You are on page 1of 9

Tourism to the U.S. Means More Growth, More Jobs, Lower Trade Deficit

Stephen Moore

More Growth, More Jobs, Lower Trade Deficit Stephen Moore Why does tourism matter to the U.S.
More Growth, More Jobs, Lower Trade Deficit Stephen Moore Why does tourism matter to the U.S.

Why does tourism matter to the U.S. economy?

Consider a family in Asia, Europe or perhaps Canada that wants to take a vacation to “see the world.” There are hundreds of millions of people like this across the globe. The family is confronted with a cornucopia of choices of where to spend its money in this wondrous world we live in. One can visit the Ei el Tower and the art museums in Paris, or ski the Swiss Alps, visit the Great Wall of China, the coliseum in Rome, scuba dive the Great Barrier Reef in Australia, or attempt to climb Mount Everest or Kilimanjaro.

But it is America that arguably has the greatest and most diverse travel attractions in the world - from coast to coast no other nation has all the natural beauty – such as our crown jewels of National Parks - or the manmade attractions from Disney World to Las Vegas to Hollywood.

It turns out that the destination choices tourists, like this family, make has a big impact on the economies of the places they visit. A lot of money is at stake here in these sweepstakes. An estimated one billion people travel every year outside their home country for business or pleasure. In 2017, international tourism generated $1.6 trillion in export earnings worldwide. It’s a competitive world out there and every nation is trying to lure this jackpot of tourist dollars inside their borders.

This report finds that promoting and facilitating foreign tourism to the United States can be an e ective way to increase American jobs and national output while reducing the nation’s trade deficit. Every time a foreigner travels to the United

States as a tourist, their spending in America is counted as export income for the U.S. economy, and thus reduces the U.S. trade deficit.

Data from the U.S. Department of Commerce reveal that foreign travel to and purchases in the United States added $251 billion in export income for the U.S. economy in 2017. On the flip side, U.S. residents spend $174 billion when traveling abroad, which counts as an import for the U.S. economy. As a result, travel and tourism generated a $77 billion international trade surplus last year – more than any other industry except for financial services – which reduces the U.S. overall trade deficit by an equivalent amount. 1

Travel is a major export for the U.S. economy, accounting for 11 percent of total U.S. exports of goods and services in 2017, up from less than 9 percent a decade ago (2007). This increase in share is a consequence of the travel exports (up 74% from 2007-2017) growing much faster than other exports of goods and services during this period (up 39%).

Travel has become the second largest export industry behind only transportation equipment. Travel and tourism jobs are jobs that stay home. The table below lists the industries that are our largest “exporters.” With tourism coming in at number two on the list, it remains an important strategy to reduce our trade deficit.

Expenditures related to international travel to the U.S. were responsible for an estimated 1.2 million

American jobs in 2016 and over $34 billion in wages and salaries paid out to the domestic workforce. 2

International travel and foreign purchases also increase state and local tax revenues by about $50 billion a year—helping pay for schools, police, health care coverage, and roads.

TOP U.S. INDUSTRY EXPORTS,* 2013

1.

TRANSPORTATION EQUIPMENT

$240.4 Billion

2. TRAVEL

$214.8 Billion

3. CHEMICALS

$189.3 Billion

4. MACHINERY, EXCEPT ELECTRICAL

$141.9 Billion

5. OTHER BUSINESS SERVICES

$123.4 Billion

6. COMPUTERS & ELECTRICAL PRODUCTS

$122.7 Billion

7. PETROLEUM & COAL PRODUCTS

$118.2 Billion

8. FINANCIAL SERVICES

$84.1 Billion

9. PRIMARY METAL PRODUCTS

$69.6 Billion

10. FOOD & KINDRED PRODUCTS

$67.3 Billion

11. AGRICULTURAL PRODUCTS

$66.2 Billion

*Domestic Exports

Source: U.S. Travel Association

TRAVEL HELPS BUST THE DEFICIT (IN BILLIONS)

