CANADA—BRAND USA’s MARKETING EFFORTS HOPE TO SQUEEZE MORE U.S. TRAVEL:. One must employ a degree of perspective in looking at NTTO’s projections of modest, single-digit increases in arrivals from Canada, as it currently represents about one-third of all international arrivals to the U.S. There is only so much that a nation smaller in population than the state of California (35.3 million vs. 37.3 million) can continue to expand in its visitor output total. Still, Brand USA will aggressively market to Canada—especially to key population centers located just north of, or not that far north of, the U.S. boundary with the country—even as its overall share of arrivals continues to decline. Making the task somewhat more challenging has been the decline in the past two years of the Canadian loon against the U.S. dollar. Once worth more than 1:1, the loon has been running of late at around 90 cents to the dollar.
MEXICO—A NEW AIR CAPACITY COULD DRIVE GROWTH.:Although its population is three times that of the USA’s northern neighbor country, Canada, Mexico’s travel population is, proportionately, smaller. It is still large enough to send millions of visitors each year to the United States and NTTO is forecasting its arrivals to increase by nearly 40 percent in five years. One factor that will drive the increase is additional lift capacity, with several U.S. carriers expanding the number of their flights to and from different Mexican destinations and the new, low cost Mexican airline Volaris now flying to more than 10 U.S. destinations from multiple cities in Mexico, in some cases with fares that are not much more than the cost of bus transportation. And more than any other country market, Mexico’s travelers have strong family and cultural links to many U.S. destinations: there were more than 12.5 million Mexican immigrants in the U.S. in 2011, reported the Pew Hispanic Center; also, the U.S. is the world’s second-largest Spanish-speaking nation—behind only Mexico and ahead of Spain. Finally, Brand USA has significant presence in Mexico.
UNITED KINGDOM—ELIMINATION OF APD TAXES FOR CHILDREN COULD SPUR FAMILY TRAVEL: The slow but sure ascension of the UK to its position as a reliable top overseas source market is safe and secure. By 2019, it should be sending visitors to the U.S. at levels not realized since before the 2008-09 economic recession hit the nation worse than it did any other in Europe. The recession wrought the demise of hundreds of tour operators and travel-related companies and brought about upheaval, mergers and reorganization among the operators that did endure and survive. The decline in the UK market would likely have been worse in the past two years were it not for the concentrated effort on the part of Brand USA, which made the country its first target market. And now, business is back to such an extent that the largest operators—Thomas Cook, and TUI brands Thomson and First Choice—are competing vigorously for consumer attention, especially online, in expensive sales and marketing campaigns.
There has also been an increase in lift capacity resulting from entry into the market of low-cost carriers and the use of London City Airport to make transfer flights to Dublin International Airport and other close-in European gateways for departure to the U.S. And there could be a bump in departures from the UK in 2015 and 2016 with the recent announcement by the UK government that it will eliminate the Air Passenger Duty (APD) for children under 12 years old traveling in economy class, beginning May 1, 2015. And from May 1, 2016, the exemption will be extended to children under 16, reducing the flight cost by up to £71 ($111) per child for the longest segments of travel covered by the APD. For trips to the USA, families will save £67 ($105) per child.
JAPAN—A MARKET THAT NEEDS TO HAVE MORE SEX: The outlook is flat to dismal. We would leave it at that, except to point out that the opinion is shared by NTTO and, in the near term, by the usually gingerly worded forecasts of the Japan Association of Travel Agents (JATA). In its just-released (Dec. 17) quarterly outlook, JATA’s Diffusion Index—a complicated collection of measuring survey responses by the travel trade in Japan that is reduced to one number—for outbound travel for Q1 2015 fell to its lowest level in two years. Said JATA: “In the next three months (January-March), no destinations are expected to show growth (and) America & Canada …will continue the slight downward trend.”
The past year has been one in which the Japanese economy has been anemic and consumer confidence, which affects travel decisions, has been low. Complicating the prospect of any significant recovery is that the decline in visitors to the U.S., as well as visitor interest, is the realization that the condition is also systemic. That is, the nation’s average age has increased, and the travel age population has been contracting—so much so that the government has been trying to encourage young couples to have babies. In addition, interest in the U.S. began to wane in the 2000s, as it had become “familiar” and travelers began looking elsewhere. Brand USA will have to work hard in its promotional activities in Japan simply so that it can stay in place and avoid further decline.
