The Outlook for Inbound Travel to the USA in 2019 is Promising.
Were it that easy, the above sentence would suffice as the definitive judgement on the outlook for tourism from overseas source markets to the United States in 2019. And for Canada and Mexico, as well. The challenge is, however, to square what we believe the outlook is for 2019 within the context of an industry whose revenue projections are subject to a dynamic pricing model that tries to take into account shocks and whims and demands that comprise everything from the uncertain price of jet fuel to fluctuation in currency values to the possibility that a terrorist attack to afflict destinations here in the United States and in source markets abroad. Now that we’re finished with the exculpatory part, what follows is what we believe the outlook is, and why, for the Top 15 overseas source markets, as well as Mexico and Canada, for 2019.
The task is made considerably more comfortable this year than last, as the USA’s top numbers crunching agency for international inbound tourism—the U.S. Department of Commerce’s National Travel and Tourism Office (NTTO)— is back in the business of reporting accurate arrivals data. It had been hampered for the better part of the year as it addressed the problem of faulty data that were the result of flawed tallying. Eventually, NTTO and the U.S. Department of Homeland Security, which oversees and is ultimately responsible for the inbound data collection process, corrected the problem and NTTO earlier this year resumed the practice of releasing monthly data reports, as well as updating its long-term outlook.
That long-term forecast, whose latest update is reproduced below (and covers more country markets than INBOUND does in our regular list of Top 15 Overseas Source Markets).
An INBOUND note on NTTO’s methodology: Now that the agency is receiving corrected data from Customs and Border Protection, which is a part of the U.S. Department of Homeland Security, its long-term forecasts resume their place as the authoritative source on international inbound arrivals. Unlike other organizations and their forecast models, NTTO’s material and process is given a rigorous in-house review at the U.S. Department of Commerce. Its model takes into account such arcane and tourism industry-specific numbers as airline lift capacity, number of new passports issued, number of visas issued—as well as economic analyses from both global and in-country sources, and input from in-country Department of Commerce commercial officers. If one were to characterize the NTTO “signature,” it would tilt toward the conservative side. Its final forecasts vary very little from actual arrival numbers. Thus, the table above serves as a principal point of reference for our Outlook.
The Impact of Currency Exchange Rates: While currency rate trends and shifts are a significant component in developing an outlook statement, they are just one component. Nevertheless, the strength (or weakness) of the U.S. dollar is a numerical language that needs no interpreter and is one of the few measures that is readily understood. Receptive tour operators in the U.S., as well as international tour operators abroad, set their prices for travel products from one to two years out based on today’s exchange rates. Here is a window on the last two years, which show how other major currencies have fared against the U.S. A cursory look at the table below shows that the currencies of key markets for U.S. inbound tourism (in particular, the continental European countries of Germany, France, Italy and Spain, which use the euro) are faring better than they were two years ago against the U.S. dollar … and certainly better than in 2015 when—in March—the euro had decline 24 percent in value vs. the previous year. This led to a decline in visitation to the U.S. by a number of European countries the following year. (A note: it is difficult to speculate on the impact of the gyrations in the U.S. stock markets and key economic indicators of late. However, one might speculate that the USA will emerge from the process with a weaker dollar, which could boost inbound arrivals from other countries, provided those countries do not suffer damage to their own economies because of what is taking place in the United States.)
*INBOUND Note: According to our count, the currencies listed in the above table, which are those used by most key inbound tourism markets for the U.S., also represent currencies used by nearly half of the world, based on the population of the countries listed. The U.S. dollar, according to Investopedia, the U.S. dollar “is easily the most traded currency on the planet.”
The Country Market Countdown: Following are brief commentaries on the 2019 Outlook for The Top 15 Overseas Source Markets, plus Canada and Mexico.
UNITED KINGDOM: There are more reliable data and survey results on the UK and its tour and travel industry than there are for any other overseas market; so, despite the anticipatory teeth gnashing and anxiety over what it is going to happen once Brexit—the UK’s departure from the European Union (EU) brought about by a June 2016 referendum voted on by British citizens—takes effect at the end of March 2019, it seems safe to assume that visitation to the United States from its Number One overseas source market will actually increase slightly. For, despite the pervasive anxiety in the tour and travel trade in the UK over the impact of Brexit, none of it really has much to do with outbound travel to the U.S.