$300

$250

$200

$150

$100

$50

$0

$251 $174 $77 Travel & Tourism Exports Travel & Tourism Imports Travel & Tourism Surplus
$251
$174
$77
Travel & Tourism
Exports
Travel & Tourism
Imports
Travel & Tourism
Surplus

Source: National Tourism Trade O ce

This paper examines what would happen if over the next four years, the U.S. were to attract 100 million tourists a year by 2021, up from 77 million in 2017. 3 This 30 percent rise is possible, given that over the past decade (as a fallout from the recession and other factors that have made it more di cult for foreigners to come to the U.S.) tourism to the U.S. as a share of all international travel has fallen to 1 in 8. If we retained America’s 2015 global long-haul market share:

• Increased tourism to this country by about 20 million more tourists each year.

• A reduction the U.S. trade deficit by an additional $40 billion a year.

• The creation more than 100,000 new jobs.

• The addition of $10 billion in total wages paid out - mostly to low and Middle income workers.

Obviously, the major impetus for this tourism rebound to occur will depend on the private sector. But Washington could make three changes to promote tourism to the U.S

First, the tourism and business travel visa system could be expedited to make it easier for tourists to travel to the United States. This could include better sta ng at ports of entry. This could be accomplished in a way that would allow our border enforcement and State Department focus its resources on keeping out terrorists, criminals, and other undesirables.

Second, global entry expansion will make it much easier for known tourist and business travelers to enter the U.S. hassle-free. The Visa Waiver Program should be modernized and expanded to allow expedited entry for visitors from nations like Poland and Israel that do not harbor terrorism.

Third, Donald Trump could use the bully pulpit to promote America as a hospitable and welcoming tourist destination. President Trump has been a one-man Chamber of Commerce in promoting American industries and products when he travels abroad. He has said many times in his foreign travels that “America is open for business.” 4 It would be constructive for the president to lay out the welcoming mat to tourists who will support American businesses when they arrive here.

2 https://www.ustravel.org/answersheet

3 https://www.U.S.today.com/story/travel/2018/09/13/international-visitors-us-up-slightly-2017/1196463002/

4 http://time.com/5120097/donald-trump-davos-speech/

Page 02

The economic benefits would hit all areas of the nation. And since the travel and tourism industry tends to hire lower skilled and younger workers, the financial benefits would go disproportionately to working class Americans.

Why Tourism Matters

Many Americans underappreciate the importance of foreign tourism to the United States as a driver for growth. But the financial impact on the states and communities is well summarized in a study by economists at Michigan State University quite aptly summarized a hypothetical scenario:

Let’s say a region attracts an additional 100 tourists, each spending $100 per day. That’s

Let’s say a region attracts an additional

100 tourists, each spending $100 per day.

That’s $10,000 in new spending per day

in the area. If sustained over a 100 day

season, the region would accumulate a

million dollars in new sales. The million

dollars in spending would be distributed

to lodging, restaurant, amusement and

retail trade sectors in proportion to how

the visitor spends the $100. Perhaps 30%

of the million dollars would leak out of

the region immediately to cover the costs

of goods purchased by tourists that are

not made in the local area (only the retail

margins for such items should normally

be included as direct sales e ects).

The remaining $700,000 in direct sales

might yield $350,000 in income within

tourism industries and support 20 direct

tourism jobs. Tourism industries are labor

and income intensive, translating a high

proportion of sales into income and

corresponding jobs. The tourism industry,

in turn, buys goods and services from

other businesses in the area, and pays

out most of the $350,000 in income as

wages and salaries to its employees. This

creates secondary economic e ects in

the region. The study might use a sales

multiplier of 2.0 to indicate that each dollar

of direct sales generates another dollar

in secondary sales in this region. Through

multiplier e ects, the $700,000 in direct

sales produces $1.4 million in total sales.

