Longer Domestic Trips Will Trump Slowed International Visitor Spending in 2015

The appreciation of the dollar against the euro may slow spending in the U.S. from international visitors but the drop in oil and gas prices should more than make up for it as domestic travelers with more money in their pockets spur weekend getaways and other short trips in 2015.

That’s the view of David Huether, vice president of research at U.S. Travel. He believes these developments will be a net positive for U.S, destinations given the overriding impact of domestic U.S. trips versus international visits.

“In 2013, 84 percent of the $888 billion in direct travel spending in the U.S. was spent by domestic travelers,” Huether says. “The remaining 16 percent was spent by international visitors in the U.S.”

Travel retailers and destinations are likely looking forward to the impact of U.S. travelers with more money to spend.

“… We’ve seen estimates of anywhere from $500 to $1000 extra in the pockets of the average American household,” said Expedia Inc. CFO Mark Okerstrom during the company’s earnings call last week. “And on a typical trip, the hotel stay part of that trip will be around $300. So that could actually drive more volume and more consumer demand around the world.

He said the increased disposable income could turn out to be a “tailwind” in 2015, offsetting some of the negative impact of foreign currency exchange woes.

Length of Trips

Huether of U.S. Travel says the extra income could spur U.S. domestic travelers to lengthen the duration of their trips, triggering increased spending on food, entertainment and recreation, and also could leader to additional shorter trips, including weekend getaways.

“So it is a positive for the travel industry, which has been growing at a fast clip over the last few years,” Huether says.

International Visitor Trends

Huether doesn’t envision much change in the growth of international visitor numbers, which grew 7 percent over the first 10 months of 2014 versus the year-earlier period.

“But what we have seen is the pace of spending by international visitors once they get here has been slowing,” he says. “The U.S. is a little more expensive now [particularly for European visitors] than it was a few  months ago.”

Lots of international visitors come to the U.S. to shop and the cost of goods and services still often makes the U.S. a bargain, Huether says, pointing to the iPhone, for example, which can be less expensive to purchase in the U.S. than abroad.

International monetary policies and the drop in oil prices could be negatively impacting U.S. visitations and spending from visitors from Russia, other European countries and Japan, but these factors are spurring travel to the U.S. from China and Brazil, Huether says.

World Travel & Tourism Council Perspective

“The lower fuel prices should filter down to consumers over time and it should see a subsequent increase in people’s disposable income and traveling habits,” says David Scowsill, CEO of WTTC. “Significant reductions in the amount that people pay for fuel at the pumps and in fuel bills also means that, in places that have large domestic tourism markets and where cars are a dominant form of tourism transport, people should have more money to spend on holidays and items on holidays.”

But that trend depends on the country.

“But, conversely, lower oil prices will impact outbound tourism from major oil exporters,” Scowsill says. “The falling oil price is only adding to the economic woes of Russia, for example, and people are likely to take fewer international trips as a result.”

Scowsill says the “WTTC would hope, given the tradeoffs, [the trends] would be a net positive for global tourism.”