A collection of results from consumer surveys during the last quarter of 2018 showed that Brits, who seem to regard a long-haul holiday a birthright, plan on traveling in 2019 as much as they did, although they might spend a little less. For instance, last month, ABTA’s annual Travel Trends Report which reviews the last 12 months and makes predictions for the year ahead, reported that (1) more people took an overseas holiday this year compared to anytime in the last seven years, with a 5 percent increase in the number of foreign holidays taken; and (2) forward bookings are up 12 percent compared to the same time last year—despite uncertainty over Brexit. (NTTO’s forecast of a 2 percent increase in inbound traffic from the UK is on target.)
JAPAN: Here are two bytes of information about the Japanese market that provide most of the substantive narrative for our Outlook on Japan. First, in its latest long-term forecast for arrivals from Japan, NTTO projects the number of visitors in 2022 to be 3,629,000. And second, 20 years before that, in 2002, a total of 3,627,000 travelers from Japan visited the United States. The fact is, total inbound traffic from Japan has been static since 2001. A major reason that the U.S.-bound traveling population of Japan has been static is that the population of the country has been static.
Aside from the special interest that the tour and travel industry has in the matter, economists, demographers and social program planners are concerned. The country’s birthrate is the lowest in the world; the population is getting older (meaning that there will be fewer people in the key traveler demographic of 35-54 years old); and the population is actually expected to decrease—to 95 million by 2050.
Japanese tour operators have been dealing with the issue by acquiring tour operators and travel agencies in other countries as they become, in effect, two-way (outbound and inbound) travel providers. So, while the usual markers we use to measure the industry’s health in a country market—economy, currency, number of passport holders, etc.—are sound the moment. And while the market is still the second-largest overseas market for the U.S. (China is projected to overtake it in 2022) nothing is happening to change our view that Japan is a no-growth market. Japan will do well to achieve the 1 percent increase NTTO has forecast for it in 2019.
Not since the Chinese government bestowed Approved Destination Status (ADS) on the United States at the end of 2007—this allowed U.S. tourism organizations to promote and sell their products, especially group tours—has the annual outlook for the market been so uncertain. The tentative nature of the situation is not a result of market conditions; rather, it has to do with a collection of political and government policies on the part of both China and the United States: a trade war between the two countries that has been characterized by new and/or increased tariffs placed upon the goods produced and/or imported by both countries; anger on the part of China over the arrest in Canada of a high-tech firm’s chief financial officer for having allegedly violated U.S. sanctions on Iran; and predictions that the Chinese government would impose a ban on travel to the U.S. All of this has had a dilatory effect on Chinese arrivals to the United States: After a decade of double-digit percentage increases in arrivals numbers, NTTO is forecasting an increase of just 2 percent in 2019.
Were it not for the politically driven tensions between the two countries, there is much to be positive about. Responsible for this are a number of factors, first among them the growth of, and increasing sophistication of the Chinese tourism sales and marketing infrastructure—in terms of technical applications, China is well ahead of the United States tour and travel industry. For instance, there is nothing in the U.S. that matches the scale of the penetration that WeChat has in China.
Another stimulus to the ongoing increase in the number of Chinese traveling abroad is the creation of scores of millions of potential international travelers created by a healthy economy and the increase in discretionary spending. At the beginning of 2018, it was reported that 8.7 percent of the Chinese population hold passports. The percentage is small, but the number it represents is huge: 120 million. And Ctrip CEO Jane Sun predicted early last year that the number of Chinese passport holders will double to 240 million by 2020. It is difficult to grasp the impact of this number were, say, just 5 percent of these potential international travelers—12 million people—to travel to the USA.
For now, all such speculation is a moot point if the U.S.-China trade war heats up or if there is a travel ban of any types. In this environment, even the 2 percent increase in arrivals forecast by NTTO for 2019 is nothing to dismiss.
