The Big Picture: Weaker U.S. Dollar stimulates Rosy Forecast by NTTO
The latest long-term forecast for inbound traffic to the United States released by the U.S. Department of Commerce’s National Travel and Tourism Office (NTTO) takes a wink at the past two years and, with currency exchange rates now suggesting a dollar that is weaker than it was two years ago, projecting modest increases this year in international inbound traffic from all but one of the Top 21 performing markets for the U.S.
We make the point because a stronger dollar in 2015 and 2016 produced a downturn in international arrivals in 2016 and 2017. As other currencies began to strengthen toward the end of 2017, the movement had an impact on travel business written up in Q4 2017 and the first month of this year. What there was of the putative “Trump Slump”—a decline in inbound traffic from certain markets—was a factor in some of 2017’s weakness, but it was only one factor versus a mix of variables employed by NTTO in its forecasting model, which also takes into account measures such as airline lift capacity, in-country intelligence from U.S. commercial service officers, national economic figures such as employment rates and household income, and more.
So, what happened with the dollar vs. key global currencies in the past year? We took a look at the exchange rates between the dollar and eight key currencies and what happened to them for the first year of the presidency of Donald Trump.
While the forecast projects increases in the numbers of international travelers in the next four years, the overall figure falls sufficiently below a hoped-for 100 million visitors a year by 2021, thanks primarily to the exchange rates that were in place from late 2015 until the latter part of last year.
The 100 million-visitors-by-2021 was established during the mid-point of the Presidency of Barack Obama, when the number of annual visitors to the USA had reached nearly 68 million. And as arrivals pushed past 77 million in 2015, the goal looked achievable—on paper. For, 2015 also brought with it a dollar that strengthened considerably vs. the British pound sterling, the euro, the Mexican peso and the Canadian dollar—suddenly, travel to the USA had become 20 percent more expensive for consumers in some markets. To make matters worse, Brazil lapsed into its worst economic recession in a century.
That the drop-off in traffic was not greater is largely a tribute to the work of Brand USA and its partners in key overseas markets, especially in the number one overseas market, the UK. The agency’s research showed that its promotional efforts were able to keep “intent-to-travel” and ROI figures high. And it appears that, with 2016 and 2017 behind us, the worst is over.
After increasing by 29 percent from 2010 to 2015, total arrivals dropped by 3 percent over the next two years. NTTO is now forecasting—once all the data are final—a 2017 total of 75.1 million visitors. This should increase to 86.2 million in 2021 (well below the 100 million target set in 2012) and 89 million in 2022.
Overall—Bad News vs. Good News: The bad news is that the outlook for inbound travel to the United States over the next five years will not achieve the increase hoped for in 2012. The good news is that, over 5 years, arrivals will increase by nearly 19 percent, or by almost 14 million visitors over what they were in 2017.
U.S. Arrivals from Top 21 International Source Markets
Sources: U.S. Department of Commerce, International Trade Administration, National Travel and
Tourism Office; Statistics Canada; Banco de Mexico. January 2018
International Visitors to the U.S. and Projections
Source: National Travel and Tourism Office, Industry & Analysis, International Trade Administration, U.S. Department of Commerce
Hotels in NYC—Strong Demand Means Continued higher ADR in 2018-19
Midst the glut of information released this month on the performance of the U.S. hotel industry, the picture for this year and next remains relatively clear: While some in the U.S. tour and travel industry believe that increased supply—which has kept pace with expanding leisure and business traveler demand for the past several years—will put pressure on hoteliers to stabilize rates and make it easier for international tour operators and U.S.-based receptive tour operators to secure allotments in key U.S. gateway markets, in New York City, the response seems to be: “Not here. Not this year. Not next year, either.”
For 2018, here is what the latest of the major analyses, from Deloitte, had to say: “While strong post-recession gains appear to be cooling off, the hotel sector is projected to sustain strong 5–6 percent growth throughout 2018, setting up the industry to hit a record-breaking $170 billion in gross bookings. Healthy business and leisure demand is helping the industry achieve strong fundamentals, including peaking average daily rates (+2.4 percent 2017 YTD October) and revenue per available room (+3.0 percent 2017 YTD October). Hovering around 66 percent, occupancy seems to have hit a peak. (Source: Deloitte: 2018 Travel and Hospitality Industry Outlook).
