Coming to America?

International tourism to the U.S. down by double digits, likely impacting retail sales and employment

Last month, the U.S. government published the Q1 2017 economic growth figures, and many economists were disappointed to see anemic GDP growth under 1%. Simultaneously on the political front, the nation has been occupied by the news of administration shakeups and the debates on national security, not to mention in-flight tech limitations and changing immigration and tourism visa policies.

So far, however, there has been little talk of the connection between the domestic economy (particularly retail and hospitality) and foreign tourism to America. As a location intelligence company with some 50 million users monthly spread over 190 countries, Foursquare has unique data assets that can jump-start the conversation. Over 13 million smartphone users have opted-in to our global research panel and share “always on” location trails; we are able to detect when these phones travel and when they walk in or out of 93 million public places around the world (via check-ins and when apps that rely on our Pilgrim technology are running in the background).

What has been the impact of the Trump campaign rhetoric and his administration’s latest controversies on foreign travelers? Is there an economic cost of being a less welcoming “Brand America?”

Whichever side of the policy debate suits you, we believe more rigorous data always improves a discussion. At the very least, we should be able to weigh the pros and cons.

So what are the recent numbers on foreign tourism and commerce in America?
Any impact on retail and services has to be situated in the larger context of what’s happening to retail over recent years. Retailers are already under pressure from the rise of e-commerce and Amazon; over 89,000 retail workers have lost their jobs since October 2016. There is daily news of retail woes and decreasing sales among American restaurant chains, too.

Other sectors as well may be affected by tighter border restrictions, perceived or otherwise. For instance, reports have cited decreasing college applications from international students. Higher education has been an area where the U.S. has long attracted ‘paying customers’ from around the globe. But for focus, this report centers on the retail and hospitality sectors.

The official government data on international visits to the U.S. was last published in August 2016 and observers are hungry for more information. Kayak.com reported international air searches to the U.S. down 12%, and Expedia’s CEO warned of impact from the administration’s policies and tone, as well as from the rise and volatility of the dollar versus other currencies. But comprehensive data has been scarce.

We at Foursquare can shed light on this topic with nearly real-time data. Plus, we can track the effect across many categories, including where tourists are going (or not going) when they shop and roam. We see, always anonymized and in the aggregate, how people move from their country of origin to hotels, department stores, restaurants and nightlife spots in the U.S. We understand how travelers explore the world. For the purposes of this report, we normalized our global data against historical U.S. government international visit statistics. We also back-tested the correlations in our data against historic government stats on international arrivals, and have seen high correlations.

Our findings reveal that America’s ‘market share’ in international tourism started to decline in October 2016, when the U.S. tourism share fell by 6% year-over-year, and continued to decrease through March 2017, when it dropped all the way to -16%. Currently, there is no sign of recovery in the data.

International Tourism to the U.S. is Down
The share of international tourism to leisure locations in America has been steadily declining since October 2016, after small YoY growth in August and September. Over the full October 2016 to March 2017 timeframe, there was an average decrease of 11% YoY.

(This should be obvious to anyone who knows our history of very accurate data predictions, but just in case you’re a new reader, we always normalize for adjustments in our panel size, which grew over this period, and we adjust for any sample size variance monthly.)

The charts below look at “market share” rather than absolute figures, e.g. the U.S. as a destination versus the Rest of World (“ROW”).

For this analysis, we looked at the kinds of foot traffic associated with ‘leisure’ travel and with ‘business’ travel. We are focused not on trips per se, but the number of stops made at certain kinds of venues by people that are visiting from abroad. Leisure venue visits are defined as stops at the following: casinos, department stores, malls, monuments/landmarks, museums, night clubs, restaurants, and theme parks. Business venues comprise stops at convention centers and offices. (Note that hotels and airports were measured separately, and not included in these definitions, since we cannot distinguish between leisure and business travelers to these destinations.)

You can see that the Rest of World has gained share of leisure and business travel activity, while the U.S. leisure “market share” has fallen dramatically.

Notable takeaways:

  • The U.S. is losing tourist activity to foreign destinations. Share of visits for leisure categories in other countries is up year-over-year by about 6%, by definition at the expense of the U.S. since we are talking about market share.
  • California, and in particular L.A. and San Diego, was most impacted by the decrease in international travelers. Both cities saw strong YoY gains in fall 2016, but international tourism has dropped sharply in Q1 2017.
  • Business trip activity is up in the U.S. by about 3% (as a share of international traveler global activity), but that trend line is not as high as elsewhere in the world, where YoY trends are closer to 10%. Relative to business travel gains globally, business travel to the U.S. is suffering.

Origin Countries: Regional Disparities
When it comes to an impact on the economy, did tourism to the U.S. slow from different countries at the same rate, or did specific regions stay away in greater numbers?

From our data, residents of the Middle East and Central/South America are avoiding the U.S. more than residents of Asia, Europe and elsewhere. It goes without saying that some of the current administration’s most controversial policies have been focused on countries within the Middle East and Latin America, and that we’re seeing a greater impact in travel from these nations.

To be clear, we do not claim this analysis can tease apart the impact of a new tone or policies versus other factors: The dollar has been up slightly (about 3% YoY versus the Euro during the past two quarters), making travel to the U.S. more expensive at times. The value of the Euro is down, making European travel marginally more attractive. There may be other factors as well.

