The Tourism Industry and Economic Issues Affecting It
CRS Report for Congress
Received through t he CRS W e b
The Tourism Industry and
Economic Issues Affecting It
M. Angeles Villarreal
Analys t in Industrial Organization and Business
Resources, Sc ience, and Industry Division
Congressional Research Service ˜ The Library of Congress
The Tourism Industry and Economic Issues Affecting It
The m easure o f a country’s international t ourism receipts, also referred t o as
travel services ex ports, i s t he total amount of spending by visitors t o t h a t c o untry.
The United S tates i s, by far, the wo r l d ’s leader in tourism receipts, accounting for
approx imately 16% of the world’s total. The m easure o f a country’s international
tourism ex p enditures, also referred t o as t ravel s ervice imports, i s t he amount of
spending by its visitors in foreign countries. The United S tates also l eads t he world
i n t ouri s m e x p endi t u res. Travel servi ces are a s i gni fi cant ex port i n t he U.S .
economy, accounting for 32% of all p rivate services ex ports.
The S eptember 11 attacks, the downturn i n t he U.S. economy, the U.S. war with
Iraq, and the outbreak of the S ARS virus have affect ed sales and profitability of a
number o f i ndustries, but travel and t ouris m are among the m ost affected industries.
The airline i ndustry h as been struggling s ince the events o f S eptember 11, with nine
of t h e t en l argest U.S . carri ers ex p eri enci n g h eavy l o s s e s o v e r t he past t wo years.
The hotel industry i s reporting its lowest occ u p a n cy rate i n m ore t han a decade.
Travel agencies have been facing difficulties s ince the mid-1990s, p rimarily due to
t h e i ncreas e i n competition from online t ravel s ites, but al so from t he fact o r s
After S eptember 11, 2001, the number o f gl obal t ravelers decreased for t he first
time since t he 1980s. As a result, U.S. tourism receipts d ecreased by nearly 12% in
2001, and U.S. ex p enditures abroad d ecr e a s e d by 7%. Employm ent l evels i n t he
Uni t ed S t at es h ave f a l l e n b y a hi gh er percent age i n t ravel and t ouri s m rel at ed
industries t han i n m ost o ther major i ndus tries. Since t he end o f 2000, employment
in travel-related i ndustries d eclined by nearly 390,000 jobs, representing over 25%
of the nation’s non-farm job l osses i n t hat time period.
Some anal ys t s b e l i e v e that travel-related i ndustries will recover from t hese
events, as t hey h ave from p ast events, such as the 1991 Gulf W ar. Others believe that
the combination o f factors h ave b een very da magi ng to the i ndustry for the l ong term.
They believe that recovery could b e consid erably slower than it has i n t he past, and
that recovery may b e m ore challenging f o r t r a v e l -related i ndustries t han for the
economy as a whole. The t ravel i ndustry, for ex ample, h as v o i c e d c o n cerns that
impending regulations on visa requirements for visitors entering the United S tates are
being implemented too quickly and could di s c ourage i nternational t ravel t o t he
In the 108th Congress, two m eas ures have been passed a n d several bills
introduced to provide assistance to the airline i ndustry and to help promote t ravel and
tourism. The FY2003 omnibus appropriations act (P.L. 108-7, H.J . Res. 2) includes
a one-time appropriation of $50 million for an international m arketing cam paign t o
encourage i ndividuals to travel to the United S tates. The Emergency Wartime
Supplemental Appropriations Act, 2003 (P .L. 108-011) includes a provision for $2.9
billion i n assistance to t h e a i rline i ndustry. H.R. 2002 would establish a pilot
program for the p romotion o f t ravel and tourism i n t he U n i t ed States. This report
will not be updated.
