While data so far is fairly limited, it’s pretty clear that we’re currently seeing a reduction in inbound tourism to the United States, for a variety of reasons. The question is, how big will the reduction be, and what impact will it have on airlines and hotels?
Trump is putting people off visiting the US
I think that a vast majority of people — Democrats and Republicans — would agree that with Trump in The White House, inbound demand for tourism to the United States is decreasing. To be clear, that’s not supposed to be a controversial take, as I think for some people, that’s almost viewed as a feature rather than a bug.
There are several things driving this reality:
- Canada is one of the biggest foreign tourism markets for the United States, and with Trump threatening to invade Canada all while waging a tariff war, many Canadians are boycotting the United States, and would rather spend their tourism dollars elsewhere
- Trump’s tariff war goes beyond just Canada, and isn’t great for international relations, with a lot of people making the decision to spend money with “friendlier” countries
- We’re increasingly seeing countries issue travel warnings for the United States, including warning of increased risk of being detained (Germany and the United Kingdom have both issued new travel warnings in recent times), and there are stories of people being detained for extended periods of time without being able to communicate with their embassy, etc.
- With the immigration crackdown, more travelers may think twice about visiting the United States, especially from countries where there are significant immigration concerns, and where the chance of being denied entry may be higher
Trump has been in office now for around two months, and the data is a bit slow to come in, regarding the impact his policies have on international travel. That’s because many international trips are planned well in advance, so there’s a delay with how consumer behavior is evolving.
However, the initial data is pretty bleak. For example, starting in February 2025, we saw a sharp decline in the number of visitors from Canada to the United States, both by air and by car. We’ve seen airlines increasingly cut their transborder schedule, due to decreasing demand. The question is, how bad will it get, and what will it mean for airlines and hotels?
How big will the reduction in foreign visitors be?
As you’d expect, the coronavirus pandemic was a setback for US tourism. When Biden was president in 2023, the administration had the goal of increasing US tourism to 90 million international arrivals by 2026, which would be 9% above the 2019 numbers, and the first time that pre-pandemic numbers would be broken.
For what it’s worth, we currently have a bit of tourism “deficit,” which is to say that more Americans travel abroad than the other way around. In 2024, 73.4 million Americans traveled abroad, while 59.7 million foreigners traveled to the United States. So that means around 1.2x as many people traveled from the United States than to the United States.
It sure seems to me like our tourism deficit is about to increase even more — Americans aren’t going to stop traveling abroad, while I think it’s safe to assume that our inbound tourism market won’t grow as much as forecasted. Research firm Tourism Economics has slashed its outlook for inbound US tourism — rather than the previously expected 8.8% increase in tourism this year, the firm expects a 5.1% decline. A 13.9% shift in demand is massive.
Of course that’s just a projection, so I’m curious to see how bad the tourism “recession” really gets. Will the decline in tourism be 5.1% year-over-year? Or will it be smaller or bigger? And to what extent will it impact airlines and hotels? All we can do is speculate, but I think it’s something to watch over the next couple of years:
- Obviously not all destinations will be impacted equally, since some places have a lot more foreign visitors than others; for example, I’d expect Florida to be hit pretty hard, especially in winter, given its popularity with Canadians, overseas visitors, etc.
- In the case of airlines, even a couple of percentage point shift in demand can have major impacts to bottom lines, given how low margin the industry is; there’s only so much that can be done to stimulate domestic demand beyond what it already is
I think many people understate how big of a part of the US economy tourism is. Admittedly we have a robust domestic tourist market, but we also have a significant international one. Tourism drives trillions of dollars in revenue to the US economy each year, making up nearly 3% of the country’s GDP. Furthermore, around 16 million Americans work in tourism, and in dozens of states, tourism is one of the largest employment sectors.
Anyway, I think this is something that’s worth watching big picture. At the beginning of 2025, both Delta and United claimed that this would be their most profitable year ever. Now we’ve seen Delta significantly reduce its first quarter guidance, claiming that a reduction in consumer confidence is lowering demand. It’ll be interesting to see to what extent a drop in foreign tourism impacts airlines as well.
Bottom line
Tourism is a major part of the US economy, though foreign inbound demand seems to be decreasing at the moment. This is due to a combination of tariff wars, threats of invasion, concerns over being detained, and just a general boycott.
One research firm suggests we were supposed to see an 8.8% increase in tourism this year, but will instead see a 5.1% decline. This would obviously have significant implications for the US tourism industry, though it remains to be seen just how bad it will get. Over the coming quarters, it’ll be interesting to listen to airline and hotel earnings calls, to see if this has a material impact on their bottom line.
How bad to you see the US inbound tourism recession being in the coming years?
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