When it comes to producing international travelers, the U.S. is growing far more slowly than emerging markets like China, which will likely surpass us shortly as a globe-trotting nation.
That's not necessarily bad news for the U.S. travel industry, however.
Travel companies that have traditionally focused on the U.S. outbound market are beginning to embrace opportunities that other source markets present, a trend that could compensate, long-term, for the wanderlust shortfall here at home.
"We've sort of been in a stall pattern," an official with the U.S. Department of Commerce said of Americans traveling abroad. "If you look at our population compared to other populations in the world, we don't travel as much as other countries."
According to the United Nations World Tourism Organization (UNWTO), the U.S. ranks second, behind Germany, in international tourism expenditure. Americans spent $79 billion traveling outside the U.S. last year compared with the $84 billion spent by Germans traveling beyond their borders. Yet the total U.S. population is almost quadruple that of Germany.
While the U.S. is by no means a source market that can be overlooked, the so-called BRIC countries -- Brazil, Russia, India and China -- are showing the most growth in terms of outbound tourism and are poised to become significant source markets in the coming years. In fact, based on current year-over-year growth figures, China could surpass the U.S. as early as this year in spending by outbound travelers.
China ranked third in international tourism expenditure in 2011, just behind the U.S., having spent $73 billion, according to the UNWTO. That represented 32% growth over the previous year, or an additional $18 billion.
In 2011, Russia spent $33 billion on international tourism, a 22% jump over its 2010 expenditure. Brazil jumped 30%, to $21 billion. India was one of the fastest-growing source markets, with a 33% increase, to $14 billion in international tourism spend. (Click on the image, left, for a larger view of a chart depicting tourism expenditures by source market.)
The four BRIC countries combined spent an additional $32 billion on international travel last year. Together, their increases accounted for an additional $32 billion, a value equivalent to the eighth-largest source market by expenditure, the UNWTO reported.
The fact that foreign markets are where the growth is happening is not lost on U.S.-based travel companies. After decades of catering to a source market here that has always ranked high, if not highest, in outbound tourism, they are starting to look at ways of reconfiguring business models to capture these emerging source markets.
One way of doing that is for U.S. companies -- especially U.S. companies with domestic product -- to invest in the inbound travel market, which is experiencing a renaissance following a decade-long, post-9/11 slump.
The new travel marketplace
The growing demand for travel to and within the U.S. has tour operators that traditionally focused more on the outbound market looking inward for opportunities.
Tour operators such as Trafalgar and the Globus Family of Brands, which have built their decades-old legacies on selling tours to far-off lands, have been beefing up their domestic offerings in recent years to meet the demand for travel here at home, either drawing international travelers or selling product to Americans seeking to rediscover their homeland.
Last month, for example, Trafalgar released its new U.S. and Canada program with 10 additional itineraries, bringing the program to 51 itineraries, or 20% additional departures. Trafalgar CEO Gavin Tollman estimates that the company's North America business will grow about 30% in the coming year.
Today, slightly more than 50% of Trafalgar's U.S. bookings are domestic travel, but "it used to be exponentially higher," Tollman said. And now, he said, inbound markets "are growing faster" once again.
Tollman said Trafalgar's parent company, the Travel Corp., has a receptive ground operation in the U.S. that is very focused on emerging markets, and "Asia has been growing exponentially over the last few years."
John Galvin, CFO of Collette Vacations, said that Collette, too, is in the early phases of looking at how the company could eventually serve markets like China or India.
Terry Dale, president of the U.S. Tour Operators Association, said, "I definitely believe that it is a long-term business opportunity for a lot of our members."
As an example, Dale cited the fact that the Travel Corp. recently opened an office in Brazil.
"We will want to start riding that wave," Dale said. "You will start to see that change. I think you will see more and more operators place more emphasis on domestic itineraries."
Dale was describing a fundamental shift in the business focus of U.S.-based travel companies, which are moving away from the models they have used for most of the last century. The reason is simple: The global reality is that focusing solely on U.S. travelers might well provide only limited growth potential in years to come.
The lost decade
Since the terrorist attacks of Sept. 11, 2001, it has been a long and bumpy road for the inbound tourism market. But now that market is in a position to capitalize on the economic opportunities that growing international source markets present.
"We have returned to pre-9/11 numbers, and that's something we should all feel positive about," said Geoff Freeman, COO of the U.S. Travel Association. "But not for a second should we rest. Our competitors in Western Europe do not require [visas from Brazilians], and they're getting more than 50% of the Brazilian market share, while we're getting 20% of it. There's a great desire around the world to come here, but there are still great barriers."
After 9/11, he said, "we allowed that perception of 'keep out' to take precedence over the welcome mat."