It seems unlikely that these small currency movements are the only factor triggering such an elastic result. This is reinforced by the regional disparities, which suggest more than pure exchange rate cost is at work. In January 2017, shopping and vacation activity from Middle Eastern tourists was down over -25%, and hovers in the negative high teens today.

Observers of the above charts will note that the downturn in tourism came months before the new President came into office, and before changes to visa procedures, restrictions on travel from certain Muslim countries, the ban on certain electronics during flights from select countries and more. This timing may align with the heated rhetoric of the height of the Presidential election last fall, as the big dip began in October. International travelers may have determined that the America within their sights was less appealing or welcoming. Trend lines become even more steep in January when Trump took office, and have continued up through the end of Q1 2017.

Should we care? Does this matter for jobs and the economy?
What’s the impact of these trends? It’s early and hard to say, but the impact could be material. Tourism in the U.S. is a big business, and not just for hotels and airlines.

According to our data, international travelers generally make up 10.7% of all visits to leisure categories. In the past six months, the above-discussed 11% YoY drop in U.S. market share for tourism activity thus adds up — impacting domestic businesses. This means that the drop in international tourism to the U.S. is resulting in an opportunity cost of about 1.2% in total visits to U.S. shops, restaurants, attractions and the like. And it’s a fair bet that international shoppers spend more than the average domestic shopper.

So though the impact may sound small, it could mean an additional 1–2% YoY sales hit to U.S. retailers already operating on thin margins and besieged by competition from Amazon, e-commerce as a whole, and a generally competitive and “over-stored” economy. It represents significant damage to a hurting sector.

For hotels in Q4 and Q1, international visitors made up about 15% of hotel visits, so that sector will also feel an impact.

Others have begun to forecast what a tourism slowdown could mean. One analysis by the firm Tourism Economics reported that Trump’s travel ban could cost the U.S. economy more than $18 billion and about 107,000 jobs.

As a Location Intelligence company, we leave the policy conclusions to others. But we do believe better data makes for a more well-rounded debate, and that is where our role centers. Proponents of President Trump’s new policies might argue that the President intended to reduce visitors from certain countries, and that the economic cost is outweighed by claimed security needs. Critics of the administration may question the effectiveness of these new tactics. Either way, we believe that the direct economic impact from these policies should be in the conversation, just as they are for discussions about the coal sector, pipeline construction, or manufacturing sectors.

The Takeaway
American retailers, restaurant groups, travel companies and the like who are feeling decreasing demand should note that international travel patterns could be affecting their bottom line.

Some ideas for how to thrive during this volatile period:

  • Travel companies should see some optimism in the business travel market. Though it isn’t growing as quickly in the U.S. as elsewhere, there is still a positive YoY trendline. Knowing more about your business travel audience using Foursquare Analytics (an interactive dashboard with details on customer trends), and marketing to these audiences specifically, using Pinpoint by Foursquare, will drive further success.
  • Retail and hospitality brands should seize opportunities to target American consumers, particularly now when the dollar is strong and retailers are feeling the loss from international spend. Consider a smartly targeted advertising program with Pinpoint by Foursquare that reaches your brand’s most passionate and loyal customers in the U.S.; a more reliable cohort right now. Identify new customers based on affinity and lifestyle targeting and re-engage lapsed customers to make up for lost revenue.
  • Brands can also consider deepening the relationship with users of their mobile apps with the Pilgrim SDK. Have a creative use for location technology? Pilgrim SDK can be embedded into an app for contextual messaging, customized engagement opportunities and richer insights on your mobile app users. Developers interested in applying to use the Pilgrim SDK can learn more here.
  • If you are an omnichannel or brick & mortar business, be smart about measuring what part of your marketing budget is driving real results. You can use Foursquare Attribution to measure which digital campaigns are generating lift versus a control group.

Methodology
Foursquare analyzes foot traffic trails drawing on the more than 50 million monthly global users of the Foursquare City Guide and Foursquare Swarm apps and websites, which people use to explore the world and check in.

In this analysis, we looked at international users of the apps who are based around the globe, in over 150 countries. We analyzed market share to remove seasonal bias and to mitigate against global trends such as general increase or decrease in travel overall. To assess business travel, we looked at visits to places categorized within the Foursquare category of Professional and Other Places; “leisure only” includes casinos, department stores, monuments/landmarks, malls, museums, nightclubs, restaurants and theme parks. Airports and hotels were excluded from both business travel and leisure categories because visits to those venues could be for either work or play; these categories were included in a third group (‘other’), which also includes any category not listed above, from libraries to grocery stores. A proxy for home and work was used to determine international residence. Data was normalized by dividing by all international tourist visits by a user in a country that is not their home country; we have controlled for changes in both the overall volume of global tourist visits and our panel size. (To confirm accuracy, we have backtested to confirm our data historically correlates closely to US government tourist arrivals data.) U.S. residents are excluded from analyses of international visits, and global travel excludes American travelers. Foursquare data is always anonymized and aggregated. For regional comparisons, one region, Africa, was removed for lack of statistical significance.