The 2016 Elections and the US Travel and Tourism Industry

A number of economic sectors hang in the balance as voters in the US go to the polls to choose the next president on Tuesday, 8 November, and the US travel and tourism industry, which reportedly contributes USD1.4 trillion to the US economy, is one of them. Foreign policy has played an unusually important role in the discourse leading up to the election, and foreign policy has a significant impact on public perceptions of countries as tourism destinations. While companies in the sector would do their best to work with either administration, based on the candidates’ stated platforms, a Clinton victory represents a brighter future for the US travel and tourism industry based on the candidates’ stated platforms.

Scenario: Trump victory

A victory by Republican candidate Donald Trump represents the worse of the two scenarios for the US travel and tourism industry. Trump has campaigned on an America-centric platform, including language and proposed policies that are inflammatory towards minorities and immigrants, as well as a foreign policy consisting of “peace through strength”, through abrasive rhetoric towards key trading partners, including China and Mexico. While Trump’s policy goals and the methods he suggests to achieve them have evolved as the campaign has gone on, several key campaign ideas have included banning Muslims or residents of terrorism-afflicted countries; deporting the estimated 11 million illegal immigrants currently residing in the US and building a wall to separate the US and Mexico; and renegotiating key trade agreements such as NAFTA and increasing tariffs on imported goods. These ideas are positioned as protecting the livelihoods of Americans and ensuring America is taken seriously by the international community, but, if enacted, all would have negative effects on the travel and tourism industry.

election-impact-on-travel

The Council on Foreign Relations, a respected US foreign policy think tank, estimates that a travel ban on Muslims to the US could cost up to USD71 billion per year and up to 132,000 jobs, taking into account both direct spending on travel and tourism as well as spill-over into other sectors, as well as losses to tax revenues and institutions of education. Mass deportations and the construction of a border wall would likely significantly damage both formal government and economic relationships between the US and Mexico. Reputations matter greatly for maintaining and growing tourism flows, and these policies would likely hurt perceptions of the US as a destination for Mexican travellers and vice versa. Mexico is the top destination for outbound US travellers, who account for 80% of all inbound travellers to Mexico; Mexico is the second largest source market for inbound travellers to the US, behind only Canada. Companies like Airbnb, which reports that 3 of its top 10 cities in Latin America by number of listings are in Mexico, and Expedia, who has invested heavily in recent years to tropicalize its booking strategy to appeal not just to inbound US travelers to Mexico but also Mexican residents, would be among those negatively affected.

Chinese travellers, projected to provide the greatest growth globally of outbound travellers, would likely be similarly disillusioned with the US should the two countries enter a trade war. Shopping tourism, a major driver of inbound leisure travellers to the US, would likely be negatively affected by increased tariffs on foreign goods – a key driver of shopping tourism is apparel and accessories, little of which is manufactured in the US.

outbound-travel-growth

These policies and their repercussions are in addition to Trump’s repeated verbal attacks and alleged physical assaults on women and Republican vice-president Mike Pence’s efforts to delegitimise homosexuality as governor of Indiana. Women and LGBTQ travellers are two fast-growing tourism segments, but inbound travellers from these segments would likely be at least somewhat deterred from visiting the US based on the rhetoric and policy initiatives regarding gender and sexuality that Trump and Pence have espoused.

Scenario: Clinton victory

A victory by Democratic candidate Hillary Clinton represents a much more optimistic scenario for the travel and tourism industry. Clinton, with extensive foreign policy experience as a result of her experiences as Secretary of State, has stressed a much more collaborative approach to international challenges. Clinton does not advocate banning any large population from entering the US, and, in contrast to Trump’s wall and deportation-based immigration plan, Clinton’s proposal for immigration calls for immigration laws to be enforced “humanely” and would include a pathway to citizenship for many undocumented immigrants. While Clinton has expressed opposition to the Trans-Pacific Partnership, she has promised to keep the US in NAFTA under its current terms and maintain strong relationships with allies (Trump has declared he would renegotiate the terms of the trade deal, or leave NAFTA). These positions would likely preserve the relationship between the US and Mexico and ensure that each remains relevant to the other with regard to tourism flows. Clinton’s remarks about the importance of allies would also likely go a long ways towards maintaining relationships with key US partners such as the UK and Japan, which are the third and fourth largest tourism source markets for the US.

Furthermore, a key priority for Clinton, if elected, is a USD275 billion programme to improve infrastructure in the US. The programme would repair key transportation infrastructure, including roads, bridges and airports, as well as seek to expand public transportation services and introduce internet access in public spaces. Improvements to transportation infrastructure would yield clear benefits for inbound travellers. The infrastructure programme doubles as a plan to create US jobs, which would likely generate positive effects for domestic tourism. Domestic trips accounted for 92% of all trips taken by US country residents in 2015. (Trump also has a jobs creation plan, but it depends heavily on tax cuts and many economists have expressed scepticism.)

Uncertainty ahead for either future president

Despite a historically strong US dollar and a global uptick in tourism-related terrorism such as bombings at Brussels and Istanbul airports, year-to-date international arrivals from markets other than Mexico and Canada to the US had increased 2.1% in April, the most recent data made available by the US Department of Commerce (arrivals from Mexico had increased 4.3%; Canada, heavily affected by the US dollar and low oil prices, saw trips to the US decline -14.2% through April). Domestic trips within the US have also reportedly increased in 2016 due to continued economic and wage growth. So far, the tourism industry has not been heavily negatively affected by the election, but, depending on which candidate wins, it will either be positioned to continue to see growth, or will be at risk of being hindered by foreign policy initiatives.

While leisure travel has remained steady, the Global Business Travel Association now projects that business travel will post a mere 1% increase in trips 2016 and an unusual -.6% decline in business travel spending.  The GBTA explains that overall global uncertainty in addition to the US elections has led many companies to take “more caution and a wait-and-see attitude, particularly with decisions that have longer-term implications”.

Regardless of which candidate emerges victorious on 8 November, the US travel and tourism industry can expect to see uncertainty remaining elevated in the months ahead. The 2016 presidential election has been unprecedentedly divisive, reaching levels of hostility not commonly seen in US presidential politics. Depending on how closely the outcomes of the House and Senate races mirror the winning presidential candidate, the future president may find it challenging to enact many of the policies and programmes included in his or her campaign platform. How well Congress and other players, including foreign heads of state, work with the future president will have further implications for the US travel industry. Businesses in general and travel companies in particular will work with the conditions created by whichever candidate is elected, but their strategies for 2017 and beyond are likely very different under each scenario.