How Has the Government Shutdown Impacted the Travel Industry?

Busy airport Unsplash


There are several ways that the government shutdown will impact the travel industry in the U.S.  We've read a lot about the financial impact, from the economic toll from government and tourism workers not receiving pay to airport terminals closing for lack of TSA screeners. But it is the long-term impact on the brand "U.S.A." that is going to continue to negatively affect the industry going forward. Here are the variables at work: growth in inbound international visitation was already projected to decelerate over the next four months to just 1.0%
 
Concurrently favorability ratings of the U.S. have declined significantly since the end of the Obama administration among the country's top inbound markets: Canada (-26% from end of Obama administration to 2018), Mexico, -34% favorable rating of U.S. over past two years, U.K, down 11%, Japan down 5%, Germany -27% and China, -8.2%
 
Add to this the element of uncertainty now of main attractions for these visitors being open- U.S. National Parks, museums-longer waits in airports or flight delays or possible cancellations due to inadequate TSA, Customers and Border Patrol staffing, and you the formula for a ruined family vacation or business trip.
 
On the business side these uncertainties will result in fewer conferences being booked in the U.S., impacting our cities with convention centers and hotel meeting space in innumerable ways, including convention and hotel staff layoffs, reduced schedules, resulting in less income for workers to spend in the local economy.
 
One in nine jobs in the U.S. rely on the tourism industry, according to the U.S. Travel Association, and when those workers' incomes are negatively impacted so are their plans for their own travels, having a compounding negative impact on the industry that often are not included in traditional assessments of negative stressors on the industry.
 
Tourism in the U.S. is a 2.4 trillion industry in terms of its economic output and if economists' predictions are correct that the shutdown will have an overall downward push on GDP by 10% we could expect the impact on travel industry to be impacted by a comparable amount. The U.S. Travel industry has estimated the impact is $152M per day. which is 7% of total economic output of 2.4 trillion.  We think the currently immeasurable impact of the shutdown, such as the decline in favorability of the U.S. and increase in uncertainty of travelers will increase the overall impact to closer to 9-10%
 
It is the longer-term impact on the brand that is hard to quantify right now but will become evident by future reports of international visitation and spend.
 
Domestically, we'll see a further eroding of confidence in the U.S. government and the administration as Americans hold back on travel or change their intended destination. Clearly those with flights and hotel reservations made prior to the shutdown are likely to take their trips, it is incremental and spontaneous travel, along with travel plans for the near term, that are doing to suffer, either with travelers just not pursuing travel, putting it off, or changing where they plan to go. Even with the latter, fears that come with uncertainty about TSA, CBP, and flights may even convert potential air travel to travel by car or other means.
 
Research has shown that approximately 13% of travelers say they will not travel in the next 12 months due to concerns about "hassles" at the airport. To put this in perspective, one in four say they may not travel because their just 'too busy' and one in five say they may not travel due to concerns over economic conditions. These data were collected prior to the shutdown but we expect that their concerns would naturally register higher now in light of the increased uncertainty created by the lack of normal government functioning in areas designed to keep them safe. [MandelaResearch]

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