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U.S. Tourism in Crisis: Aran Ryan on Travel, Tariffs, and Trade
Fear, money, and restrictions are a combustible mixture in any business sector, but in travel it can be a death knell for some businesses. The tariff situation is changing daily, and while the emphasis has been on physical goods, there is a growing shadow on tourism. Aran Ryan, Director of Industry Studies at Tourism Economics, an Oxford Economics Company, talks about how trade wars negatively affect US travel, how tourism is already taking a hit, and what we can do to ride this out.
Hi everybody. It's no Show. I'm Matt Brown, joined as always by Jeff Borman. Our guest today, aaron Ryan. He knows so much about tourism that he can probably tell you where you're going to go next on vacation before you even know. Aaron is the Director of Industry Studies at Tourism Economics, an Oxford economics company, and has over 25 years of consulting experience related to lodging, casino gaming, short-term vacation rentals, visitor activity and destination development. He assists everybody in hotels, owners, operators, and he helps them to understand the impact of tourism industry trends. He's an analytics geek, he's a father, he's a lover of the outdoors, a cyclist. He is the go-to conference speaker on tourism trends. He's a Philly fanatic. Aaron Ryan, welcome to no Show. Good afternoon. Like we were joking earlier because you live in Philadelphia, he said what if it would be? What if you really were the Philly fanatic as your side job? And it's be what if you really were the Philly fanatic as your side job? And it's like guys, I got to leave in 30 minutes.
Speaker 2:We've got Cardinals tonight. I got to do photo ops, I got to make it?
Speaker 1:That would be, yeah, that would be great. That would add or already add a lot onto your very, very busy schedule.
Speaker 3:Instead of talking baseball. That's way too much fun. Let's talk about tariffs. Yes, yes, yes. Let's talk about torching the economy. Can we do that for a while?
Speaker 1:Speaking of your day job. It's been in the news a lot recently. Tariff situation in America and outside of America is changing daily, and while the emphasis has been on physical goods, there is a palpable shadow on tourism, not just from tariffs, but from a lot of factors that are going on right now with America and its place in the world. Tourism economics has been cited in many articles over the last couple of weeks. A report that recently came out by tourism economics expected a 9.4% decline in international visitor arrivals for 2025. International visitor spending in the US is set to decline by 5%. That is a loss of $9 billion in spending, $6.4 billion of decreased spending in destinations, plus $2.5 billion of lost transportation spending. Every day there are updates to this. I don't know how you keep up with it, Aaron. Can you take us down the roads of what is negatively affecting tourism in America?
Speaker 2:So I think our our views on this have had to evolve as sort of some of the news has come forward and so, yeah, we're thinking about it, framing it as those channels, because it's useful for people to understand the types of effects that we think are going to be slowing that international inbound travel that we think are going to be slowing that international inbound travel. So, if I summarize it briefly, we're looking at negative sentiment effects, which is basically Canadians and others are angry at us now. Immigration and border uncertainty. It can be scary to cross borders and stories of detainments don't help. Third, we have a situation with a very strong US dollar, so the US is about 20% more expensive than normal. So that's another headwind that we're seeing. And then two more we're anticipating weaker economies in Canada and Mexico, as these tariffs particularly impact our neighbors. And now we're taking it home here and looking at uncertainties around the domestic economy and concerns about how the domestic traveler may pull back.
Speaker 3:You know it may not be directly related to travel, but the sentiment I thought that has captured the market, the global market, so well was when France asked for the Statue of Liberty back and we said you can take it. Is there a more illustrative way you could describe the feeling outside of America? Looking in right now, your outfit put together a number that I really grabbed onto that the US is expected to lose one and a half percentage points of global market share by 26. And that is a massive number on top of an existing trade deficit right the tourism trade deficit. Massive number on top of an existing trade deficit right the tourism trade deficit. Does that continue from?
Speaker 2:2026, or is it just too early to say right now, since you're measuring sentiment, I think we're viewing it as a reset downward, but that, yeah, it probably dissipates over time. I'm not sure when it's going to be the stiffest headwind, but yeah, eventually that eases.
Speaker 3:When you do this research, who do you survey to get this kind of insight? How's that done?
Speaker 2:Yeah. So some of it early on has been talking to people in the industry and hearing about what they're hearing, so groups that are canceling for this winter, some of those sort of leading indicators, and then it's quickly become some actual hard data coming in. So for today we just received the preliminary March international inbound numbers. So it's really exciting and disappointing to see. So. Total overseas was down 11.6% in March relative to a prior year. Western Europe down 17%, central America 23% down, caribbean 26% down. I mean those are major shifts here in just a short period of time.