BRAZIL—MORE LIFT AND EASIER ACCESS TO VISAS WILL CONTINUE TO DRIVE ARRIVALS. The years of overheated activity and year-over-year double-digit percentage increases in arrivals from this Top Five overseas market are nearing an end. The country actually slipped into a technical recession at one point in 2014, and its citizens, collectively, seem to have experienced a general malaise following a protracted, sometimes bitterly contested presidential election campaign, as well as reports of widespread corruption in certain government agencies. But the middle class that grew by 40 million people in the first decade of this century is still part of an expanded travel-ready population that will continue to drive modest, single-digit increases in arrivals over the next five years. Lift capacity should continue to increase as upstart low-cost Azul airlines (it was created by the founder of U.S.-based Jet Blue airlines) expands its long-haul service and connects other Brazilian destinations more readily to international airports. The nation has benefited greatly from expanded U.S. visa processing services and is a target market for Brand USA campaigns—especially those in the digital arena for this, the most online-connected country in South America.
CHINA—BOOM! VISA EXTENSION EXPECTED TO DRIVE EXPLOSIVE GROWTH IN FITs: The world’s largest nation and largest national economy is also—without qualification, condition or dispute—the largest and most important international growth market for U.S. travel suppliers, with NTTO projecting it to send 7.3 million visitors to the U.S. in the year 2021. Its economy has been stubbornly stable, its currency has remained steady for years, its travel-ready middleclass is larger than the total population of most nations, and both the private and public sector in the U.S. are facilitating the process of visiting the U.S. to all regions of China. For instance, since 2012, the United States has greatly expedited the visa application process. And on Nov. 10, the U.S. and China announced an agreement extending the period of validity of visas to each nation from one year to ten years for tourist and from one year to five for students.
China benefits from a continuing expansion of lift capacity by U.S. and Chinese airlines, as well as connecting flights through other Asia and Pacific-based carriers. Major gateway cities to the U.S.—New York, San Francisco, Los Angeles, Vancouver BC, Chicago and Houston—have already developed “China Ready” programs, as have a number of hotel chains and shopping mall chains with properties across America. While there are not that many U.S. residents conversant in Mandarin Chinese, travel suppliers have been able to tap into the large Chinese student population in the United States (it is probably more than 300,000 this school year) for translation and interpretation services in developing collateral materials and by serving as our guides for Chinese visitors. All factors point to continued, dramatic growth in this market.
EUROZONE—BRAND USA’S EFFORTS WILL BE CRITICAL TO GROWING AN ALREADY MATURE MARKET: The cradle of the source markets that resulted in the creation of the Visit USA product almost a half century ago, Western Europe has grown to be a reliable, if sometimes cranky, partner of the U.S. inbound tourism industry for more than a generation. France, Germany, Italy, Netherlands and Spain will remain key markets for America, as Spain and Italy’s economies have recovered from crises that in 2012 and 2013 that weakened both. The largest Euro market, Germany, remained relatively unaffected, even during the economic trough year of 2009. Germany’s TUI is now the largest travel company in the world, thanks to its merger with its parent company, TUI AG. Its vertical product (air, hotel, ground transportation and ticketed attractions and events) is now de rigueur in much of Europe.
Other operators now focus on specialty product or key into specific destinations. Meanwhile, the United States, while not necessarily the number one aspirational destination in Europe, remains the de facto number one go-to destination. Schadenfreude probably had something to do with the USA’s relative success in the relatively flat year of 2014, and will likely have something to do with the increase in visitors projected for 2015 as some Europeans stayed away—and will continue to stay away—from the favorite short-haul destinations of Egypt, northern Africa, some Middle East nations and Turkey due to political turmoil and outright warnings to stay away from some of them. Also expected to keep the Eurozone interested in the U.S. are the ongoing marketing campaigns of Brand USA, which has near continent-wide representation and promotional activities in the region.
SOUTH KOREA—GREAT GROWTH BUT WHEN WILL THEY VISIT AREAS OUTSIDE CALIFORNIA: With its population of 50 million, the people of this nation have had a close trade and cultural relationship with the U.S. for more than a half century and, as such, they send a disproportionately large number of visitors to the USA each year, and the nation will remain a strong market for the next five years and beyond. Among its visitors are the nearly 70,000 students who attend high school, college and graduate school—especially in southern California, which is also a stop on many itineraries for leisure visitors as well. This is because Riverside, California is where Ahn Changho (1878-1938), also known as Dosan, taught school at the same time he organized the Korean independence movement during the early part of the 20th Century. Not many markets have such a link. During the past several years, South Korea’s currency has remained stable against the U.S. dollar, and its extremely tech-savvy online population has been able to make suppliers competitive and keep prices low. Lift capacity will remain strong, especially since the nation’s principal airline, Korean Air, also carries international passengers from throughout Asia via connection to and through Incheon International Airport to the USA. South Korea is also a Brand USA target market.
AUSTRALIA—INCREASED LIFT OUTSIDE OF WEST COAST OPENS AUSTRALIA TO NEW DESTINATIONS: Little has changed here since our last annual outlook on top international markets. Since then, the Australian economy has remained stable, although its dollar has experienced a small slide against the U.S. dollar. Lift capacity should increase slightly over this year, as low-cost airlines from Asia begin to reach out to Australians. In the meantime, the U.S. remains by far the favorite long-haul destination of choice for Aussies. As well, a recent poll showed that 77.4 percent of Australian respondents indicated they would spend the same or more on holidays in 2015 than they have in 2014. Only 10.8 percent indicated that plan to spend less.