These secondary sales create additional

income and employment, resulting in a

total impact on the region of $1.4 million

in sales, $650,000 in income and 35 jobs.

While hypothetical, the numbers used here

are fairly typical of what one might find

in a tourism economic impact study. A

more complete study might identify which

sectors receive the direct and secondary

e ects and possibly identify di erences

in spending and impacts of distinct

subgroups of tourists (market segments).

One can also estimate the tax e ects of

this spending by applying local tax rates

to the appropriate changes in sales or

income. Instead of focusing on visitor

spending, one could also estimate impacts

of construction or government activity

associated with tourism. 5

There are also social repercussions and civic and national pride benefits of travel and tourism. Here is how U.S. Today recently summarized these e ects in a survey on the e ects that tourism has on American society:

Tourism has long been cited by world leaders as a driver of peace and security

Tourism has long been cited by world

leaders as a driver of peace and security

through understanding. In the 21st

century, tourism is closely linked to

development, embracing a growing

number of new destinations – hence

new jobs. Tourism can create civic

and national pride by encouraging

cultivation and sharing of local customs,

food, traditions and festivals. Personal

exchanges between hosts and guests

goes a long way toward fostering better

cultural understanding. Tour operators are

focusing on the experiential travel trend,

providing more authentic and immersive

experiences for their guests. Open spaces

and national parks in countries around

the world are good for replenishing both

body and soul… 6

world are good for replenishing both body and soul… 6 To be sure, there are some
world are good for replenishing both body and soul… 6 To be sure, there are some
world are good for replenishing both body and soul… 6 To be sure, there are some
world are good for replenishing both body and soul… 6 To be sure, there are some

To be sure, there are some negative e ects from tourism as well – including tra c congestion, language barriers, higher costs of local services, and

risks of terrorism. But in almost all cases the positive

e ects to workers and communities of tourism

outweigh the negative e ects, which is why almost every area wants to be a tourist destination to bring

the flow of dollars.

The numbers on a national level are astoundingly large. The chart below shows the trend in international tourist arrivals over time. From 2013 to 2017 the number of tourists arriving in the United States climbed from 69 million to 77 million. 7 These tourists spend on average about $3,000 per trip, including airfare.

TOTAL INTERNATIONAL ARRIVALS TO U.S. (IN MILLIONS)

80

78

76

74

72

70

68

66

64

77.8 76.9 76.4 75 69.8 2013 2014 2015 2016 2017
77.8
76.9
76.4
75
69.8
2013
2014
2015
2016
2017

Source: National Tourism Trade O ce

The World Travel and Tourism Council recently examined the potential growth of the U.S. Travel industry over the next decade relative to other major sectors of the economy. It found that only the oil and gas industry is expected to grow at a faster pace from 2017-27. 8 As the figure shows, travel is expected to grow at 3.3% per year versus 2% for the entire economy.

6 https://traveltips.U.S.today.com/positive-negative-e ects-tourism-63336.html

7 https://travel.trade.gov/research/monthly/arrivals/

8 https://www.wttc.org/-/media/files/reports/benchmark-reports/country-reports-2017/U.S pdf

Page 04

US GDP FORECAST BY SECTOR

CASGR% 2017-2027

1.2% 1.7%
1.2%
1.7%

BANKING

TOTAL

ECONOMY

2.3% 3.3%
2.3%
3.3%

CHEMICALS

TRAVEL &

MANUFACTURING

TOURISM

1.2%

2.0%

TRAVEL & MANUFACTURING TOURISM 1.2% 2.0% AUTO AGRICULTURE 0.4% 1.9% MINING RETAIL 2.0% 3.8%
TRAVEL & MANUFACTURING TOURISM 1.2% 2.0% AUTO AGRICULTURE 0.4% 1.9% MINING RETAIL 2.0% 3.8%
TRAVEL & MANUFACTURING TOURISM 1.2% 2.0% AUTO AGRICULTURE 0.4% 1.9% MINING RETAIL 2.0% 3.8%

