What Hope is There for a Rejuvenated Source Market of the USA’s Neighbors? In the case of Canada and Mexico, the global pandemic triggered just about a year ago by the breakout of the COVID-19 virus infected a market that was already experiencing a long-term case of the blahs; this is not good news for the U.S. because about a half of all international visitors to the United States come from Canada and Mexico combined.
And it certainly has been a big case of the blahs. Take a look at the tables below. In the most recent five-year window (2015 thru 2019) for which we have meaningful data and one will see that visitor levels generated for both country markets were almost exactly the same in 2019 as they were for 2015. No upward nor downward movement at all.
INBOUND took a look at the data to see if there might be some relationship, some correlation between some data that could answer two of the most commonly-referred-to causes that travel and tourism marketers suggest in trying to explain why the two markets have been such sluggish performers. We wanted to see how the data movement was related to the two most commonly cited reasons for the flat markets. (Caution: correlation does mean causation.)
1. Most often cited as a reason or guess was the political environment in the United States. Many tour operators and receptive tour operators, as well as U.S. travel suppliers have a negative opinion of now-former U.S. President Donald Trump.
Sure enough, inbound travel from Mexico dropped more than 6 percent in 2017, the first year of the Trump presidency. During that year, Trump’s approval rating among Mexicans dropped to single-digit percentages. Still, visitation from Mexico returned to almost the same five-year level in 2018.
Besides, there are so many people in the United States (according to a 2017 Pew Research Center analysis) with family ties to the U.S. Mexicans, which are the largest population of Hispanic origin living in the United States—more than 36 million the study said. They accounted for 62 percent of the U.S. Hispanic population in 2017. Since 2000, the Mexican-origin population has increased 76 percent, growing from 20.9 million to 36.6 million over the period.
Also, Mexicans have an easier time navigating their way to and through the United States which has more Spanish-speaking people than does Spain.
So, despite what most Mexicans might have felt about Donald Trump personally, it apparently did not have a meaningful impact on their numbers when it came to the matter of visiting the U.S.
And Canadians? According to an October 2018 Pew study, only 25 percent of Canadians rated Trump positively. While not a positive figure, it is still a better reading than Trump had in Mexico. And there were few claims that his popularity, or lack thereof, had a noticeable impact on travel to the U.S.
2. It appears that the currency exchange rate between the U.S. dollar and both the Canadian dollar and the Mexican peso has had more of an impact than any other stand-alone factor.
Take the case of Canada. INBOUND recalled a conversation back in the middle of the past decade with a U.S. travel supplier who depended heavily on Canadian visitor traffic that made overnight trips in to bordering New York State. He told us that businesses were able to absorb the financial impact when the Loonie (another name for the Canadian dollar) fell to 75 cents on the dollar but, below that meant real pain. Sure enough, the value of the Loonie against the U.S. dollar-drop by 23 percent from 2014 to 2016 to 72 cents. Visitor traffic fell by 2.3 million! The Loonie has clawed its way back to 79 cents vs. the dollar.
The Mexican peso, meanwhile fell by more than 28 percent from the end of 2014 to the beginning of 2017, during which Mexican traffic fell by more than 1 million visitors..
Correlation or Causation? We can’t say with certainty, but the data above certainly seem to suggest that the decline in the value of the Loonie and the peso had something to do with the no growth path of Canadian and Mexico visitation to the U.S.
Q: Will the situation change?
A: Of course, it will. Connect Travel, which publishes the INBOUND Report, held several webinar virtual roundtables during the past year that brought together Canadian tour operators, sell the U.S. product as well as domestic Canadian tour operators who send visitors to the U.S. and other parts of Canada.
If there was one message that seemed to ring loudly through all of the discussion about when the market would begin to recover and which segment (domestic or international) would recover first, it really didn’t have to deal with where Canadian travelers would visit in the USA. It all had to do with a pent-up demand that is ready to explode once it is safe to travel. As of this writing, there seems to be a consensus that it will likely be no sooner than end of the second quarter or during the beginning of Q3.
In the interim, all of the data churned out by NTTO will be there to study for full-year 2020 and full-year 2021 but these won’t meaning—except for monthly or quarterly data that can be matched to the same months in the data for 2019 and before—for some months ahead. Then, maybe, Canada can put the blahs behind.