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The 12% drop in US inbound international travel and the potential looming recession drive Americans to adjust their travel plans towards domestic locations. – Image Credit Unsplash
According to economists, the travel industry’s hopes of a swift recovery to pre-pandemic levels of travel bookings have been dampened. They now predict a full recovery by 2029. The 12% drop in US inbound international travel and the potential looming recession drive Americans to adjust their travel plans towards domestic locations. The uncertainty driven by ongoing tariff plans and changing foreign policy significantly impacts this economic shift.
During a webinar, titled “Trump & the Travel Industry: Key Impacts and Latest Outlook,” Adam Sacks, president at Tourism Economics, said the travel industry’s optimism for a quick rebound to pre-COVID-19 travel volumes has been quashed. Previously, predictions pointed to a near-full recovery by 2025, but revised forecasts now estimate a full decade from the pre-pandemic era to a complete recovery, implying significant economic losses.
Whether the US is heading towards a recession remains a contentious issue. Ryan Sweet, Oxford Economics’ chief US economist, still holds a glimmer of hope that the country could evade it, provided there are no further changes to President Donald Trump’s tariff plans and foreign policy.
A significant concern is the uncertainty driven by tariffs on the market. Sweet highlighted four interconnected shocks facing the US economy, with tariffs leading the pack. The other shocks include stress on supply chains and turbulence in financial markets, both at least partially influenced by the tariffs.
Due to the direct and indirect impact of tariffs, goods prices are expected to increase almost instantly by nearly 10% in some cases. Sacks emphasized that any perceived benefits of Trump’s tariffs, such as attracting more business to the US’s manufacturing activity, would not compensate for the disruption already caused and yet to come.
Supply chains are under stress due to increased activity from the 90-day pause on tariffs as businesses stock up, straining port activity. According to Sweet, a paradigm shift from globalization towards protectionism will inevitably cause hiccups, such as supply chain stress.
Meanwhile, financial market turbulence has unsettled consumers. Despite expressing concerns, consumers have not yet curtailed spending. Sweet highlighted the need for clarity to promote business decision-making, particularly for small businesses.
According to Sacks, travel has already taken a hit. A flash study by MMGY revealed that while 83% of US consumers still plan on traveling in the next year, 80% will alter their travel behavior due to current events. Moreover, due to current policy decisions, over half of US consumers believe that Americans won’t be as welcome in other countries.
National Travel and Tourism Office data indicates an 11.6% year-over-year drop in overseas visitor arrivals into the US in March. According to Sacks, this decline is not solely due to policy changes, but also by rhetoric and the combative nature of the ongoing trade war.
While domestic travel might remain robust, possibly even boosted by Americans staying closer to home, the fall in international travel will not fully offset the losses. “The losses inbound will be significantly greater than the pullback of outbound,” Sacks added.
Economists originally predicted a 2% US GDP growth in 2025, but new projections suggest a decline to around 1.2%. However, businesses are still investing and hiring, which are positive signs in the current climate.
Sweet believes that even if a recession does occur, it will not mirror the severity of the pandemic or the 2008 financial crisis. He remains optimistic about the future, stating, “The economy will come back… 2026 is going to be a much better year.”
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