SOUTH KOREA: All the stars seem aligned correctly for those who sell the USA to South Korea. The nation of 51.4 million overtook Germany (population: 82.4 million) as the Number 4 overseas source market for inbound tourism to the USA several years ago, and continues to increase its traffic to the United States. The trend should carry on for the next five years. The rosy outlook comes in the wake of a challenging couple of years for the country’s tour and travel industry. In 2017, China slammed South Korea with a flat-out ban on travel to the nation by Chinese residents by prohibiting travel agents and tour operators from selling South Korean product. The move was in reaction to installation of a U.S.-developed missile defense system (two Terminal High Altitude Area Defense, or THAAD, launchers). While China and South Korea have since smoothed over their differences, the U.S., became unpopular this year when President Donald Trump criticized South Korea’s government for not footing the bill for THAAD. Once the numbers are final, is projected that travel by South Koreans to the U.S. will have increased by zero percent in 2018, after increasing 18 percent in 2017.
But, as far as we can discern, the strength of the relationship between South Korea and the USA is too deep and interwoven to discourage travel to America. South Korea is a nation where English—American English—is widely taught in elementary, junior high, and high school. It ranks third among all nations in the number of students it sends to study at American colleges and universities (behind only China and India). And the VFR market, especially in California, is large. Also, South Korea is one of the few Asian nations (the others are Japan, Taiwan and Singapore) that are part of the USA’s Visa Waiver Program. Its economy is healthy, its travel-ready middle class is ample and the exchange rate between the U.S. dollar and South Korea’s won is stable—at about the same level as it was at the beginning of 2015. It will easily achieve NTTO’s forecast for a 5 percent increase over 2018.
Were one to read the current reports in the German travel trade news media, one would get the impression that it has been a challenging year for the country’s tour and travel industry. And so it was, as several of German’s largest tour operators said so near year’s end. Then, too, there was this from the second-to-last issue for the year of the trade publication FVW: “Falling booking curve, subdued expectations for the future: According to the FVW sales climate index, the mood on Germany’s counters is slumping significantly towards the end of the year—to the lowest level this year.”
But, remember, the glum tones and language one reads are in response to the overall performance of the industry. For the long-haul outbound tourism sector, it was merely static. FTI and America Unlimited, two German operators that have a heavy focus on USA product, reported to FVW that, once the final numbers are in, they did not expect a fall-off vs 2017. And German operators who took part in the annual IPW trade show last May in Denver seemed to have similar analyses. In a sentence, the outlook for 2019 and the near-term is that, while business is not expected to decline, it is not expected to increase that much, either.
Aside from some issues unique to tour and travel, the systemic problem faced by the long-haul tour and travel industry in Germany, which is the No. 5 overseas source market, is nearly identical to that faced by Japan, the No. 2 overseas source market: There are simply not enough new Germans joining the population. The country has the lowest birth rate among industrialized nations and is second worldwide only to Japan. The German population in 2000 was 81.5 million. This year, it was 82.3 million. The median age is increasing, and the number of Germans in the 35-to-54-year-old target demo for travelers is shrinking.
So, while all other factors seem to be in place in order for the U.S. to reap the benefits of long-haul travel, there doesn’t seem to be any evidence that the market will grow that much. Therefore, any increases in the numbers of Germans visiting the U.S. in the near-term will be small—in the range of one to two percent—like the one percent increase forecast by NTTO for 2019.
“The Crisis” is over. The pain continues. When INBOUND’s editor met up last October during NAJ’s RTO Summit Orlando with a receptive tour operator acquaintance, he asked her “What’s it look like for Brazil right now?” In response, her head went back and her eyes rolled skyward in an expression so universally understood that it needed no translation. But receptive tour operators are a resilient and creative lot, and she was soon in the middle of a discussion of what she was doing to get business back to the levels they were in 2014, a year that ended with the beginning of an economic recession so broad in its impact and reach across all sectors of the Brazilian economy that the resultant situation was referred to simply as “La Crise.” (“The Crisis.”) Without dwelling further on the story of the recession, everyone in the tour and travel industry is relieved that it began to end last year. And with its end began a recovery of outbound tourism to levels that should reach (and exceed) those 2014 levels by 2022, according to the long-range forecast of NTTO.
Analysts who studied what happened to the tour and travel industry during the recession have come to believe that the Brazil has a core of well-off travelers who will visit the USA no matter what, as did the 1.725 million who did so in 2017.
Another thing that everyone learned is that Brazil’s largest company, CVC, has apparently been successful in a campaign, begun in 2016—the trough of the recession—of acquiring other brands and launching a program of expanding its travel agency locations by 100 units a year. At last estimate, the company had added 216 additional agencies by June of this year—behind schedule, but now with well over 1,200 agents nationwide—including rural location and small cities that had never before been considered a market. The net result is that Brazil and its tour and travel industry have emerged from “La Crise” with even more potential long-haul travelers than they had in the peak year of 2014, when the recession began.