Background: Im portance o f t he U.S. Travel and Tourism Industry ............1
U.S.InternationalTradeinTravel Services ..............................3
Employment in Travel and Tourism Industries ...........................5
Declining Industry S ales and P rofits ...............................7
SARS Outbreak ...............................................9
EconomicPerformanceofMajorTourismDestinations in theU.S. ..........10
U.S.Travel andTourismOutlook ....................................14
Legi slation and Legi slative Issuesth
in the 108 Congress ..........................................15
Table 1 . U.S. and W o rld International Arrivals: 1992 - 2002 ...............3
Table 2 . U.S. Ex ports in Private S ervices and
Travel S ervi ces (Touri s m R ecei pt s) ...............................4
Table3. U.S.Tradein Travel Services andPassengerFares ................4
Table 4 . Employm ent i n Industries R elated
toTravel andTourism ..........................................6
Table5. TravelAgencySales ofAirTransportation ......................9
The Tourism Industry and
Economic Issues Affecting It
Background: Importance of the U.S. Travel and
The Uni t ed S t at es i s b y far t h e worl d l eader i n i n t ernat i onal t ouri s m recei pt s, or
the amount of s p e nding by international t ravelers in a host country. The United
States is also the world leader in international t ourism ex penditures, or the amount
of spending by U.S. travelers abroad.1 The United S tates accounted for
approx imately 16%, o r $88 billion, of worl d i nternational t ourism receipts i n 2002.
In international arrivals, o r t he number of v isitors from a foreign country, t he United
States ranks third i n t he world, after France and Spai n, with a world market share of
The t ourism i ndustry h as been facing difficulties i n r ecen t years b ecause of a
combination of f act ors. The S eptember 11 attacks, the downturn i n t he U.S.
economy, the U.S. war with Iraq, and the outbreak of the S ARS v irus have affected
sales and profitability of a number o f i ndustries, but travel and t ourism relat ed
industries are among those m o s t s e v erel y affected. After September 11, 2001, the
number o f i nternational t ravelers t h r oughout the world decreased for t he first time
since t he 1980s. C onsequently, U.S . i nternatio n a l t o u rism receipts d ecreased by
nearly 12% in 2001, and U.S. ex p enditures abroad d ecreased by 7%. Employm ent
levels in the United S tates have fallen b y h igher amounts i n t ravel and tourism related
industrie s t h an i n other major i ndustries, with a l oss of nearly 400,000 jobs. Data
from t he first quarter of 2003 continue to show declining employm ent l evels i n
travel-related i ndustries.
In the 108th Co n gres s , t wo meas ures have been passed and several bills have
been introduced to provide assistance to tourism related industries. The FY2003
omnibus appropriations act (P.L. 108-7, H.J.Res. 2) includes a one-time
appropriation of $50 million for an international m arketing cam paign t o encourage
individuals to trav el to the United S tates. The Emergency Wartime Supplemental
Appropriations Act, 2003 (P.L. 108-011) includes a provisi o n for $2.9 billion i n
assistance to the airline i ndustry. H.R. 2002 would establish a pilot program for t he
promotion o f t ravel and tourism i n t he United S tates.
1 International t ourism r eceipts and expenditures are measured by the amount of spending
by vi sitors in a f oreign country. T he measure of a country’s international t ourism r eceipts,
also referred t o as t ravel s ervi ces exports, i s t he total amount of spending by vi sitors to that
country. T he measure of a country’s international t ourism expenditures, also referred t o as
travel service i mports, i s t he amount of spending by its vi sitors to other countries.
U.S. and W orld International Arriva ls
The W orld Tourism Organization/ United Nations Rec o mmendations on2
Tourism S tatistics defines t o urism as the activities of persons traveling t o and
st ayi n g i n p l aces out si de t h ei r u sual pl ace of resi d e n c e f o r n o t m o re t h an one
consecut i v e year for l ei sure, busi n ess, a n d o t h e r purposes. T hi s s ect i o n d escri b es
recent t rends i n t h e num ber o f i nt ernat i ona l a r r i v a l s t o t h e Uni t ed S t at es and ot her3
The United S tates i s among the t op three t ourism des tinations in the world. In
and t he United S tates with 45.5 million visitors. International arrivals to the United
States totaled n early 42 million i n 2002. The h ighest number of arrivals to the United
Stat es cam e from C anada (13 million), followed by M ex ico (9.8 million), t he United
Kingdom (3.8 million), and J apan (3.6 million).