Steady, Decade-Long Increase in NYC Supply: The two tables below shows how the hotel room supply and the number of visitors to New York City have kept pace with each other over recent years.
New York City Hotel and Room Supply 2007 – 2017
Note: Includes hotel inventory as of April 2017. Source: STR, 2017
Meanwhile, the current development pipeline – featuring new entries and many updates – includes over 140 projects across the five boroughs representing the full spectrum of hotel experiences. New proposals are planned throughout the City, covering all five boroughs. While NYC & Co. records a number of “unnamed projects” at this time, most are already well above ground in their building as developers work with brands and management companies to find the best match. Global brands are also making NYC home (Riu, Pestana, ibis Styles and others.
Source: NYC & Company November, 2017
Visit Florida Funding in Peril … Again
Governor Wants $100 Million, Some Legislators Want to Cut Request by Half: After a six-month battle last year that pitted Florida’s legislators against Gov. Rick Scott and almost all of the state’s tour and travel industry that also followed the departure of nearly every top official of Visit Florida, the state’s tourism marketing and promotion agency, they’re at it again.
Gov. Scott has asked for $100 million to fund the office; the House has a budget that calls for $76 million; and the Senate’s budget for Fiscal Year 2019 sets funding at $50 million.
In addition to the question of whether $100 million, $50 million or some level in between the two is a sufficient level of funding, the absence of certainty over a budget amount has the net effect of freezing any plans for new programs or promotions that would launch after a new Fiscal Year begins on July 1st.
The failure of state government officials to establish in timely fashion last year—no agreement was reached until June—put a choke on Visit Florida’s 2018 calendar of activities and programs.
Background: The saga of Florida’s budget woes had its de facto beginning with the forced resignation late in December 2016 of Will Seccombe, who was ousted from his position as president and CEO of the public-private sector organization over an expired $1 million dollar contract with a globally known rapper, Pitbull, whose efforts included a video of a scantily clad women performing with the rapper on the state’s beaches. (The video did not go over well with certain key members of the Florida legislature.) It seemed to conclude with the July 7 resignation of Alfredo Gonzalez, the organization’s vice president of global meetings and trade.
Seccombe was not the only December victim of the episode. Before he resigned, he had to terminate two senior agency officials—Vangie Fields, chief financial and operating officer; and Chief Marketing Officer Paul Phipps—who had the misfortune to be associated with the Pitbull contract and the organization’s refusal to make it public. Earlier in the day on which the three agency leaders were let go, state legislators had eliminated funding for the jobs of Phipps and Fields. The exodus of key officials seemed to conclude with the July 7, 2017 resignation of Alfredo Gonzalez, the organization’s vice president of global meetings and trade.
In the meantime, Visit Florida had a new president and CEO—Ken Lawson, a native Floridian who has no background in the travel and tourism industry, but whose resume included a tenure as U.S. Marine Corps Judge Advocate General, and who had spent 12 years in public service in numerous regulatory positions, including nearly six years as Secretary of the Florida’s Department of Business and Professional Regulation (DBPR).
state legislators finally gave into demands by Scott and the state’s tour and travel industry, there was further damage caused by language in the budget that called for the release of salary information from the agency’s member organizations; a fifth of Visit Florida’s DMO members left the state agency.
At the Moment: Shortly after the announcement of the State Senate’s budget mark, Gov. Scott issued a statement in which he said, “I completely oppose the Florida Senate’s proposal to cut Visit Florida’s budget by a third … After the devastating hurricane season we faced last year, we shouldn’t be playing games with our state’s tourism industry.”
Unlike the stand that state senators and legislators took a year ago, they seem to be slightly more conciliatory this year, with Sen. Wilton Simpson, chair of the tourism portion of the proposal in the senate budget, said the $50 million market was just a “starting point” for negotiations with Scott and the House.