AUTO

AGRICULTURE

0.4% 1.9%
0.4%
1.9%

MINING

RETAIL

2.0%

3.8%

2.0% AUTO AGRICULTURE 0.4% 1.9% MINING RETAIL 2.0% 3.8% FINANCIAL SERVICES CONSTRUCTION Source: World travel &
2.0% AUTO AGRICULTURE 0.4% 1.9% MINING RETAIL 2.0% 3.8% FINANCIAL SERVICES CONSTRUCTION Source: World travel &
2.0% AUTO AGRICULTURE 0.4% 1.9% MINING RETAIL 2.0% 3.8% FINANCIAL SERVICES CONSTRUCTION Source: World travel &
2.0% AUTO AGRICULTURE 0.4% 1.9% MINING RETAIL 2.0% 3.8% FINANCIAL SERVICES CONSTRUCTION Source: World travel &

FINANCIAL

SERVICES

CONSTRUCTION

Source: World travel & Tourism Council

One way to appreciate the economic and jobs impact of tourism is to examine how international visitors benefit a state like Florida. According to a 2018 report by the tourist promotion group VISIT FLORIDA: “In 2016, out-of-state visitor spending in Florida reached a record $112 billion, an increase of 2.7 percent over the previous year. Visitors generated $88 billion, or roughly 10 percent, of Florida’s total Gross Domestic Product (GDP), up 4.2 percent over 2015, and visitors generated $11.6 billion in state and local taxes, up 3.3 percent.” 9 Clearly, tourism is a driver of growth in the Sunshine State.

In response to these upbeat numbers, then- Governor Rick Scott said, “In 2016. Florida’s tourism industry helps support more than 1.4 million jobs across our state and is a major driver in our growing economy.” 10

state and is a major driver in our growing economy.” 1 0 9

9 https://www.floridatrend.com/article/23799/visit-florida-releases-new-economic-impact-figures

10 Ibid

Page 05

Nationally the employment impact of travel is important and growing as well. From 2008 to 2017, travel employment rose at a rate of 20% versus 12% for all industries. See figure below.

TRAVEL EMPLOYMENT GROWS FASTER THAN THE REST OF PRIVATE SECTOR • 2008-2017

20% 20% 17% 14% 11% 12% 8% 5%
20%
20%
17%
14%
11%
12%
8%
5%

Travel

Rest of Private Sector

Source: Bureau of Labor Statistics

Many industries in America are directly impacted by tourism. These include restaurants, hotels, taxi services, airlines, retail shopping centers, amusement parks, sporting events, and so on. These expenditures are directly responsible for roughly 1.2 million jobs and at least $30 billion in worker pay and benefits.

The jobs that are created in these industries are often ideal “starter” jobs for young Americans as they first enter the workforce. The economic evidence shows that when workers enter the workforce and start to earn a paycheck at an earlier age, their lifetime earnings rise. Moreover, jobs in the leisure, hospitality, travel and retail industries are much less likely to be “outsourced” to other nations than the manufacturing and service jobs in other industries.

Think about it this way. In 2017 the U.S. trade deficit stood at $552 billion. 11 But the tourism surplus was

over $77 billion. 12 This means that our trade deficit would have been 14% larger had it not been for tourists traveling to the United States and spending money here.

During the recovery from the 2008-09 recession, travel has had an outsized impact on reducing the trade deficit. As the figure below shows, the deficit in trade increased by more than $54 billion from 2010-2017. The trade surplus from foreign visitors to the United States ROSE over than same time period by $19.5 billion. The trade deficit would have risen almost 40% faster were it not for the growth of travel and tourism.