Provided the nation’s wobbly economy can continue its shaky recovery—the market should be able to generate the 2 percent increase in visitors to the U.S. in both 2029 and 2020 forecast by NTTO.
For the past decade, travel from France to the United States has been on a steady upward path, seemingly undeterred by events and circumstances that sent other markets reeling; even in the midst of the Great Recession of 2008-2009, traffic to the United States declined by only 3 percent (in 2009). One possible reason is that the wholesale part of the industry seems to have been strengthened by some mergers and acquisitions in the past several years that have streamlined the way business is done by some major operators as sales and marketing activities have been tightened up and consolidated, making them more efficient and productive.
Chief among these were two:
First was the acquisition of Kuoni France earlier this year by the DER Touristik Group—Germany’s third-largest tour operator and its largest in terms of long-haul outbound product. Additionally, two months ago, DER Touristik UK acquired UK tour operator Journey Latin America, which specializes in tailor-made trips and group tours to Central and South America.
Second was the acquisition two years ago of Paris-based Transat by TUI, Europe’s (and Germany’s) largest operator. The acquisition, which involved a long and drawn-out negotiations with several labor unions over employees who lost their jobs, made TUI the largest travel provider in Europe’s two largest markets: Germany and France.
The acquisitions above were different, as far as business analysts were concerned, than other acquisitions in the tour and travel industry in Europe, as they did not involve private equity firms without a history in the industry. While both TUI and DER Touristik were motivated by a desire to grow their business outside of Germany—where it has been flat to modest, due in part to a no-growth population—the knowledge that Transat and Kuoni France were acquired by companies that actually knew the business, seemed to give comfort to those who follow the tour and travel industry.
Another major factor auguring well for the French market has been the steady increase in the number of adventure and experiential travel tour operators, as well as creative, outside-the-box operators who are developing new and interesting product, such as one operator who is packaging tours that revolve about popular music of the past half-century. NTTO has forecast a 4 percent increase in travel to the USA from France this year. This should be accurate.
: By normal standards, one would have expected the number of travelers that Australia sends to the United States to ease off following a period of non-stop growth that started at the beginning of this century. And it did—in 2016 and last year. Why? While Australia hasn’t had an economic recession in 27 years, it has not been immune from currency exchange fluctuations. In July of 2014, the Australia dollar stood at $0.94 vs. the U.S. dollar. It then slid to its low point–$0.69—in January of 2016. It seems mired there; lately it has been at or near $0.71 or so.
The currency exchange rate alone is enough for some observers to explain the drop-off in traffic from Australia in 2016-17. But, then, it has developed that there is something else: competition. The USA, the undisputed favorite long-haul destination of Aussies, now has competition from China. Data compiled by Australia’s Department of Foreign Affairs and Trade shows the number of foreign tourists flying to and from China on Qantas increasing by 260 percent, from 123,800 to 445,000 between 2007 and 2016.
While most Australian international travelers still aspire to visit the USA, China is closer, and the airfare is competitively priced. It seems as if U.S. travel suppliers have received the message and are beginning to re-emphasize the familiar points that make the United States such an attractive destination to Australians: Americans speak the same language; the country’s topography and its wide-open spaces have a special appeal; and Australia is a Visa Waiver country.
: “The Perfect Storm.” Just prior to preparing this year’s Market Outlook, the INBOUND report spoke with a sales and marketing executive from the U.S. who has been working the Indian outbound market for nearly a decade. When asked about the near- and long-term prospects for this country market, his optimism was dripping over the brim as he told us, “It will soon have the world’s largest population. They speak English. Its international air service is growing. Their economy is doing well. The aspiration of Indians to travel to the U.S. is high … it’s a perfect storm.” Our source was, they say, “spot on.”
Some detail to the above points:
—India will soon have the world’s largest population. From an item in the Sept. 11, 2018 issue of the Asian Times, India’s population on Sept. 9, 2018, according to estimates by the U.S. Census Bureau’s World Population Clock, was 1.336 billion versus China’s 1.339 billion, and India’s population was growing at a much faster rate than that of China.