The House is another matter. Last year, House Speaker Richard Corcoran held out for totally eliminating Visit Florida’s budget. He and Gov. Scott has a highly visible feud over the issue, which did not end until a special legislative session approved a $76 million budget—the same level proposed in the House for the upcoming 2019 Fiscal Year.
Canadian Inbound Snapshot—More Arrivals Records Set
Looks Like a Record Year is Certain: The latest monthly data for international arrivals (for November 2017) to Canada seem to suggest that the year just ended will be the best ever for inbound tourism to the country. The snapshot below shows results for Canada’s 11 target markets. Note the number of source markets for whom November established “highest ever” records. In the second graphic below, not that the trend line is either at or above the line for 2016, which produced the second-largest total for all international visits to Canada.
Quick note: Through November 2017, Canada experienced a total of 19.45 million visitors for the year. The record total for a year is 20.179 million visitors, set in 2002. The second highest is 19.98 million, which was the total for 2016.
NEW AIR SERVICE
- United Airlinesis now offering a daily service between Houston Intercontinentaland Sydney. Patrick Quayle, United’s vice president of international network, said the airline was thrilled to launch the service. United is the largest U.S. carrier offering the most seats between Sydney and the U.S. and we look forward to continuing to serve as Sydney’s airline of choice.” United has no direct competition on this route, although Qantas, Australia’s flag carrier, does offer a daily A380 link between Sydney and Dallas/Fort Worth. United already serves Australia’s largest city from its Californian hubs at Los Angeles and San Francisco.
- Aeromexicohas introduced service between Salt Lake Cityand Guadalajara. Launched on January 15th, the airline replaces fellow Delta Air Lines on the route. It is the carrier’s eighth US route from the Mexican city. Aeromexico is already operates a weekly service, on Saturday, between Salt Lake City and Mexico City, a seasonal route that is scheduled to run until March 31st.
- Icelandair will launch three new flights to the US this summer, all operating to and from the carrier’s Reykjavik hub. The carrier now operates 23 destinations in North America and 20 European destinations from Reykjavik’s hub.
—A new flight to Kansas City will start on May 25. It will operate three times a week.
—A connection to San Francisco will begin June 1st. Operating four times weekly, it is a re-start of a route that ended more than a decade ago.
—A new flight to Baltimore from begins May 28. The service will operate four times a week, and is also a re-start of a route served more than 10 years ago.
- Cathay Pacific will open a connection between Hong Kong and Washington D.C.on Sept. 15. The new service will be operated four times a week. Flights depart from Hong Kong at 6:35 p.m. for arrivals at 10:20 p.m. on Mondays, Tuesdays, Thursdays and Saturdays in Washington D.C. Flights depart Washington DC on Tuesdays, Wednesdays, Fridays and Sundays at 01:15 a.m. to land in Hong Kong at 5:10 a.m. the next day.
Maine uses EB-5 Visa Program to Fund Chinese Medical Facility
Wealthy Chinese Investors/Tourists Still Dominate EB-5 Visa Projects: Taking a cue from other parts of the country that have benefited from it, Maine officials moving forward with development of a regional center to connect foreign investors to projects in Maine, such as a $40 million Chinese medical tourism facility proposed for Auburn, Maine.
Under the EB-5 program, foreign entrepreneurs can get visas for investing in projects such as a proposed $40 million Chinese medical tourism facility in Auburn that create jobs for U.S. workers. The EB-5 Immigrant Investor Visa Program, created in 1990, provides a method for eligible immigrant investors to become permanent (or “green card”) U.S. residents by investing at least $1,000,000 to finance a business in the United States that will employ at least 10 American workers.” Most immigrant investors who use the EB-5 program invest in a targeted employment area (TEA) — a rural area or area with high unemployment — which lowers the investment threshold to $500,000. The EB-5 program is intended to encourage both foreign investments and economic growth.
One unintended byproduct of the program is the large number of Chinese investors looking to become long-term residents—or eventually, citizens—of the United States. The number of resident-investors under the program is limited to 10,000. Since the program became more popular a decade ago, investors from China have ranked at the top of the list. The table below shows the breakdown of the numbers of investors and their country of origin for 2016—the most recent year for which complete numbers are available.