CHANGE IN THE U.S. TRADE BALANCE

2010 – 2017
2010 – 2017
and tourism. CHANGE IN THE U.S. TRADE BALANCE 2010 – 2017 Source: U.S. Census Bureau, International
and tourism. CHANGE IN THE U.S. TRADE BALANCE 2010 – 2017 Source: U.S. Census Bureau, International
and tourism. CHANGE IN THE U.S. TRADE BALANCE 2010 – 2017 Source: U.S. Census Bureau, International

Source: U.S. Census Bureau, International Trade Administration

This is especially important given the current administration’s desire to reduce our trade deficit. From the first day Donald Trump started running for president he promised to reduce our half-trillion- dollar trade deficit. 13 Increasing tourism is one easy way to do that.

Also, as a pure economic accounting measure, the U.S. GDP goes down when we import and it goes up when we export (i.e. sell more goods and services to foreigners). This means that more tourism translates to a higher GDP every year.

11 https://www.census.gov/foreign-trade/statistics/historical/gands.pdf

12 http://tinet.ita.doc.gov/outreachpages/download_data_table/2008-2017-new.pdf

13 https://ustr.gov/sites/default/files/files/Press/Reports/2018/AR/2018%20Annual%20Report%20I.pdf

Page 06

Why Has Tourism to the U.S. Stalled?

The United States clearly has some of the greatest and undoubtedly the widest variety of tourist attractions in the world. These include natural attractions—including our spectacular national parks, our mountains, beaches, warm weather vacation spots, and so on. We have also created shopping paradises, glamorous cities from New York to Chicago to San Francisco and thoU.S.nds of magnificent destinations from Charleston South Carolina to Las Vegas and Laguna Beach California and other major attractions. What other nation has both a Hawaii and Alaska? The manmade and natural attractions make nearly every state in the

nation a desirable tourist location, which means many multiple trips to experience it all. No nation has the wide array of five star restaurants and hotels and spas sporting events and so on than the U.S. There is only one Las Vegas, one Wrigley Field, one Yosemite, one Mount Rushmore, and one Times Square.

Yet, the chart below shows the problematic trend in travel to these shores. While the numbers entering the U.S. is up, our market share is down. The decline is a missed opportunity to raise the U.S. growth rate and lower our trade deficit.

share is down. The decline is a missed opportunity to raise the U.S. growth rate and
share is down. The decline is a missed opportunity to raise the U.S. growth rate and
share is down. The decline is a missed opportunity to raise the U.S. growth rate and
share is down. The decline is a missed opportunity to raise the U.S. growth rate and

The growth rate in foreign visitor spending in the United States since 2015 has also fallen relative to the growth rate in other large nations, according to data from the U.S. Travel Association. More people travel to France and Spain in a year than the United States and Spain has overtaken the U.S. to rank second. 14

Some of that is clearly a result of the lower costs for the half billion people living in Europe to travel across the continent (often by a short train ride) than to fly to the U.S. But America could be doing better. Is that a tear rolling down Honest Abe’s cheek in his memorial?

INTERNATIONAL TOURISM ARRIVALS, 2017 (IN MILLIONS)

France

Spain

USA

China

Italy

Mexico

UK

Turkey

Germany

Thailand

86.9% 81.8% 76.9% 60.7% 58.3% 39.3% 37.7% 37.6% 37.5% 35.4% 0 10 20 30 40
86.9%
81.8%
76.9%
60.7%
58.3%
39.3%
37.7%
37.6%
37.5%
35.4%
0
10
20
30
40
50
60
70
80
90

100

Source: UN World Tourism Organization

The good news is that though the U.S. share of travel and tourism dollars has fallen, the U.S. is still the number one place where foreign travelers spend their dollars. The United Nations finds that the U.S. receives about three times more in revenues from tourism than any other nation. 15 See Figure below.

