association. “The latest government travel data is deeply concerning not just to our industry, but to anyone who cares about the economic wellbeing of the United States,” Dow said. “Travel is our country’s number two export and supports more than 15 million American jobs.”
He added, “These numbers are an undeniable wake-up call, and correcting this troubling trend needs to become a national priority. “The travel industry will turn over every stone looking for all available policy options to better promote the U.S. as an international destination, and we stand ready to partner with the federal government to grow travel, and American jobs and exports along with it.”
Revisions Continue to Delay release of NTTO arrival data. One serious problem with the data released Nov. 29 by NTTO is that they are indeed preliminary and subject to revision. And they will be revised. In 2016, some mid-year numbers were so far off the mark (for instance, preliminary data for June 2016 arrivals from China were down 33 percent vs. June 2015) to industry observers were left incredulous.
As it developed, NTTO, which had been pressed by the U.S. Travel and Tourism Advisory Board, appointed by the Secretary of Commerce and comprised of industry representatives from through the country, to come up with more timely data, in turn pushed U.S. Customs and Border Protection (CBP), which collects the data and turns it over to NTTO, which has had ongoing problems in getting information in a timely fashion. Some of the data, for U.S. territories in the Pacific, is still manually tallied and collected. And at first, information collected at some kiosks proved to be incomplete in the information that passengers arriving in the U.S. filled out. In general, what NTTO received was incomplete and hard to work with.
In an effort to turn its product around more quickly—NTTO used to have its information for a specific month released within 90 to 120 days of the month in question—NTTO dropped the preparation of the explanatory news releases that accompanied the monthly reports, depriving users of the agency’s insight on the data. Yet things are still behind, because it does not have in hand the information from CBP in a timely fashion (the latest monthly release, covering June 2017, was not available until Nov. 29, almost six months after the fact).
So, all of the data above are furnished with a codicil: “Expect revisions.” There is some good news for those who follow NTTO’s work. One can expect to see the agency put out a long-term forecast for 2018 and beyond sometime this month.
Markets Tanking for U.S Continue to Grow for Canada
Could it be that Some International Visitors are Forgoing the U.S. for Canada? While the arrivals figures for the first six months of 2017 from top producing international markets for the USA are on the decline, many of the same markets are performing handsomely, according to the latest monthly report—for September 2017—released by Destination Canada, the country’s tourism promotion agency.
For the first nine months of this year, Canada has experienced an increase of more than four percent in arrivals from both its 11 target markets and from all international markets. The only market registering a year-to-date decrease which, Destination Canada said, is “where outbound travel in general may have suffered in the midst of concerns for the economy ahead of Brexit.”
Meanwhile, Mexico is setting a record this year in the numbers of its travelers who are visiting Canada, while travel to the U.S. by Mexicans is down by more than 9 percent (or more than 750,000 visitors) for the first six months of 2017. Should the year-to-date pace through September hold for the last quarter, Canada should set a record for annual arrivals by international visitors. (editor’s note: Two reasons for Canada’s popularity: 1. Weakened Canadian dollar. 2. Donald J. Trump is not their president)
The Next Step in the Evolution of International Tourism Sales: Get off the Hamster Wheel
by Jake Steinman
Editor-in-Chief
With the UK probably America’s most mature inbound market, the value proposition for World Travel Market held every November in London seems to be trade public relations and networking and schmoozing at the 4:00 p.m. receptions.
During the day, appointments with buyers often include, as they have for the past 10 years, a pitch for marketing support that travel suppliers view as a shake-down—openly wondering how they can justify the expense of attending an event where the line between buyers and sellers is so blurred. One person we encountered at WTM openly mused about other ways she could have spent her marketing dollars for a digital marketing campaign that can precisely target her most likely prospects. Instead, she and those like her believe that the same expenditure makes them feel as if they are on the proverbial hamster wheel–running hard but going nowhere.
After observing three days of WTM, it dawned on me that shows such as WTM, ITB, IPW and others are gathering places for the industry to engage in networking, public relations and learning about trends as much as they are about sales. And then there are those who worry that their very absence may have buyers asking about their whereabouts, not to mention that they could be opening a door for a competitor. When actor-writer-director Woody Allen once said “85 percent of success is just showing up,” he could have easily been thinking about the tour and travel industry.
But while the environment has changed dramatically in the past five years, the UK industry has not. In the worlds of one destination marketer, “the industry lacks evolution.” It has stayed in place.
The Tour and Travel Industry Distribution Chain: In conventional product marketing, there are distributors who take the product to a retail network that sells to consumers. The travel trade’s version of these distributors is a chain that usually involves receptive tour operators who sell to in-country wholesalers who, in turn, sell to travel agencies who reach the end consumer. Major retailers such as supermarkets or department stores usually add “slotting fees “or additional margin for products that don’t sell themselves. Our industry’s answer to this is the offer or, in some cases, the demand for funds to cover brochure support or ad programs on their websites–funds that are nothing more than subsidies which contribute little to generating demand for the product needed to help the “sell-through” phase.
