Despite reports earlier in the year that the U.S. travel and tourism industry were declining in what some experts deemed as a “Trump slump,” the outlook for the industry as a whole is strong, which is good news considering its impact on employment and tax revenues.

The U.S. travel industry is the largest in the world, with travelers spending an average of $2.7 billion per day, according to the U.S. Travel Association. The industry supports 15.3 million American jobs and contributes $157.8 billion in taxes. In fact, each U.S. household would pay $1,250 more in taxes each year without the tax revenue generated by the travel and tourism industry.

Recently, Prevedere’s economist Andrew Duguay did a deep dive into the health of the travel and tourism industry. Here is an overview of the findings.

Leading Indicators Point to Healthy Travel and Tourism Growth

Prevedere is expecting improving conditions for travel and tourism growth over the coming months. A few of the leading indicators for the travel industry that economists watch include:

  • international and domestic air travel
  • industry capacity utilization
  • number of new hotel openings
  • stock market / corporate profits

These indicators are all pointing in the right direction, and Prevedere anticipates rooms sold to show 2.4% annual travel and tourism growth by the end of 2017 (from 1.9% growth in 2016).

Travel and Tourism Growth in 2018

Increased business travel and highly effective capacity utilization, along with increased capacity (new hotel openings) are creating a positive environment for hotel occupancy rates and rooms sold.

On the leisure side, there have been seen some disposable income challenges at a total U.S. level, but overall employment remains high. The skilled work (white collar, high education) job market remains competitive, meaning a large class of people can afford to travel and should continue to have spending capacity at least through early 2018.

International leisure travel is where the market has struggled. The strong dollar hurt foreign travel to the U.S. in 2016. While that has relaxed some in 2017, the travel ban has pushed some tourists to go elsewhere, hurting international tourism to the states.

Leading Hotels and Airlines Betting on Continued Growth

Travel and tourism companies are taking note of this positive outlook, and shaping their plans accordingly. In September, InterContinental Hotels Group announced plans for a new hotel concept – Avid. It noted in a release that “Our extensive consumer research and conversations with owners identified a clear opportunity to reach an important set of business and leisure travelers in a vastly underserved $20B segment of the U.S. midscale market.” This follows news of a new Trump Hotels brand – American Idea – announced in June.

Though in many respects it has been a tough year for the airline industry – with highly publicized customer service challenges and severe weather-related disruptions – airlines seem equally optimistic. Delta is investing millions to enhance its customer experience, and most analysts are feeling good about the airline industry as a whole.

Warning Signals to Watch

The health of the 2018 tourism industry in the U.S. will depend heavily on continued positive moves in employment, on the dollar continuing a mild cooling and better international relations than we have seen thus far in 2017. Though current signals are pointing to a healthy early 2018, travel and tourism companies should keep a close watch on these signals to look for any changes in momentum.

To learn how changes in the economy and consumer behavior can impact the future of your business and industry, contact us for an initial consultation.