Under terms of the program, states can set up regional centers to attract investors (rather than seek investors for single projects). The Maine Department of Economic and Community Development first considered becoming a regional center two years ago. It took another year to secure federal government approval.
He said the state’s new regional center already has some project leaders “that are very interested” in participating in the program. One of them is Miracle Enterprise, a China-based group that plans to turn the former Lunn & Sweet Shoe Co. factory on Minot Avenue into a five-star resort catering to rich Chinese patients seeking American medical treatments
George Gervais, commissioner of the Department of Economic and Community Development, told the Portland Press Herald that the new entity would not be the first regional center in Maine. Over the years, private groups – including the owners and executives of Saddleback ski resort in Rangeley – have started regional centers, but none has attracted any money to Maine
According to the Press Herald, Auburn Economic and Community Development Director Michael Chammings said he spoke to Miracle Enterprise’s project manager less than two months ago and the group was then working its business plan around the lack of a regional center.
He added, “I’m sure they’re happy the program has been put into place.”
At a Glance: Lake George, NY
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HODGE PODGE: Shifts, Shakeups and Occasional Shaftings in the Tour and Travel Industry
Oliver Krieg has left GTA and joined Amigo Tours, which is based in Mexico sells product there and several other countries in Europe and South America. Krieg had been a part of GTA since 1999, serving lastly at area sourcing manager, destination services, Americas. He left GTA at one point in his tenure there to join AlliedTPro for five years, working as product manager, services. Evidently, Amigo Tours will utilize his sourcing contacts to build their American hotel inventory.
Jim Marini has been promoted to the position of vice president of sales, Amtrak Vacations/Yankee Holidays. He has been with YLG for five years, and previously served as director of sales for Amtrak Vacations/Yankee Holidays. Marini has more than 20 years of sales experience in the travel industry and at YLG, having previously overseen both national and international partnerships, as well as YLG’s outside sales team.
Emma Holliday has been appointed national account manager for Thomas Cook Airlines UK and Condor. Holliday, who has been working in the travel industry for 25 years, joins Thomas Cook Airlines from Leeds Bradford airport where she held the position of aviation sales manager. She will report to Sharon Confue, head of sales UK at Thomas Cook Airlines and Condor.
Joe Steel has been named new chief executive for the UK-based live entertainment ticket distributor Encore. Steele is former chief executive of Bookable, and has experience in digital leadership roles at Expedia, TripAdvisor and Thomas Cook. Encore has partners in the U.S. such as NewYorkTheatreGuide.com.
In Brazil, the tour operator/travel agency Viajes Masters (Travel Masters) has hired André Rossi to start today as the new sales manager. With 32 years of experience in the area, the executive accumulates passages by operators such as CVC, Flytour Viagens and, more recently, Visual Tourism.
Patrice Geske has been promoted to the new position of director of marketing for the Globus family of brands in Canada. Geske, who has been with Globus for nearly nine years, works out of the company’s Canadian office in Toronto.
Eric Gordon has been named director of sales and marketing at Beyond Times Square Inc., which he already owns—and has owned since 2003. Before this venture, Gordon was president and owner at Park East, an African Safari company.
Graham Balmforth, national sales manager for Superbreak, is retiring from the tour and travel industry following a 41-year career. Balmforth has been with Superbreak since 1995.
Lee Travel Consulting (LTC), which is lead by managing director Chris Lee, has been appointed to represent Visit Orlando in the UK market. LTC will work as an extension of the Orlando-based team “to provide the UK travel industry with an even more personalized service and education,” said Elaine Blazys, vice president of travel industry sales for Visit Orlando.
In a realignment and consolidation of responsibilities at Thomas Cook Group in Germany, Paul Schwaiger, commercial director of sales, now also manages the tour operator sales of the Condor long-distance route, the distribution in the German market and the marketing of Thomas Cook Group Airlines. Michael Frahm, previously head of tour operator sales for the short- and medium-haul routes, will also be responsible for long-haul sales and thus cooperation with Condor customers in the tour operator and cruise sector.