—They speak English. The estimates we’ve seen peg India’s English-speaking population at or near 125 million and is growing exponentially as the country becomes more and more an international economic power. The people who speak English (always in addition to at least one of the languages spoken in India) also fit the profile of the Indian professional who travels internationally.
—Their economy is doing well. Yes, it is.
—International air service is growing. In addition to increase lift capacity to the U.S. by Air India, the nation’s flag carrier, there have been considerable increases by other carriers in flights out of India to the Middle East—especially to Dubai, home base of Emirates airlines and the location of one of the few U.S. CBP pre-clearance facilities for travel into the USA.
—There is a strong aspiration of Indians to travel to the United States. In addition to leisure travel to America, the U.S. is a strong VFR market, especially in the Boston-to-Philadelphia corridor, and in parts of California, where many Indian professionals have settled—usually after earning at least one degree from a U.S. university. India is No. 2, behind only China, in the number of students it sends to study in at American colleges and universities.
—It’s a perfect storm? Yes. That’s why NTTO is forecasting 5 percent increase in Indian visitation to the United States in 2019. This follows an overall increase, since 2000, of almost 350 percent in the number of Indians who have visited the USA each year.
Italian travelers do not deviate very much from the norms of continental Europe’s top two markets, Germany and France, in that they do most of their outbound travel within or near Europe. And since, like Germany and France, they respond to currency exchange rate fluctuations in the same way, they didn’t send as many visitors to the USA in 2016 as they did in the year before. The euro was trading at $1.39 against the dollar in March 2014. A year later, it had dropped to a low of $1.05. The result was a 5 percent drop the following year (2016) in the numbers of visitors to the U.S. The euro began to recover in the second quarter of 2017. By that time, Italian operators had adjusted to the weaker euro and also had new prices in place; the market recovered in 2017, increasing the number of visitors by 4 percent.
But the attraction of the U.S. or Italians is different, deeper than it is for other continental European nations. It has to do with the fact that close to 16 million people in the U.S. identified themselves as Italian Americans in the last such survey (by the Sons of Italy) on the matter. A plurality of Italian Americans lives in two states: New York and New Jersey. Add to this the factor that nearly a quarter (23.3 percent, according to NTTO) of Italians listed visiting friends and relatives as a purpose of their trip to the USA last year. One can understand, then, a big reason why New York’s JFK airport is the preferred port of entry for 3 out of every 8 Italian visitors to the U.S. No other port of entry comes close. This percentage increases, of course, if one adds the percentage of Italian visitors (6 percent) who use Newark’s Liberty International Airport—across the Hudson River from Manhattan.
In such an environment, one cannot expect many surprises from the Italian market—there are, for instance, no big surprises when it comes to the number of new airline routes from Italy to the USA—which, nonetheless, has proved to be a solid, reliable source market. It should meet NTTO’s forecast for a 5 percent increase in visitors to the United States in 2019.
Another solid, reliable overseas market for the United States, Argentina’s annual number of visitors to the USA has not experienced a decrease this century (there was a zero percent increase/decrease in 2014). No other major market can make the same claim. And it has been able to do so through some traumatic political developments; a currency valuation whose vacillations have been so extreme that many Argentinians occasionally switch to using a not-so-underground alternative currency, “blue dollars,” which is so readily acknowledged that daily rates are posted online.
At first blush, one would also think that the predictability of their travel intentions is such that airlines serving the needs of outbound traveling Argentinians could charge pretty much what they wanted to charge. For example, last year the top port of entry for travelers from Argentina to the U.S. was Miami, with 59 percent flying to the de facto capital city for Latinos outside of South America. The No. 2 port of entry was New York (18.5 percent). And while in the U.S. on their travels, what did Argentinians do? The top three activities were: shopping (87.6 percent); sightseeing (79.6 percent); and going to amusement parks/theme parks (43 percent). (All figures are from NTTO.)
Knowing this, and knowing that the citizens of Argentina have to pay high taxes on out-of-country purchases, tour operators and travel agents in the country wage fierce pricing wars in the travel trade news media, hawking payment-over-time packages larded up with activities that are included in the price of travel so that they don’t qualify for an out-of-country “shopping tax.” Air carriers who want to serve the market are also competitive, making the cost of flights between Argentina and the U.S. (or to and from connecting flights in South America) affordable.