Freeman said the negative perceptions that potential international tourists had about the experience of traveling to America "was the most significant factor" in what U.S. Travel refers to as the "lost decade" following 9/11. Finally, he said, the post-9/11 drop-off in international travelers to the U.S. has been rebounding in recent years. (Click on the image, left, for a larger view of a chart depicting the number of tourists visiting U.S. destinations.)
Freeman added, "The foreign press, our competitors around the world, did exactly what you would expect them to do, and they capitalized on that."
For example, he cited a 2008 article in the Sunday Times of London headlined "Travel to America? No thanks."
"It took some time for the travel industry to understand the new world in which it was operating," Freeman said.
For several years following 2001, Spain surpassed the U.S. as the No. 2 destination for international tourism arrivals, second to longtime leader France. In 2009, the U.S. recaptured the No. 2 spot, even though inbound travel dipped that year, because the global economic crisis produced a dip that was felt across the board.
Since 2009, the U.S. inbound travel market has been steadily recovering. Last year, the U.S. welcomed 62.3 million international travelers, a 4.2% increase over 2010, according to the Commerce Department. The 59.7 million international travelers who came to the U.S. in 2010 represented an 8.7% increase over 2009.
The Commerce Department forecasts year-over-year growth in international visitation in the 3% to 4% range through 2016, with China being the No. 1 growth market, and Brazil No. 2.
Not surprisingly, the travel industry here has been lobbying hard to continue to improve America's image abroad and to strengthen inbound tourism recovery. For the first time, that effort got some federal muscle behind it when Congress passed the Travel Promotion Act and President Obama signed it into law in 2010.
"You're seeing the greatest commitment that a president has ever made to the travel industry," Freeman said. "This administration has embraced travel as a great potential economic generator."
The Travel Promotion Act created the Corporation for Travel Promotion, a public-private entity that operates the newly launched Brand USA campaign, which many in the industry say can only help the positive inbound travel trend that is already under way.
"Travel and tourism is a vital part of America's exports success story," said Acting Commerce Secretary Rebecca Blank. "More and more visitors are attracted to our unique entertainment, outdoor recreation, cultural and historic destinations. We've seen dramatic increases in spending by international tourists in our nation since 2010, with travel and tourism accounting for 25% of services exports and 7% of all U.S. exports."
She said that efforts to make America the top tourist destination in the world offer a tremendous opportunity to create jobs and strengthen the U.S. economy. That is why, Blank said, the Obama administration put forth a National Travel and Tourism Strategy with the goal of attracting 100 million international visitors annually by the end of 2021, an increase of more than 50% over estimates for 2012. (Click on the image, left, for a larger view of a chart depicting income from tourism by destination.)
"At a time when too many Americans are still looking for work," Blank said, "we can spur economic growth by making it easier for more international travelers to visit our country, which is exactly what the national strategy will help us accomplish. And our message is simple: Whether you live in the United States or come from abroad, choose America as your next vacation destination."
Still, just because the federal government wants the U.S. to be a hot destination right now will not make it so. That's not how trends in travel work.
That the U.S. is enjoying an uptick can be attributed to several reasons.
"I think there are a number of positive trends," Tollman said. "First and foremost, it's not a deterrent that the dollar decreased [in value relative to other currencies]. So the value proposition is exponentially higher. I also think that what has occurred is each of the various destinations have become more interesting within the country itself."
Tollman said the biggest draws in the U.S. are its major cities like New York and San Francisco and its national parks.
Lisa Simon, president of the National Tour Association, said, "On top of international inbound travel, we continue to see that the U.S. is a leading destination for American travelers. And the appeal is the same: There is an almost immeasurable diversity of product across this land, literally something for everybody."
That's the message Brand USA is trying to communicate in an international travel marketplace where competition for emerging market share is fierce. The U.S. is far from the only country trying to court the Chinese, Brazilians, Koreans, Japanese, Russians and others.
Chris Perkins, chief marketing officer for Brand USA, said, "The competitive pressure is high, and it's compounded by the fact that these other countries have been doing this for years. The U.S. has a lot of awareness but fairly low clarity about what we have to offer. ... The core of our brand strategy speaks to the very unique freedoms in the U.S., as combined with both the diversity of experiences and people. It gives us a distinction that can't be really had anywhere else."
Perkins and others say that if the U.S. travel industry plays its cards right, it could ultimately have home-court advantage in a global travel marketplace that is increasingly embracing the U.S. brand.
"I would suggest people never wanted to leave," Freeman said of the drop-off in U.S. inbound travel.
"People didn't want to leave; America unfortunately sent a message over the years of go away."
But now the message is very clearly to come back, and they are.
Follow Michelle Baran on Twitter @mbtravelweekly.