I just finished making all of my travel arrangements for my annual summer vacation.
I booked my departing and returning flights, along with my five-day hotel stay. I’ve never been more ready to relax and fully experience a brand new place.
I’m not the only one who’s making vacation plans. It’s that time of the year.
Summer months tend to be the busiest months for travelers. At least, it’s the most ideal time of the year for tourists to visit the U.S. — travelers don’t have to worry about too many flight cancellations because of winter storms.
The U.S. Travel Association reports that overseas travelers spend approximately $4,400 when they visit the U.S., and they stay an average of 18 nights.
And in 2015, direct spending on leisure travel by domestic and international travelers in the U.S. totaled $650.8 billion.
However, a recent executive order could negatively impact how many tourists the U.S. sees this year.
In March, President Trump introduced his revised executive order that would temporarily ban the entry of travelers from Sudan, Syria, Iran, Libya, Somalia, and Yemen.
What does that mean for the U.S. economy? Should we be worried about how the ban might impact our economy?
These are all valid questions. But maybe we shouldn’t be losing sleep over it just yet. However, we should be aware of the industries that could experience the most damage from this travel ban.
The Travel Industry Will See Some Changes
According to the World Travel & Tourism Council’s annual Economic Impact Research report for 2017, the country’s travel and tourism sector provided $1.5 trillion to the economy in 2016 and supported more than 14 million jobs.
The ban could cause a disturbance in many different industries that rely on tourism. Airlines such as Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and United Continental (NYSE: UAL) could see a decline in revenue.
The Financial Times reported that these three airlines saw a 2.5% year-over-year decline in revenue from passenger miles during this past February.
Of course, the ban doesn’t just impact airlines. It’ll also influence the individuals who work for these airlines, resulting in fewer hours for employees or even layoffs.
Hotel chains like Marriott (NASDAQ: MAR) and Hilton (NYSE: HLT) could also see a loss of business because of the ban. If there are fewer tourists, that means more hotel vacancies, which could also result in hotel employees losing their jobs.
Tourism Economics is predicting that there will be 4.3 million fewer international travelers visiting the U.S. this year because of Trump’s ban, a revenue loss of $7.4 billion.
The Effect on Other Businesses
In March, the Global Business Travel Association polled its members to determine if businesses were now taking into consideration the president’s revised travel ban.
According to the poll, 47% of European travel professionals said they’d expect a reduction in their companies’ travel to the U.S. In addition to that, 17% of those professional reported that they’ve already canceled business travel to the U.S.
The ban isn’t only impacting the six “banned” countries; instead, it’s having a deeper effect on the world as a whole.
Dara Khosrowshahi, CEO of the world’s largest online tourism market, Expedia (NASDAQ: EXPE), had this to say in an interview with Financial Times:
I think that because of some of the perceived positions coming out of the current administration, the U.S. as a destination is potentially looking less attractive as a product…
Either the U.S. has to go on sale in order to keep volumes up, or volumes are going to come down. When we look at our business, the leading indicator is pricing. Pricing has come down.
It’s obvious that travelers worldwide are having negative feelings towards the executive order, even if it doesn’t directly affect them.
It’s becoming unattractive to travel to the U.S., whether it’s for business or pleasure.
Until next time,
Jennifer Clark
Pro Trader Today