Are Tourism Exports At Risk?

By Patrick Coate, PhD

Changing U.S. policies may affect international trade in many ways, including one important aspect of trade that may not first come to mind: tourism. Many observers have recently warned that the Trump Administration’s recent travel ban, comments on immigration, and the associated unwelcoming climate will depress tourism significantly throughout the United States. I do not find these claims to be ironclad, but they are plausible and an interesting way to think about the U.S. “trade surplus” in tourism.

International visitors spend around $250 billion annually in the U.S., and tourism accounts for 11 percent of U.S. imports and 2.6 percent of total gross domestic product. So even a relatively small change in tourism can make a serious economic impact. A number of recent articles predict a chilling effect on tourism, resulting in millions fewer visitors per year and  billions in lost revenue. They often cite travel website data showing a drop in search traffic for flights to the U.S. One report found that searches were down 10 percent from this time last year, and local effects may be worse. The Chicago Tribune cited Kayak’s U.K. site reporting a 52 percent year-over-year decline in flight searches to Miami.

How much money does this translate to? One expert claimed the U.S. had lost $185 million in a month due to the travel ban, and another projected $7.4 billion in lost revenue for 2017. An NBC News article quoted expert Laura Mandala tying tourism to international opinion more generally. “It is well documented that a decline in U.S. global favorability ratings has corresponded to a decline in visitation to the U.S.,” she said. For example, during the Bush years, international visitation declined by 20 percent, said Mandala. In a similar vein, Daniel Gross in Slate argued that we should worry not only about the marginal traveler, but about the impact on the U.S. bid for the 2026 World Cup, citing concerns from Europe’s top soccer official.

The World Cup is an interesting economic case in its own right. For recent hosts South Africa and Brazil, the infrastructure cost of hosting the tournament dwarfed the economic boost from tourism. But the U.S. has dozens of big cities with idle football stadiums in the summer, so the marginal cost is minimal, and I agree with Gross that the World Cup would be a huge economic boon to American tourism. Where I disagree with his thesis is his contention that recent comments are more than political posturing. Recent executive orders are unlikely to be strongly related to U.S. travel policy in the summer of 2026. The awarding of the next two World Cups to Russia and Qatar, respectively, undermines FIFA’s credibility to award tournaments based on political liberalism.

About the overall figures, I think these observers have a point, but the larger estimates should be taken with a grain of salt. A CNBC report quoted the CEO of multinational hotel company IHG saying he has seen no impact. In contrast to Mandala’s statements, this World Bank chart does not show any obvious breaks in the rise in tourism between the Clinton and Bush or Bush and Obama administrations. So the figures that suggest a 1 percent to 3 percent decline in tourism strike me as far more reasonable than the web search figures of 10 percent or more. Still, if this decline comes from rhetoric and the spillover effects of overzealous enforcement on legal travelers, even those relatively small losses can be avoided for billions of dollars in gain to U.S. tourism – and the tourism trade surplus.

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