Major brands (i.e. Disney, Universal, Florida, California), invest millions in marketing while niche brands use online marketing tools to find the most likely targets to buy their products. Imagine—if the Russians can spend $150, 000 to reach 126 million Americans on Facebook by sending posts so precise that they reach only those in your neighborhood who may be disposed to dislike Hillary Clinton—just what can be done with a modest budget to reach prospective visitors by structuring a digital marketing campaign using some of the over 1,000 targeting options on Facebook or Google.
While international consumer budgets are limited, the UK is an extremely mature market in which consumer marketing is the best way to achieve the demand that will sell through product. Yet, we found at WTM that tourism marketers remain mired in the sell-in phase and still try to use conventional FAM trips by journalists (and now bloggers and self-professed “influencers”), and travel agent training which, considering the extremely high turnover rate, becomes a task that lives somewhere between Sisyphean and whack-a-mole.
A New Vision: We spoke with Billie Moser, vice president of marketing for Travel Portland, a forward thinking and highly respected industry professional with a different grasp on mature markets and a vision for international marketing that goes beyond in-country representation and Brand USA’s off-the-shelf programs.
For example, after much analysis, in 2013, Travel Portland’s China strategy began with a five year sell-in effort targeting Chinese tour operators and receptive operators positioning Portland as a hip, young destination that was safe, affordable and well located between San Francisco and Seattle gateways. As more direct airline connections began serving the Seattle gateway, Portland became part of an integral part of any Pacific Northwest package. Sometimes a destination’s product can evolve faster than tour operators are willing to recognize.
In its analysis prior to hosting the Active America China Summit (AACS) and its 60 Chinese tour operators last spring, Travel Portland found that operators were selling their city as a tax-free shopping destination for fashion apparel. Realizing that many destinations offer similar shopping products, she used the AACS, including its FAM day, to define Portland and the surrounding regions as a nature-and-outdoor wonderland. This primary message is key to a strategy that involved direct-to-consumer content marketing.
The pivot to a content strategy to help create demand that will help operators sell-through the product began by hiring a local Chinese “influencer” to record life in Portland through blog posts and videos and images that would be pushed out through Chinese social media channels in the hope that operators begin to offer more nature product in the coming year. Said Moser, “We do, however, know that the messages we are putting out there are resonating as we can see from our Online Audit.”
What does Moser recommend with markets such as the UK and Germany? “I’m hands-on with the entire international budget and select the best programs from Brand USA that meet the individual markets’ strategies,” she told us. “I work with them as though they’re another one of our agencies and try to mold their existing programs to fit our needs.” And what advice would she have for tourism marketers with limited resources? “Find two or three operators who ‘get’ your destination and work to help them sell your product to their customer base.”
When that happens, you’re no longer running hard just to stay in place.
Which Country’s Travelers are The Most Digitally Savvy?
And other Info-bytes and Statistical Nuggets from New Research: Travelport’s just-released “The Global Digital Traveler Research” contains a well of information on key international country markets that contains findings on everything from the percentage of travelers globally who voice search their travel information to the percentage of global travelers who say they would feel lost without their smartphone. Travelport also designated India as the “world champions” of digital travel. (And, by the way, China’s travelers topped the charts for being the biggest app-users with an average of 20 such services used during each trip.}
First, a note on the sample. The findings are based on an online survey that utilized Toluna Research’s* sample of travelers in August 2017. The research covered 19 countries globally and was restricted to people who had taken at least one return flight last year. In total, there were 11,000 respondents from the 19 countries. Australia Brazil Canada China Colombia France Germany India Indonesia Italy Japan Mexico Russia Saudi Arabia South Africa Spain UAE UK US www.travelport.com/info (Add to all tables that follow: © 2017 Travelport. All rights reserved. Travelport, Apollo, Galileo, Worldspan and the Travelport logo are trademarks of Travelport. All other marks are the property of their respective owners. *Toluna Research: www.toluna-group.com)
National and Demographic Highlights: The Travelport study covered travelers in 19 countries. The responses from the varied collection of country markets, regions and demographic groups were able to provide some interesting findings, which are highlighted below.
The Digital Traveler League Table: By combining the main indicators of digital usage by travelers in each country, the Travelport research team was able to create a league table to show who are the most and the least digitally-dependent among the nations surveyed. The findings reflect overall smartphone, fixed-line and mobile internet penetration levels locally. There are some striking differences in digital travel behavior between the countries in the survey. Some people are heavily reliant on mobile technology while others are less digitally dependent when planning and making their journeys.