The steady increase, year after year, of the Argentine market’s output and the presence of the “blue dollar” market that is part of the sub-market that serves the Argentina’s economy help one to understand what a U.S.-based receptive who works the market told INBOUND decade ago: “If they want to go someplace, they’ll go. Period.” NTTO is right to forecast a 3 percent increase in visits to the U.S. from Argentina in 2019.
There are two major components to the near-term future for Colombia and its standing as a source market for the United States. The first part has to do with the enormous impact of the peace settlement sealed in the summer of 2017 between the Colombian government and a guerrilla rebels fighting as FARC (Fuerzas Armadas Revolucionarias de Colombia, or the Revolutionary Armed Forces of Colombia) that ended more than 50 years of conflict. It was a feat so impressive that the Nobel Peace Prize was given to Colombian President Juan Manuel Santos for his role in securing the agreement. With peace a reality and all the economic factors that support a healthy tour and travel in place, the future was promising and, to some extent, it very much still is.
But the second part of the story has to do with the dismal political situation and cratered economy in Venezuela—Colombia’s neighbor to the east. By last summer, an estimated one million Venezuelans had fled to Colombia through the country’s wide-open border. Then, last October, Colombian Foreign Minister Carlos Holmes Trujillo told a conference on migration that some 4 million Venezuelans could be living in Colombia by 2021.
The shock of the refugee crisis had its impact on the ability, or inclination, of some Colombians to do any traveling—this just as outbound travel to the U.S. was taking off to record levels. Despite its trials, the country’s economy has been healthy. Its currency is stable. Air service to the USA has increased both directly and through connecting flights by low cost carriers. NTTO’s outlook is positive. But one wonders how long Colombia can deal with its Venezuelan population before its demands strain the economy, as well as the spending power of Colombians.
SPAIN: In 2016, every major European source market experienced a decline in the number of visitors it sent to the USA, except for Spain. This is likely because the largest travel agency in Spain, El Corte Inglés (or “The English Cut,” which is also the name of the huge department store chain in Spain that also serves as a distribution channel or the agency) had signed an agreement with Miami-based Tourico Holidays (now part of Hotelbeds) to be its booking engine. While this certainly bolstered outbound traffic from Spain, the industry wasn’t finished. In 2017, the IAG Group (which includes British Airways and Iberia) launched LEVEL, a low-cost carrier headquartered in Barcelona, Spain. Barcelona is also home to another low-cost carrier, Vueling, which serves much of Europe. Together, LEVEL and Vueling (through its passengers from other destinations who connect to other carriers in Barcelona) are sending tens of thousands of Spaniards to America. (The low-cost carrier LEVEL also has flights to a few Spanish-speaking markets in Latin America.) NTTO is bullish enough on the near-term future for Spain that it is forecasting steady increases in visitor numbers from the country through 2013—this would represent a 10-year increase in inbound traffic from Spain to the USA of more than 50 percent. And there is every reason to believe that Spain will perform that well.
NETHERLANDS: The Netherlands is such a reliable, mature source market for the United States that the small country defies definition through normal numerical analyses (It covers 16,412 square miles, which would make it slightly larger in size than the state of Maryland, which ranks No. 42 among U.S. states, yet it sent 700,000 visitors to the USA last year, suggesting that one out of every 25 of Dutch citizens visited America in 2017). Like some other European countries, it registered a decline in 2016 due to a drop in the value of the euro the year before—France, Germany and Italy all experienced drop-offs in the number of visitors they sent to the United States—but it now looks strong for the next five years. One factor that has made the Dutch a sought-after market is that they are not focused on a single U.S. destination or region when they travel to America. Indeed, they are eager to visit all parts of the United States in search of new and different experiences. In 2017, for example, some 32 percent of Dutch travelers visited the USA’s South Atlantic region; 21 percent visited California or the Pacific West, and 34 percent visited the Middle Atlantic, including New York City—according to NTTO. Finally, like No. 15 Sweden, the people of the Netherlands are extremely proficient in English language skills. The annual EF English Proficiency Index, which ranks 88 countries and regions by their English skills, placed Sweden No. 1 and the Netherlands No. 2 in 2018;. NTTO’s forecast for a five-year run of annual increases in visitation from the Netherlands is spot on.
