Overall, the outlook for the inbound travel market is, in two cautious words, not unsettling. While there are some country markets with real challenges, none face situations which are so formidable—with the possible exception of Venezuela—that they should discourage U.S. travel suppliers from doing business in them. The narrative for the world’s travel economy is similar to that of the global economy which, a recent Reuters item descried thus: “The world economy may be set for another year like 2015, with modest growth in developed economies offsetting persistent weakness elsewhere but generating very little inflation and keeping interest rates low.”
Following the table below are brief sketches presenting the outlook for individual country markets. This paper concludes with NTTO’s outlook for global regions.
Top 15 Overseas Source Markets for Inbound Tourism
Plus Canada and Mexico
Arrivals (000s), 2014-2016
|Country/Market & Rank
|7. South Korea
|* - Forecast
|Source: U.S. Department of Commerce, International Trade Administration, National Travel and Tourism Office
ANALYSIS AND ARRIVAL PREDICTIONS FOR 2016
Still expected to be the largest overseas source market to the United States through most of the current decade, the UK’s anticipated steady increase in visitor volume in 2016 and through the succeeding four years is the expected result of a conflation of positive factors: the UK economy has grown, modestly but with certainty, ever since the shadow of the 2008-09 economic recession lifted; the currency exchange rate between the pound sterling has not fluctuated vs. the dollar as much as have other currencies; the number of acquisitions and mergers within the tour operator community has abated, giving U.S. suppliers a better understanding of who it is they will be working with; there has been a substantial increase in the number of new, more experiential-in-nature travel agencies by big-name brands that have opened in the past two years; the non-stop promotions of Brand USA, which have been unanimously credited among the trade with stimulating renewed interest in the U.S. as a destination among British travelers, will continue; new and interested product in the U.S.—such as a new Wizarding World of Harry Potter at Universal Studios Hollywood—is certain to appeal to Brits; and the Air Passenger Duty (APD), the tax levy which has added roughly $100 per person to the price of a flight to the United States, has been eliminated for passengers under 16 years of age, effective March 1, 2016. What weakness there is in the ongoing UK recovery (its annual arrivals have yet to reach the high of 4.7 million registered in 2000) is that the purchasing power for middle class Brits has remained about the same as it has been for a decade.
INBOUND PREDICTS: ↑4.5%
For U.S. travel suppliers, DMOs and Brand USA, the challenge in marketing to Japanese travelers is akin to the conundrum in the answer the Red Queen gave to a question from Alice in Lewis Carroll’s Through the Looking-Glass: “Now, here, you see, it takes all the running you can do, to keep in the same place.” No one seems capable of figuring out how to reinvigorate a market that once sent 5.37 million visitors to the United States in 1997 and is projected by NTTO to send just 3.5 million visitors not quite 20 years later in 2016. Economic challenges of the past two years have not helped matters, but it would not have made that much difference in arrivals numbers even if there were a fully healthy economy. A major reason for the decline is the aging over the past several decades of the Japanese population, due in large part to a low birth rate, resulting in a shrinking travel-ready population. Combine this with the fact that the USA is a “familiar” destination … and the marketing scenario requires suppliers, DMOs and Brand USA to do all the running they can do just to stay in place, Japan will see another decrease.
INBOUND PREDICTS: ↓1.5%
After a decade of overheated promotion and consumption that saw the number of arrivals in the U.S. from Brazil register nothing but double-digit percentage increases each year—from 485 thousand visitors in 2005 to 2,264,000 in 2014—the latest 2015 data suggest that the rate of increase this year is hovering close to zero percent. A “perfect storm” of economic factors took place during the past year, during which the country sunk into its worst economic recession in a half-century and the value of the Brazilian real dropped by nearly 40 percent vs. the U.S. dollar. Some tour operators who sold their products in reales but paid their U.S. suppliers in dollars were unprepared for the economic crunch and one of the largest, Nascimento, went bankrupt last summer. Still, as numerous sources have told the Inbound Report—even though 2016 should see a single-digit percentage decline in visitor arrivals to the USA—well over 2 million visitors are still expected to descend upon their acknowledged “dream destination” as Brazilian operators and U.S. receptive tour operators have found that shorter stays, an increase in MICE traffic and a lower per capita spend on shopping and attractions (particularly in the Orlando area) will be the new normal. And, according to a spokesman for United Airlines, his is not the only carrier that is planning to cut routes to Brazil in 2016. INBOUND PREDICTS: ↓6.1%
Despite—or maybe because of—the over-the-top prognostications for increased arrivals, the number-one overseas source market-to-be by the beginning of the 2020s, China, presents a sticky challenge for U.S. travel suppliers, DMOs and receptive tour operators even as it adds another two-and-a-half million visitors a year to its total Visit USA traffic in the next five years. Unlike other inbound source markets that took decades to mature, the system in China is supported, to a substantial degree, by government pronouncements and bi-lateral agreements. In 2015, the US and Chinese governments’ extension of visas from one year to ten years has created huge interest for MICE products to US and, earlier this year, Chinese President Xi designated 2016 “The Year of Chinese America Tourism,” which will also be a positive factors.