Speaker 3:I heard Accor quote they're seeing 25% down from Europe into the US right now. I mean it's staggering. Are you seeing or hearing an industry voice that is revolting against this movement, against this trend?
Speaker 2:It's yeah, it's a mosaic of responses, right, I think, as people.
Speaker 1:That's a poetic way of putting this.
Speaker 2:There's somebody leading the charge in the whole effort that I don't know that is interested in hearing those voices Well, said when did it dawn on you and your research team that this was not going to be a blip?
Speaker 1:I mean, I can't imagine what your information processing structure has been like and I was also kind of thinking we were talking about before this interview. You know, I think this is a pitfall of every forecaster and economist in the world, but you did this bulk of research last year that was talking about 2025. And then in the span of a few days, I feel like it's almost all gone. When moments like this come along after a year or longer of hard work and research, do you embrace the zen of it all? Do you kick over trash cans? Do you have like a whole team of people working 24 hours? What do you do when models blow?
Speaker 2:up. Well, I think the story has shifted and you kind of got to be on the story. So when the story shifts, you stay with it, and so that's been the piece here. Originally, in December, we put out a note after the election saying this is what we saw in the first Trump administration and we expect some headwinds to travel. We expect some of these sentiment effects, but at that point in time we didn't expect it would go this far. So since that point we've been continually updating that view and trying to stay on top of what that latest expectation is.
Speaker 3:Last summer, when you were on the hotel data circuit giving updates and prognostications, you had a slide that I remember very well, going through a Biden-Harris victory and then the header was full-blown Trump. Does this exceed all of your prognostications and all the modeling for full-blown Trump?
Speaker 2:Yeah, it's been off the charts and that's for us as well. So we rely on our broader Oxford economics views on the economic outlook. And so they had done some of those scenarios or pre-election, and said here's what we think tariff rates could be under a full, full blown Trump scenario. And now they've done updated slides that just show you know, are we higher than sort of the highest tariff scenario that they had published.
Speaker 3:We keep hearing and reading that economists all agree that tariffs are a bad idea, but very few of us actually hang out with economists. You do. Do you know any economist that thinks that this trade war is smart, and particularly for travel? Anybody, anybody. Come back. You don't even have to say their name. Actually, please say their name. They're our next guest.
Speaker 2:No, I have not seen folks underscoring this, saying this is the banner year coming, okay good, well, I can keep saying I don't know a single economist.
Speaker 1:Thank you, We've been wondering what, just on the street level, hotels and tourism-related businesses are going to do. How are they going to ride this out? Have you seen any data that talks to how all this is going to affect building a hotel or an airport or any kind of tourism-related business for that matter? I mean, when you start talking about steel, tv monitors, furniture, transportation, it's like I wonder what the slowdown is going to be on the on the on the stuff side, on the product side.
Speaker 2:Yeah, I think on the on the first thing about pivoting, um, it does maybe go back to that individual traveler a little bit. I mean, you've seen some of the destinations try to position themselves in the minds of, say, Canadian visitors as being you know, it might have been Palm Springs with some banners up saying this is Palm Springs, identify with us as the destination rather than the US as the country, in a sense operators. The same thing that if somebody has come to your property before and you remind them of that relationship and the trust they had and how they were treated when they were there, that's really powerful stuff and I think that travelers remember that and can latch on to that and make a decision in this chaos.
Speaker 1:I think it was stunning for us to see the numbers associated with canadian tourism. I think we kind of take canadian tourism for granted and the billions of dollars it puts in this economy. This came up. We kind of foreshadowed this. About a year ago, jeff and I did spring training and went to Blue Jays game. All these snowbirds who came down from Canada, it's like, oh wow, this must just be generating a lot for wherever we're done eating or wherever we were, it's like, oh right, this is happening all over in ways that we don't realize. Quick trips to New York City, to Seattle, to the American Southwest ways for Canadians to kind of get sun, and I had not realized how big of an impact that they actually had.
Speaker 3:I saw numbers from Booking and Expedia that into Seattle Canadians are down 50% roughly. One was like 45, 155, something like that. But it's a massive market on the border right. And specifically to baseball, though, the Toronto Blue Jays are the biggest demand draw for the Seattle Mariners. People from Canada come to see the Blue Jays play Down 32% for Blue Jays weekend. How long will the hotel community, the travel industry, the hospitality industry it goes wider and wider and wider Put up with this? Eventually it's going to come and maybe Aaron this is the question Eventually it's going to come to. These are real jobs on the line. I think we can measure the dollars a bit easier.