In 2001, international arrivals to the United S tates d ecreased by 11% from t he
previous year, while international arri vals worldwide d ecreased by only 0.6% (see
Table 1). This marked the l argest decline for a s ingl e year in the history of tracking5
arrivals to the U.S. In 2002, international arrivals to the United S tates continued t o
decline, falling by 7% from t h e p r ev i o u s year. Visitation l evel s from C anada, the
United Kingdom, J apan, Germany and Fra n c e a l l d ecreased in 2002. Mex i co and
South Korea were the only t wo countries to re gi ster growth in arrivals to the U.S. i n
2002, and t hese increments were onl y m a r gi nal. Total v isitation from M ex ico
increased 0.5% in 2002, while that from S outh Korea increased 3.4%. 6
2 The W orld Tourism Organization i s an i nternational organization associ at ed with
the United Nations, and serves as a global forum for t ourism poli c y i s s u es. Its
membership includes 139 countries, s even territories an d s ome 350 Affiliate
Members. Se e W or l d T our i s m Or ga n i za t i o n we b s i t e , [ ht t p : / / www.wor l d-t our i s m.or g] .
3 The unit o f m easure generally used to quantify t he volume o f i nternational t ourism
for s tatistical purposes is the number o f i nterna t i o n a l t o u rist arrivals. International
arrival data r efer to t h e n u mber of arrivals and not to the number of persons. One person
who makes several t rips to a certain country during a time period will be counted as a new
arrival each time, and a person who t ravels through s everal countries on one trip is counted
as a new arrival each time. International visitors include overnight visitors, and same-day
4 World T ourism Organization, Tourism Hi g h lights: 2002. Se e [ ht t p : / / www.wor l d-
5 U.S. Departme nt of Comme rce, International T rade Admi nistration, Office of T r avel and
T o urism Industries ( OT T I), News Release, Highlights of 2001 Data Release, March 28,
6 OT T I, “2002 Year End International Arrivals to the United States,” April 17, 2003.
Table 1. U .S. and World International Arrivals: 1992 - 2002
Arrivals 1992 1994 1996 1998 2000 2001 2002 a
U.S. 47 45 46 46 51 45 42
Rest of world 454 505 551 583 645 648 673
Total World 501 550 597 629 696 693 715
U.S. Share 9.4% 8.2% 7.7% 7.3% 7.3% 6.5% 5.9%
Sources : U .S. Departme nt of Comme rce, Interna tional T rade Admi nistration, Office of
T r avel & T ourism Industries. World T ourism Organization.a
U.S. International Trade in Travel Services
U.S. ex ports in travel services is measured by the amount of spending by foreign
t ravel er s i n t h e U n i t ed S t at es, al so referred t o as U .S . t ravel recei pt s. The U ni t ed
S t at es i s by far t he worl d l eader i n i n t ernat i onal t ouri s m recei pt s (or t ravel servi ces
e x p o rts), followed b y S pain and France. In 2001, the United S tates accounted for
app r o x i m a t e l y 16% of worl d t ouri s m recei pt s , well ahead of Spain (7.1% of total)
and France (6.4% of total). U.S. imports in travel services is measured by the amount
of spending by U.S. travelers abroad, which isalsoreferredtoasU.S.tourism
ex penditures. The United S tates i s also t he leader in imports in travel serv ices,
followed b y Germany and t he United Kingdom. In 2001, U.S. travel services imports
total e d $58.9 billion, while Germany’s t otaled $46.2 billion, and t he United
Kingdom’s totaled $36.5 billion. 7
Travel servi ces ex port s (t ouri s m recei pt s i n t he Uni t ed S t at es) are a s i gni fi cant
e x p o rt i n t he U.S . economy, accounting for 32% of all p rivate services exports in
2002. T h e s hare of U.S. travel services ex ports, as a percentage of all p rivate
s ervices ex ports, however, h as fallen notably since 2000. Although t his t r e n d h a d
been taking place since t he mid-1990s, t he recent downturn i n t he tourism i ndustry
cause d t h e s h are o f U.S . ex port s t o fal l even furt her (see T abl e 2). T ot al servi ces
ex ports decreased 4.1% in 2001, and t hen i ncreased 3.8% in 2002. In comparison,
travel services ex ports decreased 11.6% in 2001, and continued t o d ecrease b y 3.6%
As shown i n Table 3, the United S tates has had a surplus i n i nternational t rade
in travel services since 1990. The s urplus rose from $10.4 billion i n 1990 to a p eak
of $26.3 billion i n 1996. The U.S. s urplus in travel services had b een declining s ince
but i n t h e l ast p art o f t he decade, i m port s (or U.S . ex p endi t u res abroad) i n creased at
a h igher rate t han ex ports (U.S . t ravel receipts). In 2001 and 2002, both U.S . imports
and ex port s i n t ravel servi ces fel l , but U.S . ex port s fel l by a h i g h e r p ercent age,