On the receiving end, another challenge has emerged—the inadequate supply of trained and certified Mandarin-speaking tour guides and personnel in the United States. The good news in all of this is that, even if the challenges of a doubling of the market are not adequately addressed, more parts of the USA stand to benefit over the next five years from a traveling population that is already shifting away from group tours to FIT mode as more and more are opting for self-drive products and exploring non-gateway, second-tier destinations via America’s highways and byways. INBOUND PREDICTS: ↑8.1%
A strong and resilient inbound source market for more than a half-century, this country seems likely not to expand or recede very much in the number of visitors it sends to the USA for some time to come. Hit hard by a dramatic decline in the value of the euro in the fourth quarter of 2014, just as brochure prices were established for the coming travel year, the largest tour operator in Europe, Hannover-based TUI and its competitors found themselves cutting package prices, promoting “late sells” with lower online rates and, to offset a flat long-haul market (not to mention the drop-off in traffic to northern Africa and the Middle East), focusing on product to other European destinations. For 2016, it seems inconceivable that the euro could fall further vs. the dollar (it looks as if it bottomed out at about $1.06 this past October), but payment for most wholesale product purchased for the year has already been made, so a further decline in arrivals to the U.S. is not likely. The NTTO estimate of no change from 2015-16 seems fair. In the long-term, however, another problem looms. This past year, the birth rate in Germany became the lowest among all major nations, leaving economists to wonder who is going to replace (and help care for) the retiring population in coming years—not to mention the population segments that travel overseas. INBOUND PREDICTS: ↓1.1%
Here, the outlook for visitor arrivals to the U.S. could be worse, were it not for the creativity and resilience of French operators and their U.S.-based receptive operator counterparts. So, the NTTO forecast for essentially no change in the number of French visitors in 2016 vs. 2015 seems conservative to us. Operators had been doing well enough in France in the first couple of years following the 2008-09 economic recession, but the nation suffered from the impact of the debt crisis that primarily affected Greece and, as it turned out, the major European nations that bordered the Mediterranean—Greece, Italy, France and Spain. There was a credit crunch that had an impact on 2012 traffic from all four nations. Reacting to the effects of the situation, operators moved aggressively to include more MICE travel, a segment that is more immune to fluctuations in the economy because it seeks mostly luxury product and warrants pricier visitor experiences. Reflecting this shift, the number of MICE buyers at IPW increased by 100 this past year, and will increase even more in 2016. (There is also a strong loyalty to the U.S. among French travelers, a feeling that was underscored by demonstrations and expressions of sympathy in the U.S. in the wake of the Nov. 13 terrorist attacks in Paris that killed 368 others.) One can confidently forecast single-digit increases in visitor arrivals from France through the end of the current decade. INBOUND PREDICTS: ↑5.3%
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 in five years or so. There are few potential disruptive bumps on the road to this figure, 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 Changho (1878-1938), the leader of the Korean independence movement, lived for 25 years; fourth, it is the number three source of international students attending school in the United States; 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. While South Korean travelers tend to favor West Coast destinations, the VFF 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. INBOUND PREDICTS: ↑5%
Hey mate! Your currency, the Australian dollar, has taken a beating against the U.S. dollar, dropping some 23 percent since IPW in Chicago in April 2014 until this month—going from 93 cents to 72 cents in value. Such numbers would be daunting to international tour operators in any other source market, but in the case of Australia, the USA stubbornly remains its favorite long-haul destination of choice. Rather than forego their holiday in the United States, Aussies will search for shorter itineraries, less expensive packages and accommodations, and reduce the number of add-on options. NTTO has projected a small change (+ 3 percent) in the number of arrivals from Australia in 2016, which would be a good sign of the market’s resilience. One way of telling us if the market is on course will come when the Australian Bureau of Statistics (ABS) releases its monthly figure on departures for overseas destinations for this month. January is a popular month for travel among Australians—the strongest for the first quarter, to be sure—and in 2015, just less than 100,000 Aussies came to the USA. If departures/arrivals for the month are close to this figure, the inbound tourism industry in the United States will likely have the year that NTTO is forecasting. INBOUND PREDICTS: 0%
We could probably cut and paste here parts of the outlooks for France and Spain. As is the case in France and Spain, the outbound industry in Italy has to deal with a weak euro/strong dollar; an economy that is still working to stop its knees from wobbling and a political situation that re-defines the meaning of stability on a daily basis. But, like those in France and Spain, Italy’s tour operators have found some comfort in the additional business provided by the MICE market and, along with the reality that, for Italian travelers, the USA constitutes a luxury tourism product, those planning on visiting the United States in 2016 are not the kind of traveler who is going to stay home because of fluctuations (one way or the other) in the value of the euro vs. the dollar. It is safe to project that outlook for 2016 is “Molto bene!” and, possibly, a million visitors from Italy will experience the USA during the year. INBOUND PREDICTS: ↑4%
As we see it, no Top 15 overseas market has a better, steadier outlook than does India. For about a decade, the major obstacle to increasing its number of visitors to the USA was poor lift capacity. Because of its location, the world’s second-largest nation is a long distance in either direction (east or west) from the USA. New Delhi, for instance, is 7,311 miles from New York and 8,008 miles from Los Angeles. But that obstacle has been overcome as three Middle East-based carriers—Emirates, Etihad and Qatar Airways—have ramped up the number of flights from southwest Asia to their hubs on southern/southwestern part of the Persian Gulf and their connections to the west and the USA.
