A week ago we witnessed the gargantuan fall of British travel behemoth Thomas Cook. While the collapse may partly be attributable to some unprofitable mergers, Britain’s inability to secure a permanent solution to the Brexit crisis added to the industry’s instability. Back home, the US has some key takeaways from Thomas Cook’s slump.
United States has been witnessing a degradation in the international travel market share since 2015, according to data revealed by the US Travel Association. The market has declined from 13.7% in 2015 to 11.7% in 2018, and the organization expects this to further dip to less than 11% by 2022. A ‘Trump Slump’ is, therefore, not entirely a misgiving.
The pessimism is reflective in the stock performance of travel companies including Expedia Group (NASDAQ: EXPE), Booking Holdings (NASDAQ: BKNG) and Makemytrip Ltd (NASDAQ: MMYT). Shares of Booking and Makemytrip are trading lower than a year ago, while Expedia is almost flat. Expedia and Booking have also now relegated to a single-digit annual sales growth trend.
The pessimism is spread out to hospitality firms as well, with shares of Marriot International (NASDAQ: MAR), Wynn Resorts (NASDAQ: WYNN) and MGM Resorts (NYSE: MGM) mostly trading sideways over the past 12 months.
The recent series of mass shootings are among the primary reasons for the shortage of international tourists traveling to the US. A number of countries including Japan, China, New Zealand, Germany, and Canada have issued warnings to citizens traveling to the US, in light of the recent shootings.
Incidents like the one at El Paso, where the gunmen reportedly said they particularly targeting Mexicans, are sending the message that even tourists won’t be spared.
This complemented by a strong US dollar makes the country less attractive in terms of expense and safety. China, which accounts for a major chunk of tourists traveling to the country, has especially been vulnerable to the currency headwinds last year since yuan’s value plunged against the USD.
The number of Chinese travelers in 2018 was 2.9 million, down from about 3.2 million in the year before. President Donald Trump’s unhealthy relationship with the Asian country, as well as with a few others may also be pointed out as factors leading to travel share decline.
Brand USA revival
Since travel and tourism generate over 2.5 trillion in economic output and employs about 16 million people, it’s high time the government takes action to boost growth. A group of executives from numerous firms including Carnival Corp (NYSE: CCL) and American Express (NYSE: AXP) had recently approached the government to reconsider the funding of Brand USA, a body that promotes travel into the country.
The body received its funding from the fees charged from the travelers until last year when Congress diverted the funds away from it. Even as other countries are encouraging such bodies to drive tourist inflow, the US seems to be going in the opposite direction.
According to Euromonitor International, international travel spending is set to touch $3 trillion within the next five years. Tourism firms are now reliant on government action to bite into this glowing opportunity.