The Ripple Effects of Tariffs and Tourism: Could the U.S. be Rolling Up the Welcome Mat for International Travel?
When we think about tariffs and tourism, we often envision their impact on goods and products rather than services like travel. However, the tourism sector is also significantly affected by tariffs, especially when it comes to pricing and the broader perception of a country as a travel destination. The role of destination marketing organizations (DMOs) becomes crucial in navigating these challenges, as they are tasked with attracting tourists and maintaining the appeal of a country despite external economic pressures.
The United States, which ranked as the third most-visited country in 2024, welcomed 72.3 million international visitors and topped the global charts for tourism revenue, earning approximately $194 billion, according to the World Travel & Tourism Council. However, with the imposition of tariffs, the travel and tourism industry is bracing for a significant shift. Forecasts now predict a 5% decline in international visitor spending in the U.S. this year, which equates to a loss of $9 billion in tourism-related revenue. This includes a $6.4 billion drop in spending at destinations and $2.5 billion lost in transportation.
Here’s How Trump’s Tariffs Could Impact Travel and Tourism
1. A Shift in Travel Sentiment
Tariffs and the resulting economic strain can influence the global perception of the United States. Travel sentiment may turn negative, especially in key markets like Canada and Mexico, where travel demand is already sensitive to price changes and geopolitical tensions. According to research from Tourism Economics, we’re looking at a 9.4% decline in international arrivals for 2025, with Canada seeing the largest drop—over 20%. DMOs play a key role here, as they must proactively combat negative perceptions and keep international travelers excited about U.S. destinations, even amid economic uncertainty.
2. Economic Strain: Travel on the Brink
The economic strain caused by tariffs could be felt not just in the U.S., but in neighboring countries like Canada and Mexico, which are both facing recessions. This would likely reduce both leisure and business travel. If the U.S. implements a 25% tariff on goods traded with these nations, travel costs will rise as airfare and hotel prices become more expensive. With less disposable income and an overall tightening of budgets, people may cut back on international trips, choosing cheaper alternatives. For destination marketing organizations (DMOs), this means a need to adapt their messaging and offer more enticing packages that reflect the value of U.S. destinations despite higher costs.
3. Currency Fluctuations
Another significant consequence of tariffs is the fluctuation in currency values. A rising U.S. dollar, which may be a byproduct of tariff-related economic changes, could make U.S. travel prohibitively expensive for foreign tourists. This would increase costs for international visitors, making it less appealing to visit the U.S. and prompting them to consider more affordable destinations. DMOs in the U.S. will need to be particularly proactive, ensuring that their marketing efforts highlight the value of visiting the U.S., despite currency disparities and increased costs.
What We Can Expect, Amidst Economic Changes from Tariffs and Tourism
1. The Rise of Domestic Travel
With international travel becoming more expensive, many travelers might opt to explore domestic destinations. For residents within the U.S., travel within the country will likely become more attractive and affordable. This could result in an uptick in domestic tourism, with people exploring their own backyards rather than venturing abroad. For DMOs, this offers an opportunity to refocus their efforts on local markets, emphasizing the appeal of undiscovered gems within their own regions. Supporting local tourism could also be a sustainable solution, especially when cross-border travel becomes cost-prohibitive.
2. Crafting a Compelling Local Identity
For regions looking to carve out an economic niche, tourism branding is vital. A well-crafted tourism brand, grounded in authenticity and local values, can position a destination as a must-visit location. Communities that focus on their unique offerings—whether natural beauty, rich history, or vibrant cultural scenes—are better equipped to compete in a crowded tourism market.
By capitalizing on what makes them special, regions can create a compelling narrative that resonates with tourists. DMOs can play a key role in building and nurturing these community brands. In the face of economic challenges, the right brand positioning can keep a region top-of-mind for travelers, ensuring that visitors continue to choose these destinations, even when their budgets are tighter.
Conclusion
In conclusion, softer spending in airfare and lodging could present an opportunity for more localized pushes for destination marketing organizations. DMOs can market experiences that are just as delightful, but don’t incur the type of spend consumers maybe planned for before the tariffs.
Tariffs and the resulting economic shifts could have a profound impact on U.S. tourism, and destination marketing organizations (DMOs) will be at the forefront of adapting strategies to maintain the country’s appeal to international travelers. While there are certainly challenges in this time, Red Sage can offer strategic consulting for adapting marketing strategies to the current economic climate.