The built-in factor that makes India an easier country than most for Visit USA marketing efforts is that it is the second largest English-speaking nation in the world—second only to the United States, with 125 million English-speaking residents. And most of its traveling population speaks English. A sizable portion of its visitors are students: almost 133,000 attended U.S. schools in the 2014-15 school year. Only China sends more students to the U.S. These students help fuel a large VFF segment, as do large Indian-Americans near some U.S. population centers in U.S. Northeast.
Also, Brand USA has stepped up its marketing activity in the country. Its 2015 road show—the third yearly undertaking—has visited major as well as secondary population hubs. And as U.S. travel suppliers, hoteliers and DMOs improve their capacity to accommodate the unique travel preferences and characteristics of Indian travelers—vegetarian meals are a must, and multi-generational travel groups of six or more from one family are common—they will ensure a smooth transition from selling to, and servicing, a growth market to selling to and servicing a key mature market. INBOUND PREDICTS: ↑7.3%
Following a half-century of internal warfare between Colombia’s military and guerrilla forces led primarily by FARC (Fuerzas Armadas Revolucionarias de Colombia, or Revolutionary Armed Forces of Colombia), there came the announcement earlier this year of a settlement ending the conflict. The agreement seems to have stuck and, as a result, the only real major obstacle to Colombia’s continued growth as the second-ranking source market in South America is no longer there. The nation’s economy is on a steady growth curve, it has a substantial “able-to-travel” population in the right demographic (25-to-54 years old) and it is close enough to the continental United States that our country is almost a short-haul destination. Indeed, Cartagena, a major point of departure for Colombians, is only 1,100 miles from Miami.
The country has an abundance of air service as major Colombian airlines, major U.S. carriers and regional carriers combined provide service from five cities in Colombia. Its residents, one Colombian tour operator told us several months ago, are comfortable in the U.S. because there are so many Spanish-speaking people in the United States .And based on anecdotal accounts from operators at the 2015 IPW in Orlando and La Cita de Las Americas show last September in Boca Raton, Florida, business for 2016 should be strong enough that it just might exceed NTTO’s already healthy forecast. INBOUND PREDICTS: ↑5.1%
The outlook for the Number 12 overseas source market is similar to that for Italy and France. The country was the second most-affected nation during the economic woes and debt crisis that beset some European nations—especially Greece—two years ago. (Budget and austerity measures imposed by the government were unpopular with most Spaniards and likely contributed to the electoral loss on Dec. 20 of the country’s ruling political party.) But receptive tour operators in the U.S., as well as operators in Spain found additional business in the MICE market to help compensate for the decrease in leisure tourism caused by the nation’s shaky economy. 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. INBOUND PREDICTS: ↑3.3%
Chaos—economic and political—reigned throughout most of 2015 in Argentina and the nation’s outbound tourism industry was one of its victims. The nation’s population was preoccupied much of the year with a bitterly fought presidential election. Mauricio Macri, the mayor of Buenos Aires, became president following a run-off election in which he received just 51 percent of the vote. The atmosphere was so hostile that his predecessor, Christina Fernández de Kirchner, refused to attend Macri’s Dec. 10 inauguration. The nearly year-long election process kept many Argentines from traveling abroad. In addition, the Argentine peso has been so weak vs. the U.S. dollar, that a parallel currency, the “blue dollar,” became a de facto medium of exchange. Argentine tour operators have been enormously resourceful in dealing with weak peso, the blue dollar and rampant inflation, selling all-inclusive package product over time and avoiding surtaxes on goods purchased abroad by including as many products as possible in a package price. The early take on Macri seems reassuring. He has already lifted capital controls—imposed by his predecessor’s administration in an effort prevent “capital flight” out of Argentina—that will allow businesses unlimited access to foreign currencies. But enough damage has been done. Visitor traffic to the USA will, once the totals are final, show a decrease. And because much long-haul travel has already been purchased, the decline will continue through 2016. INBOUND PREDICTS: ↓6.3%