Top of the League—India: According to the report, Indian travelers would tell us: “Most of us would feel lost without our smartphones, though we might not use them for all the phases of a trip, but the Indians are the world champions of digital travel. They clearly love the convenience of their smartphones and use them from booking a trip to boarding a plane with a digital boarding pass.”
World’s List of Top 10 Tourism Cities Includes just one from USA
A regular feature of World Travel Market week in London is the release of reports and studies that slice, dice and granulate the world’s international tour and travel industry and ranks its various components according to enough indices that just about every country market on earth can point to a ranking of some sort as a good reason to show up at WTM. But none gets more attention than Euromonitor International’s Top 100 City Destinations Ranking. For, not only does it put together a list of top performing cities in the world, it tallies the top 10 cities in each major global region and, in a few cases, in some countries as well. And it has brief analyses of key issues in each region.
First, the Top Ten Cities of 2017, according international tourism arrivals:
New York Dominates the Americas: According to the Euromonitor report, the city “is the clear leader in the Americas. To many it might seem that the city is untouched by what is happening in Washington DC, but NYC & Co has revised its forecasts for 2017, expecting a potential fall of 300,000 visitors, although this is likely to be a worst-case scenario.”
Trump Factor Could Threaten Growth: As the report puts it, “Uncertainty reigns with Donald Trump in the White House,” and goes on to explain: “Global unease has accompanied President Trump to the White House. Trump entered office on the back of claims that he would close the U.S. border, build a wall between Mexico and the US and end trade agreements, all potentially affecting the travel industry.
One of his first actions was to pull out of the Trans-Pacific Partnership (TPP) in January 2017. Similarly, he has threatened to pull out of the NAFTA agreement, which allows free trade between Canada, Mexico and the U.S.”
The report adds this note: “Euromonitor International’s Travel Forecast Model provides an indication of the impact a Trump Trade War would have on the travel industry. If the US drops out of NAFTA and imposes a 35 percent tariff on Mexican imports, followed by Mexican retaliation, the impact on inter-regional travel would be considerable.”
At a Glance: Harrisburg & Hershey
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HODGE PODGE: Shifts, Shakeups and Occasional Shaftings in the Tour and Travel Industry
Richard Singer has been named chief executive of travel price comparison website Icelolly.com. Singer, who was previously Travelzoo’s European president, was scheduled to become managing director of Monarch Holidays earlier this year; however, the company shut down in October before he began work. He had spent five years with Travelzoo.
Alexandre Mesquita has left his position with Hostway Travel and launched his own consulting firm that will focus on leisure, special, specific interest travel, as well as groups and incentive trips. Prior to working at São Paulo-based Hostway, Mesquita had served as commercial manager for Grupo Águia, which includes the familiar Stella Barros, Interplanet and Planeta Brazil brands.
Jim Henderson has retired from Visit Anchorage`after serving the organization for 28 years. He joined the bureau in 1985 as convention sales director and, four years later, became vice president of convention sales.
Tour and travel industry veteran Ken Fischang has launched a consulting firm, the Fischang Group, that specializes on interim management and business development support. Fisching, who abruptly resigned earlier this year from his post as president and CEO of Sonoma County Tourism after serving nearly 12 years in the post, had returned to Michigan where he was briefly executive director of the Saugatuck Douglas Area CVB. Earlier in his career, Fischang had served for five years as executive director and vice president, marketing, of the Kalamazoo County (Mich.) CVB.
Rene Schaufuss has been named CEO of source markets for leading German tour operator FTI. The position is a new one as the company expands its management team. Schaufuss joined FTI in October . He was previously director of tour operating with the Primera Travel Group in Copenhagen. His resume also includes a tenure with Kuoni in Switzerland.
Laurence Hicks, former managing director of London-based Wendy Wu Tours has launched Inclusive Retreats a LGBT-friendly tour operator that sells tailor-made holidays to a range of destinations – but only where homosexuality is legal – and is also handpicking hotels that are LGBT-friendly within countries such as the USA, UK, France, Spain, Australia, Mexico, Thailand and Israel. Hicks, who launched the new company last month with around 50 properties on the company’s website, wants to double the number of properties it features to around 100 by the end of the year before starting to approach travel agents and consortia.
Emily Milligan has been named director of business development for Fly My Group, a U.S. company that specializes in flights and itineraries for groups. Milligan joins Fly My Group from the Student & Youth Travel Association and SYTA Youth Foundation, where she had been associate director.
Alexandre Chavot has joined the sales team of Beachcomber Tours in charge of France’s Rhône-Alpes region. Prior to his new position, Chavot worked for several years at Plein Vent as a sales representative then head of large accounts and groups.
Dusseldorf, Germany-based Alltours has announced that director of sales and marketing Mike Hennig (left) will leave the company next March “for purely personal reasons” after just 18 months in the position. Also, flights director Richard Brodrecht (right) will leave the group at the same time for personal reasons. Replacements are being sought for both jobs.