Speaker 2:We watch market caps just blowing up, we watch investment drying up, but eventually this has got to hit jobs, right, yeah, I mean, if this is the approach to fixing the trade deficit, it's not going in the right direction.
Speaker 3:In tourism, we're fixing Canada's trade deficit.
Speaker 1:Aaron, is there anywhere in America that's exempt from this? Is Vegas tariff-proof? I know you've done a lot on kind of casino gaming. Do the Vegas and Orlando's, do they get a little bit of insulation from some of this stuff, you think?
Speaker 2:I think some of that repeat traveler, you know, if they know the location, maybe they come back to it. Maybe there's a bit of that for some people in Vegas. I mean, the thing that concerns me is that it's yeah, broad strokes. International travelers are affected, and then domestically, if folks are spending that discretionary money that was previously available for travel, if that's now getting spent to pay tariffs and higher costs for items, I think it's going to affect a lot of places.
Speaker 3:Are there countries that are benefiting from the decline of inbound US travel as staying at home in Canada or staying at home in Europe? Are you seeing any trend that we are actually helping other tourist destinations?
Speaker 2:It's hard to see the data yet, but I think that is the view that it likely helps maybe Western Europe to agree. For example, I think Canada is a little bit dependent on these follow-on trips that somebody's visiting both the US and Canada, and so if those fall back, then it also hurts Canada. Is there a silver lining to this? I don't know if I'll call it a silver lining, but I think it is a little bit along the lines of what you're asking. And you may have seen me use a slide before that looked at durable goods purchases over time and said, as we came out of the pandemic, right, there was durable good purchases soared and spending on recreation and broader services was taking longer to recover.
Speaker 2:And I kept looking at that slide, you know, quarter after quarter, and you're saying, like you know, this has got to shift right. This I mean we have enough patio furniture and these other items, this clutter that we've built up. We got to switch back to those experiences that we all loved, and we did. It just didn't shift the numbers as much as I thought it would. But you know, the things that are getting tariffed right now are goods. So some of that patio furniture you know is sort of insanely cheap, like right. It doesn't seem to catch the externalities of what do we do with that garbage when it's done? You know where? Where are those resources coming from? So I think it's, you know, not a terribly bad thing that some of that stuff costs a bit more, and maybe some people direct their spending to you know some of those yoga classes or go to see a local live band or something. That money's, you know staying local and going directly into people's pocketbooks.
Speaker 1:Do you think there's a possibility that people will stay closer to home and that local tourism economies will get like a little bit of a boost from this Maybe?
Speaker 2:Yeah, and I think, yeah, I think some people will stay close to the home. As you get a little bit uncertain about things, you, you revert to that planned trip or that local, regional trip. Um, and we should keep in mind that, even if, even if we're talking about, say, out of a hundred guests that typically showed up on a on a given weekend night, that you know we're talking about a dip that say 96 or 98 of them still come, and that's the sort of impact that you know we're talking about a dip that say 96 or 98 of them still come, and that's the sort of impact that you know can freak out hoteliers, but most people are still traveling, so it's not all going away.
Speaker 3:You know, I did see, and I apologize I don't have the number handy, but the national restaurant association put out, I think, their Q1 report, something like this, that showed dining in restaurants in America down 5% year to date, something to that effect and a corollary metric the opposite direction of cooking at home. It may have been a survey, but we're seeing or at least I've been reading that there is a shift of less dining out, more self-service at home right now, and food price being supposedly the real driver of that. I saw an article written it was an op-ed by a gentleman named Martin Ferguson. I've never heard of him before.
Speaker 3:I read this just yesterday and it was kind of a silver lining approach to this. He said, on the face of this meaning trade war, it's about steel, semiconductors and solar panels, but really, if you pivot away from how this is going to affect travel, it's going to regionalize. Globalization is not finished, it's not over with, but it will more regionalize economies With that, though, because it will become more difficult to interact in a cross-border manner with service. Who knows local regulations, which are probably going to get more disparate from place to place to place, more difficult, more challenging. That it could put more emphasis on the need for business travel in the long run. I love the optimism. How does that resonate with you?
Speaker 2:I don't know. I'm pretty optimistic too and I love scraping for the positive in things. I don't know that that one's jiving with me.
Speaker 1:Yeah, I wonder where the rubber really hits the road is when we start getting away from physical products, and I'm thinking about the impact on hotels, even for this or any kind of tourism. Once you start getting away from physical imports, like the steel and the semiconductors, and you start moving into tech products, sas products, it's like OK, now we're going to have tariffs. And like what if Europe comes back and says OK, here's 25 percent tariff on Salesforce, on Netflix, on MailChimp, you know, let's go down the list of all the things that are exports from the US, but then also things that I think are part of the travel experience and the sales experience for travel companies in the US. You know they're used every day, every minute. I wonder how far this tariff situation is going to go when it comes to what is a product and what's not.
