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Trump’s ‘revised’ travel ban: has the damage already been done?

They say a week is a long time in politics – but never was this expression so apt under the Trump administration. Last week 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. However, 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

This week, the Trump administration said it was drafting a revised version of the travel ban that will be issued “very soon” and yesterday it also initiated another executive order (EO) that amounts to a tough crackdown on mainly undocumented Mexicans in the US who could now face mass deportation. The new EO states that “all those in violation of immigration laws may be subject to immigration arrest, detention and… removal from the United States”. The laissez-faire approach of previous administrations towards Mexican migration looks to be over. 

From a duty free perspective these new and revised EOs have some potentially damaging consequences in their own right with respect to travel – but when coupled with other existing tourism trends the outlook for the US could weaken.   

To recap, 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.

Negative reaction to ban from travellers

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 that was not encouraging. 

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 revised travel EO is perceived around the world as negatively as the one that was struck down by the courts, interest in travel to the US will wane.   

‘Blind discriminatory actions’

The UN World Tourism Organization condemned, in strong terms, the initial 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 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.

We are not alone in thinking this. Nadejda Popova, Travel Project Manager at another global analyst, Euromonitor, commented on the initial travel ban: “The ambiguity of these developments introduced by President Trump is casting a shadow over the future travel demand to and from the US, especially as many trade representatives are concerned that such changes could bring retaliation from other countries. The executive order could also impact how the US is perceived as a tourism destination.”

The hard facts: US tourism is trending downwards

There are subjective views about what may happen, but other factors are already putting the US in a tricky position. When it comes to travel and tourism-related receipts (ie what international visitors spent while in the US + what they spent to get there) the trend has been downwards in recent years: from +15% in 2010 to +5% in 2015 according to government data.

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). 

Mexican backlash?

Meanwhile, citizens of the US’s number two inbound visitor 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 – and after yesterday’s harsh EO announcement. 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, neither of which will fuel demand to travel to – or much less shop in – the US.

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 most powerful nation on Earth in the face of EOs or policies that seem unfair or discriminatory could evaporate from key inbound mature markets such as Europe, and even from 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. 

[This is an update of a commentary that first appeared on the CiR website, here.]