INTERNATIONAL TOURISM RECEIPTS, 2017 (IN BILLIONS)

USA

Spain

France

Thailand

UK

Italy

Australia

Germany

Marco (China)

Japan

210.7 68 60.7 57.5 51.2 44.2 41.7 39.8 35.6 34.1 0 50 100 150 200
210.7
68
60.7
57.5
51.2
44.2
41.7
39.8
35.6
34.1
0
50 100
150
200

Source: UN World Tourism Organization

250

One survey by the World Economic Forum “Travel Competitiveness Index” rated the U.S. 6th in the world for travel. 16 That’s good, but not good enough. There is no reason the U.S. can’t be number one for travel destination desirability.

So why aren’t the Brits, Germans, Japanese, Australians and Chinese coming at the rate they used to? And why is it that even as international travel is up worldwide, America’s share of the tourism tra c has failed to keep pace?

Here are the three likeliest explanations. First, the dollar has strengthened which makes it more expensive to travel to and shop in America.

Second, the U.S. Government has made it more di cult to come into the United States as a result of toughened customs and immigration enforcement. This has been part of e orts keep terrorists and other bad actors outside these borders.

And third, hospitality matters. Many foreigners don’t like Trump or they – mistakenly, in my view – think that he doesn’t like them. His nationalist America

14 https://www.e-unwto.org/doi/pdf/10.18111/9789284419876

15 Ibid

16 http://reports.weforum.org/travel-and-tourism-competitiveness-report-2017/country-profiles/#economy=U.S.

Page 08

First policies have clearly had success in growing the domestic economy, but the rhetoric coming out of Washington regarding foreigners is not always welcoming. We know that this can persuade foreigners to avoid coming to the U.S. and spending their money here.

4.

Set a national goal of 100 million tourists by 2020 and 150 million by 2030. These are attainable goals and private and public e orts should combine to make attaining those goals a reality.

What Can Be Done to Make America Number One Again in Tourism?

There isn’t a lot we can or should do about the value of the dollar. The dollar is strong because the U.S. economy is roaring and foreigners want to invest in the U.S. We certainly don’t want to try to get rich by substantially and intentionally weakening the dollar. What we need is a stable dollar with tame inflation at home.

Here are four steps that would help promote tourism to the U.S., while safeguarding our security and safety from terrorists or criminals who would do us harm.

1. Expedite entry into the U.S. in order to reduce hassles and delays for families and business travelers. This is tricky, because we surely don’t want to allow criminals, terrorists or drug runners to slip through the cracks. But customs and immigration enforcement need to better target the potential troublemakers.

2. Expand the visa waiver and global entry system to reduce the psychic cost of international travel to the U.S. for those who are known to be zero security threat.

3. Reverse the so-called “Trump Slump” in tourism, by having the President rhetorically laying out the welcome mat to foreign travelers. President Trump could and should sound a welcoming message through such means as public service announcements and international press briefings.

Conclusion: America’s $30 Billion and 100,000 Jobs Opportunity

What if these policies and goals worked to restore the U.S. market share in foreign travel relative to other competitor nations? We have run these numbers and the results show that each year the United States adds 20 million more visitors, we would add $40 billion to annual GDP and 100,000 to 200,000 additional jobs to the American economy. Over a decade, the U.S. Travel Association believes the added GDP would be nearly $400 billion. That would generate some $100 billion in added tax revenues to the co ers of states, localities and the federal government.

This should be a top economic goal of the Trump Administration. In his foreign travels, Donald Trump has emerged as a highly e ective one-man Chamber of Commerce selling America to investors and CEOs of major companies. Come to America to do business, he has urged. “America is open for business,” he said to a world audience at a recent G8 meeting.

Now he needs to declare that America is open

for tourism as well. This shouldn’t be a hard sell to foreigners given the multitude of unrivaled

attractions in the U.S

strategy will generate more GDP and more tax revenues. This means lower budget and trade deficits and more jobs here at home.

A more robust pro-tourism

Stephen Moore is the distinguished visiting fellow for the Project for Economic Growth at the Heritage Foundation and an economic consultant with FreedomWorks. He served as a senior economic advisor to the Trump campaign.