Travel Promotion Act passes in the US

On 4 March 2010, President Obama signed the Travel Promotion Act into law. The new law creates the Corporation for Travel Promotion, which is a not-for-profit organization. The Corporation will be responsible for promoting the US internationally as well as educating international visitors on visa and security requirements. Currently, international promotion is handled by private companies or city and state entities.

An attempt to reverse declining share

The creation of a national tourism board is an attempt to reverse declines seen in international arrivals after September 11th. Although, the number of arrivals recovered to their 2000 level peak in 2007, it was driven mainly by increases in visitors from Mexico and Canada. In fact, arrivals from Japan, the UK, and Germany had not recovered to their 2000 peak level as of 2009. As a result of this slow recovery, the US has steadily seen its share of international arrivals and incoming tourist receipts decline since 2000.

US Share of Global Tourism

% share 2000   2009  2014
International arrivals (people)  7.3    5.9   5.7
Incoming tourist receipts (value) 20.3   14.2  13.9

Source: Euromonitor International

Funded by foreigners

The Corporation will be funded by a US$10 fee paid by visitors from the 36 countries (Greece will be added effective April 2010) in the Visa Waiver Program every two years. The fee will be collected in conjunction with the Department of Homeland Security’s Electronic System for Travel Authorization (ESTA). The US Travel Association estimates that US$8 million will be generated monthly. Funds from the fee must be matched from the private sector up to a maximum of US$100 million and industry sources report that funding could reach a total of US$200 million. The Congress and the Secretary of Commerce will oversee the Corporation, which will have a board of 11 members.

Critics at home and abroad

While the US$10 every two years is far less than the US$131 cost of obtaining a visa, there are many industry players in the US that fear the additional fee, along with ESTA registration, will discourage travel despite the new marketing efforts. Critics abroad include the International Air Transport Association (IATA), which also criticized the additional cost and the purpose of the fee, preferring that more time and money were spent on streamlining the customs procedure. However, with the Discover America initiative, the US government has been working to improve visa processing and customs to make them a more efficient and pleasant experience.

In Autumn 2009, John Bruton, the European Union’s Ambassador in Washington DC, expressed his objections on behalf of the EU to this apparent “tax” when travellers from the EU are already spending large sums of money within the US and threatened that the EU could retaliate. The US Travel Association, however, has pointed out that many countries levy fees on foreign tourists on flights, hotels or through visas to fund their international promotion efforts. The US now will be competitive with their efforts.

 

International Promotion Spend Estimates
Spend US$ million
EU 800
Mexico 150
Australia 113
Canada 60
China 60

Source: Euromonitor International

Opportunities in emerging markets

It is likely that marketing efforts will begin in 2011 according to the US Travel Association. Oxford Economics projects that by the third year of implementation, approximately 1.6 million new visitors and US$4 billion of new revenue will be generated, while creating 40,000 US jobs. There is still a risk that the additional fee and electronic registration may deter some visitors from Visa Waiver Program countries, but it is not expected to be a significant deterrent. Factors such as exchange rates, airlift, friend and family ties, business relationships and strong tourist attractions will likely override the nominal fee and additional hassle of registration.

While the largest source markets for visitors to the US will not be neglected in the marketing campaign, the great opportunity lies in using the sizeable US$200 million to market to emerging countries, where advertising spend go further and increasing wealth makes travel to the US affordable for more people.

It is important to note that several of these source markets were recession-resistant in 2009. Arrivals from Brazil grew by 8.5% while Colombia, China and India declined only by 2%. Given the disastrous global economy in 2009, a coordinated effort to promote the US in these countries, along with current efforts to streamline the visa process, will position the US for long term growth in international tourism.

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