Speaker 3:You know, matt, I mean Europe has notoriously been going after our tech industry with fines, going after Google, you know, billion dollar fines for antitrust issues, apple for tax issues in the tax haven in Ireland, right, and the EU is trying to suck some cash out of that, right. So I think our tech industry, which is frankly without rival globally, has been a target and I think again, just opinion the tariffs that we're seeing on manufactured goods are probably retaliatory, even to your question. Right, you're attacking our industry, we're going to attack your industry in some way. I'm not at all trying to justify the action, but I think what you're saying, matt, is already kind of playing out right now, just in a little bit of reverse. Not will they come after service industries? It's they already have, and so now we're going after the stuff they make too.
Speaker 3:One thing that really stands out to me I'd still love to hear Aaron's take on here is last week's bloodbath was historic in the marketplace S&P 10% plunge on a two-day cycle a Thursday and a Friday to lose 10%, $11 trillion since the Trump slump began on Inauguration Day $11 trillion. Can you help us put into perspective how the immensity of an $11 trillion stock market equities wipeout. Doge is only going to claw back a few billion 20, 30, 40 billion, max 100 billion. Right, we're still so far from an $11 trillion stock market wipeout. How does this come together? Can you make sense of it for me?
Speaker 2:Yeah. So there's one piece is how does the equity decline impact household wealth and household spending? I think this episode is a little bit different Sort of. The focus is like we've seen these stock market declines and it's almost a message of how business leaders are starting to view the situation. And some of that is even more threatening than the sort of the loss of numbers on a screen or in a retirement account that are a little bit more abstract. I mean, the stock market was doing pretty well, right? So some of this is almost house money, right, yeah? And so in and of itself, economists might say, look, the economy can take that sort of bump in the road, but if it's at the same time, if it's happening because everybody's become a lot less certain about the environment, then that's the piece that gets me is more concerning.
Speaker 3:I see two things to that that bother me, and I don't mean your answer by any means. It's yes, the economy could have very well been overheating At the same time, there was no reason to set fire to it, right? If it was going to lose a couple of points, it didn't need to lose 10 points in two days, right, we didn't have to do that. The other part that I find really difficult is the treasury secretary said I see no reason that we have to price in a recession to all of this talk. And I said well, but it's happening. That's the reason why you have to. It's already underway. Radio silence, except for the dog.
Speaker 1:It's time for the lightning round. A palate cleanser here after all this tariff talk. What's the best under-the-radar restaurant in Philadelphia?
Speaker 2:If I get a choice, that's not a restaurant. I'd say underrated lunch is to grab a sandwich and eat it in Rittenhouse Square sitting on the wall. That's the best sandwich in my mind.
Speaker 3:Would it be a DeNicks sandwich, because then I'll join you my mind Would it be a Danik sandwich Cause?
Speaker 2:then I'll join you. Yeah, that's a little bit of a walk to do that. You'd probably have to break into the sandwich before you got there.
Speaker 1:As I mentioned earlier, you've done uh, you've done a lot of work and a lot of research on casino hotels. What is the casino game you've been luckiest at?
Speaker 2:I've probably lost money. The slowest of craps.
Speaker 1:I hear you, I hear you and I see you. Aaron, is it?
Speaker 3:impossible for people who are statistically minded to enjoy gaming in a casino? I think so. Yeah, okay, wow, you can turn it off.
Speaker 1:So yeah, okay, wow.
Speaker 2:You can turn it off, you can leave the office and go straight to a casino and then actually enjoy doing what you know is bad for you. Yeah, I mean, it is primarily a work endeavor. This is less about personal recreation, but sure, of course. Now I had somebody read my bio lately and they said experience and they named several sectors and then casino gaming, and then they sort of chuckled because they pictured that as being like yeah, I just thrown in personal hobby there too.
Speaker 1:What is your favorite hotel amenity?
Speaker 2:I don't know, what am I happiest about when I see it. Sure Gosh, I don't know, not great at these kinds of questions. No, I get it. I get it. I'll think of three answers here in two minutes, I know.
Speaker 1:Totally. I thought you were just going to be easy, like pool. I was hoping for something really obscure, the pool Like oh right, there's a certain kind of coffee that's downstairs. I'm going to really see that I get it.
Speaker 3:I really love it when they give me two keys and I'm only one person. I just, I just love that, aaron.
Speaker 1:Ryan, thank you for being a guest. Thank you for laying some truth down in an era that needs truth.
Speaker 2:Great. Thank you, John.