SWEDEN: The country has one of the healthiest economies of all European nations, but is easy to overlook in its economic impact or its importance as a source market because, geography aside, it is not a very populous nation. With its roughly 10 million Swedes, the country has slightly less people than the U.S. state of North Carolina. So, its population base makes it a challenge to measure the real impact of a 2017 decline, year-over-year, of 7 percent in visitors to the United States when one realizes that the decline translates to just 37,000 fewer visitors. However, several receptive operators have reported a decline in group activity of 25-60 percent from prior years, which they attribute to our political environment. From a different perspective, the number of Swedes estimated to have visited the USA in 2018 was 517,000, which means that little more than 1 out of every 20 Swedes visited the United States last year. So, when trying to figure out what caused the decline in a survey of Swedish travelers, it is difficult to find a sample large enough that would represent the true reason, although competition from other destinations is likely, as Swedes and other Scandinavians have experienced a big increase in available airline seats from low-cost carriers who have increased routes and connecting flights into and out of Sweden. Now, with the Swedish krona having stabilized after having dropping 30 percent against the U.S. dollar in 2015 (another contributing factor to a decline in travel to the U.S. in 2016 and 2017), the NTTO forecast for small increases in annual growth in Visit USA traffic over the coming five years is sound.
CANADA: As has been the case with our neighbor country to the south, Mexico, poor approval numbers for U.S. President Donald Trump have not translated into a depression in the number of Canadians—the number one international source market for inbound tourism to the United States—coming to the United States. Indeed, they made a comeback in 2017 and 2018 and are poised to increase through 2023, reaching new record levels along the way.
If any factor consistently correlates with the decline and/or rise of the number of Canadian visitors to the U.S., it is the value of the Canadian dollar (the loonie) against the U.S. dollar. Once at parity with the U.S. dollar in 2013, the loonie began a downward flight in July of 2014, stopping briefly at $0.94, going further south, to $0.79 in March 2015, then bottoming out at $0.69 in January 2016; these data help to explain the huge decline in visitors from Canada in 2016.
Also at work in this mix are increased marketing efforts by Brand USA and U.S. private sector organizations, especially near the U.S.-Canada border, promoting travel to the United States. Now that the loonie has stabilized vs. the dollar, the upward path forecast by NTTO seems plausible to INBOUND
Despite the fact that the people of Mexico have had a record low approval of U.S. President Donald Trump, the antagonism toward the U.S. leader has not translated into a reluctance to visit the United States because, the fact is that, the cultural and linguistic bonds between the U.S. and Mexico are too firm and too well-established to prevent the country from being one of our two largest international source markets for inbound tourism.
There is no doubt that a weak Mexican peso, more than any other factor, contributed to the drop-off in visitor traffic from Mexico to the U.S. in 2017 that totaled almost 1.2 million visitors. That was driven by a decline of 38 percent in the peso’s value ($0.078 to $0.48) from the beginning of 2014 to the beginning of 2017. Since then, the currency has hovered at or near the $0.050 mark, and operators who sell the U.S. product in Mexico have adjusted.
But it is the other numbers which show that the neighboring country of almost 130 million people that secure its position as a top source market. It is difficult to get an agreed-upon-number as to what comprises the Mexican middle class (presumably a segment that would be able to travel to the U.S.), but some estimates put at nearly half the population. Regardless, there is a travel-ready population resulting from a growth of the middle class since 2000. (In 2003, the number of Mexican visitors to the United States was 10.5 million—half what it is projected to be this year.)
Aside from the economic factors driving travel, Babbel magazine tells us that in the United States, more than 41 million people who speak Spanish as a first language (about 13 percent of the population), and that number continues to grow. Additionally, the U.S. is home to nearly 12 million bilingual Spanish speakers. This makes the United States the second-largest Spanish speaking country in the world (after Mexico). And there are 32 million Americans who are of Mexican descent.
Obviously, there is a strong VFR market for Mexicans traveling to the U.S. and one of the reasons they are doing so in greater numbers than a decade ago is the growth of two low-cost carriers, Volaris and Viva. Volaris now travels to 26 U.S. cities and Viva to 12. Also, legacy carriers have increased their lift capacity between the U.S. and Mexico. There are more data to buttress the point, so do not be surprised that NTTO is forecasting an increase in the number of Mexicans traveling to the U.S. this year at just over 20 million—more than 2 million more than there were in 2017, when Donald Trump became president and the peso had bottomed out against the dollar for about a year.