The popular quip—“If it ain’t Dutch, it ain’t much!”—just might have some merit as a proposition, as this small (est. population in 2015: 16.9 million) country has proved itself to be a durable and substantial overseas source market. The Dutch economy is largely dependent on international trade and, as such, most of the country’s residents are multilingual. For example, 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. While the effects of the weak euro have been real, Dutch operators have been able to absorb the impact by diversifying its product line. As well, for most Dutch travelers, travel to the USA is a luxury experience; its affordability is not something that is contingent on the currency exchange rate. While the NTTO forecast of an increase of 26, 000 Dutch visitors to the U.S. from 2014 through 2016 would be an asterisk for most of the larger source markets, it represents a solid 4 percent increase for the Netherlands. The market should continue through the rest of the increasing its traffic by modest, single-digit percentages. INBOUND PREDICTS: ↑.5%
“Hopeless” is how we characterized the outlook for the Venezuelan market last year and, in retrospect, that assessment might have been a tad optimistic. For most of 2015, the nation’s economy seemed to be stumbling downward toward the ninth circle of Dante’s Inferno. Earlier this month, Alejandro Werner, director of the Western Hemisphere Department of the International Monetary Fund, told the Spanish international news agency EFE that Venezuela will end 2015 with an inflation of around 160 percent, the highest in the world, and that its economy would contract by 10 percent by the close of the year. While some economic observers take solace with the news that combined opposition parties won more than two-thirds of the seats in the nation’s Dec. 6 parliamentary elections and reduced the ruling party of President Nicolas Maduro to a weak minority, it will be many months before action can be taken to begin to reverse the course of the nation’s economy. For the inbound tourism industry, currency controls have meant that U.S. carriers have had to take payment for flights in Venezuelan bolivares and wait for the government to convert them into dollars. Some airlines have waited two years for payments. The situation has found that Venezuelans who have been able to do so have used third parties in the U.S. to establish credit card accounts in the USA so that they can transact business—and make cash withdrawals at ATMs—in dollars. With good reason, many receptive operators are foregoing the opportunity to do business in Venezuela for the foreseeable future and airlines are cutting back service. INBOUND PREDICTS: ↓8.3%
All of the bad news in the outlook for the USA’s largest international inbound source market, Canada, is reflected in a few numbers: 16 percent, which is how much the Canadian dollar (also referred to as the “loonie”) has fallen in value vs. the U.S. dollar since last December; 23 percent, which is how much the loonie has fallen in value against the U.S. dollar since December 2013; and 1 percent, which is what NTTO is projecting as the percentage decline in visitor traffic from Canada next year. That miniscule one percent adds up to 212,000 visitors in the case of Canada. The weakened loonie has had a particular impact on New York State and New England, whose tourism suppliers and merchants of all kinds of goods have depended on overnight and weekend excursions by Canadians, about 90 percent of whom live with 100 kilometers of the U.S. border. “Snowbirds” and others who travel further into the USA comprise a more well-heeled market segment, and often pay for their travel arrangements in Canadian dollars (leaving tour operators to absorb the difference or raise prices). If they do pay in U.S. dollars, they can generally afford to pay higher prices. INBOUND PREDICTS ↑0.2%
There are a several sound reasons for expecting the market from Mexico to continue to grow for the rest of the decade. First, while the Mexican peso has taken a hit because of the strong U.S. dollar (it has fallen 15 percent against the U.S. dollar since last December), it has fared better than other currencies and has had less of an impact on travel purchases than the exchange rate has had in other countries. One reason is that many Mexicans, especially those in the major cities close to the U.S. border, already use the dollar in their business transactions and price their goods and services (including travel) accordingly. Also, the size of the “travel-able” Mexican middle class has increased considerably since 2000, expanding the potential market for U.S. visitors. Then, too, air service from Mexico to the U.S. interior has gone from not-quite-adequate to the point at which the budget carrier Volaris—it began operations less than a decade ago—now flies to nearly 20 U.S. destinations from points in Mexico. Volaris reaches cities such as Portland, Fresno and Reno, as well as Chicago, Houston and New York. Some of Volaris’ fares aren’t that much more than the cost of a bus ticket. Finally, providing support for the market is the size of the Spanish-speaking Mexican-Americans population. A Pew Research Center report in 2013 that analyzed U.S. Census Bureau data reported that 33.7 million Hispanics of Mexican origin resided in the U.S. in 2012—11.4 million immigrants born in Mexico and 22.3 million born in the U.S. who self-identified as Hispanics of Mexican origin. Not only does this number comprise a base for a huge VFF destination; it also ensures that Mexican visitors will be able to interact in Spanish just about any place in the United States. INBOUND PREDICTS: ↑3.3%