Trump travel ban could cost the US dearly
Over the weekend the White House announced that it would not pursue its court battle further in trying to reinstate a travel ban from seven Muslim-majority countries – but lasting and serious damage may already have been done to travel and tourism to the United States, we believe here at CiR.
February 2017 | by Garry Stasiulevicuis, President
US President Donald Trump’s 27 January executive order for a blanket ban on travel from Iraq, Syria, Iran, Libya, Somalia, Sudan and Yemen was met with strong opposition and demonstrations in the US and other parts of the world.
Furthermore, data from seat analyst, ForwardKeys shows a -6.5% year-on-year fall in seat bookings globally in the week following the EO, a worrying decline if it were to persist, even at a slower rate. Additionally, the US-based Global Business Travel Association (GBTA) held a straw poll of its US members in the week after Trump’s EO.
Some 29% expect the ban to negatively impact their company’s business travel over 3-6 months, and 28% say the same for the longer-term, over the next 6-12 months and beyond. The GBTA poll also showed that US travel professionals, like the US public, are deeply divided on tactics like blanket travel bans, with half strongly or somewhat opposing the action, and 38% strongly or somewhat supporting it.
While the poll was based on a very small sample over just two days, it offers some insight into the thoughts of a very worried travel industry in the US. If Trump’s travel EO – which he says may resurface in another form after being struck down by the courts – continues to be perceived negatively, interest in travel to the US may wane.
‘Blind discriminatory actions’
The UN World Tourism Organization has condemned, in strong terms, the nationality ban. “Global challenges demand global solutions and the security challenges that we face today should not prompt us to build new walls; on the contrary, isolationism and blind discriminatory actions will not lead to increased security but rather to growing tensions and threats,” said UNWTO’s Secretary-General, Taleb Rifai, rather unequivocally.
Rifai noted, too, that “the image of a country which imposes travel bans in such a hostile way will surely be affected among visitors from all over the world”. At CiR, we also expect the image of the US to be tainted by such ill thought-through policy decisions.
US tourism is trending downwards
But subjection aside, other factors will also put the US in a tricky position. The trend when it comes to travel and tourism-related receipts (i.e. what international visitors spent while in the US + what they spent to get there) has been falling in recent years: from +15% in 2010 to +5% in 2015 according to government data.
So far in 2016 up to November, the growth trend fell further to barely positive at +0.1%. Passenger fare receipts were also negative in 2015 at -5% YoY and -6.8% in the year to November 2016. The US government’s own forecast suggests volumes in 2016 will be down by -0.9% on 2015 to record 77.5m visitors who stayed one or more nights in the US. That will be the first decline in total arrivals to the US since 2009 – the time of the global financial crisis.
So the scene was already set for a decline in travel revenue and numbers, largely an effect of the strong US dollar which is thought to have hit spending by Europeans, and UK citizens in particular (the UK is the biggest inbound market outside North America). Meanwhile, citizens of the US’s number two market of Mexico may have little appetite to vacation or visit its northern neighbour in the wake of the negative rhetoric flying in their direction. The value of the Mexican peso has also been sliding since 2013 and the same is true for the currency of the US’s top inbound market of Canada, despite a small rebound last year.
The wider issue now for duty free and travel retailers, airlines and airports, is not simply currency or cost considerations of travellers, but their ‘feelings’. Their good will to the US in the face of EOs or policies that seem unfair or discriminatory could evaporate from key inbound mature markets such as Europe, and even Asia.
It seems likely that the US travel business will take a hit from the combination of factors outlined above – and while US outbound travel should continue to drive travel retail sales abroad, duty free operators in the US may feel some pain.