INDIA—ABSENCE OF DIRECT FLIGHTS AND VEGETARIAN RESTAURANTS LIMIT LEISURE GROWTH TO VFR DESTINATIONS: The strong expectations for this market would probably be even be higher were India not as geographically distant as it is—more so than any of the other top inbound source markets. But in recent years, air carriers in the Middle East and in Asia have established connecting flights to India and are driving an increase in lift capacity that should fuel additional inbound traffic through 2019. One of the driving factors for visitors from India to the U.S. is the large number of family and friends already in the country. Thousands of Indian professionals hold high-tech positions in major population areas—such as the NYC-Philadelphia corridor—and have relatives and friends who visit for extended stays. Also, more than 100,000 students from India study in the USA; this total is second only to China’s U.S. student population.
The connection is evident in NTTO data which show that, when listing the purposes of their trip to the U.S., 38 percent of travelers from India list VFR as one of them—this is more than any other country. In addition to the internal factors that are pushing traffic to the USA, there is also the presence of Brand USA, which has representation in the country and which now heads annual trade missions to India. Finally, travel to the USA has been made much easier in the past two years because of an increase in the number of U.S. visa application review offices and staff.
COLOMBIA—COLOMBIANS HAVE FOUND SOMETHING NEW TO GET HIGH ON … TRAVEL TO AMERICA: Long poised to be a major overseas source market, Colombia has emerged to be just that. The second largest nation in South America (pop. 48 million), it has experienced in recent years a sustained period of relative economic stability and a growth in its middle class. Just this month, a political calm that hasn’t been witnessed in a half-century came about when the powerful guerrilla organization FARC (Fuerzas Armadas Revolucionarias de Colombia, or Revolutionary Armed Forces of Colombia) declared a unilateral cease fire in its conflict with the government. FARC has been a power in the rural southern part of the country, funded by its involvement in the nation’s drug trade. The Colombian government’s persistence in fighting the FARC forces, as well as the emergence from subsistence lifestyles of a larger, stable middle class whose numbers might have been more sympathetic to FARC in the past may have had something to do with it.
Its growth in visitor numbers, then, should come as no surprise. Among South American points of departure, it is geographically nearest to many U.S. destinations. Its best known city, Cartagena, is about as close to Miami (1,100 miles) as is New York City. No other South American gateway city is as close. And air service has expanded considerably. Colombia’s Avianca airlines has recently increased flights from different points in the country (it began service last summer from the capital city of Colombia’s Risaralda state to NYC), and the new low-cost carrier VivaColombia, which is part of the Panama-based Grupa Viva, is beginning service to the U.S.
ARGENTINA—FLAT AS A PANCAKE: The travel trade in Argentina is optimistic about prospects for the near term future, despite the volatile behavior of the nation’s economy during 2014 and an increase in a government-imposed surcharge on credit card purchases abroad. Despite a sharp decline in the value of the Argentine peso vs. the dollar, the cost of travel has not increased that much. In addition, flights to the favored U.S. destination of Miami (5,554 miles from Buenos Aires) are less expensive and not as long as flights to other favored long haul destinations such as Madrid (6,246 miles) and Paris (6,819 miles). As well, U.S. travel marketers have refined and improved their approach to the market and have increased their online penetration into Argentina.
VENEZUELA—AIRLINES NOT GETTING PAID … THEY CUT CAPACITY IN HALF: “Hopeless” is not normally a word used to describe the outlook for a travel market, but it just might work in the case of Venezuela. It is near hopeless, at least, because of the one obvious factor. That is, lift capacity has been cut in half as major carriers—they include American Airlines, Air Canada and Avianca, to name a few—have drastically reduced service. The reason is that airlines exchange the country’s currency (bolivares), which is used to pay for outbound flights, for dollars with the approval of the Commission for the Administration of Currency Exchange. Because of delays in such approval, however, some airlines have not been able to trade bolivares for dollars since 2012, which means they are stuck with a currency that is next to worthless, and is not accepted by international creditors. The amount of money involved is more near $4 billion.
There is nothing in the nation’s economic outlook that is positive. It was best described in a recent Cambridge Times article that said Venezuelan President Nicolás Maduro “finds himself newly isolated, with his country in pitiable financial shape, beset by spiraling inflation, widespread import shortages, and a shrinking economy, not to mention toxic political unrest – and all of this was before international oil prices began to plummet from a four-year high this past summer.”And to make matters worse, President Barack Obama on Dec. 18 signed into law legislation that will allow him to freeze assets and deny or revoke visas of Venezuelan officials Responsible for violence and human rights violations in the wake of anti-government protests early in 2014.