7 World T ourism Organization, J une 2002.
causing the s urplus to fall further. The s urpl us i n t ravel servi ces decreased from $26
billion i n 1996 to $7.5 billion i n 2002, a 72% decrease. In comparison, the s urplus
in al l private services trade decreas ed by 32% during t he same time period.
Table 2. U .S. Exports in Private Services and
Travel Services (Tourism R eceipts)
Export Grow th Rates
Al l 7.4% 2.1% 5.2% 8.2% -4.1% 3.8%
T r avel b 4.5% -3.1% 3.4% 9.0% -11.6% -3.6%
Tr avel Services Exports as % Total Services Exports
Source: U.S. Departme nt of C o mme rce, Bureau of Economic Analys is, Online U.S.
International T ransactions Accounts Data, 2003.a
Includes T rave l a nd Passenger fares
Table 3. U .S. T rade in Travel Services and Passenger F ares
Expor t s a Imports a Trade B alance
Year $Billions %Change $Billions %Change $Billions %Change
Source: U.S. Departme nt of Comme rce, Bureau of Economic Analys is, Online U . S .
International T ransactions Accounts Data, 2003.a
Includes T rave l a nd Passenger fares.
Travel and t ourism receipts h ave fallen i n o ther countries as well. In the United
Kingd o m , for ex ample, tourism receipts fell b y $3.2 billion, or 16.7% in 2001. A
s m a l l number o f countries, however, s uch as S pain and C hina, h ad high er tourism
receipts i n 2001 than in 2000. China and other Asian destinations, h o w e v er, h ave
been heavily affected by the 2003 sever e acute respiratory s yndrome (SARS)
epidemic, as wel l as t he economic slowdown i n t he United S tates (see s ection bel ow
The t op five markets i n 2001 which generated U.S. ex ports in travel and
passenger fares, or ex penditures i n t he United S tates by i nternati onal t ravelers, were
the following: United Kingdom ($11.9 billion, down 16% from 2000), J apan ($11.7
billion, down 16%), Canada ($8.2 billion, down 7 %), Mex i co ($6.3 billion, up 1%),
and Germany ($3.7 billion, down 27%). 8 Mex i co was t he only one of these countries
that increased spending on travel and p a ssenger fares t o t he United S tates i n 2001. 9
Employment in Travel and Tourism I ndustries
Trave l a n d t ourism related industries h ave b een particularly affected by the
securi t y concerns rel at ed t o t he S ept em ber 1 1 at t acks, t h e war wi t h Iraq, and al so by
the s lowdown i n t he U.S. economy. A s ignificant number o f j obs that have been lost
since 2000 are i n t ravel-related i ndustries. J obs directly related t o t ravel and tourism
include those i n t he hotel and l odging i ndustry, amusement and recreation s ervices,
air t ransportation, and t ravel agencies. Other t ravel-related s ectors i nclude passenger
rai l t ransport at i on, crui se l i n es, food servi ce, and rent al cars. Accordi n g t o t he U.S .
Travel Industry Association o f America (T IA), the U.S. t ravel and tourism i ndustry
em ploys 7.9 million people, or 6% of total U.S. employm ent, in direct travel -
generat ed j obs. Di rect t ravel -generat ed j obs i n cl ude t ransport at i on, l odgi n g, m eal s,
ent ert ai nm ent , recreat i on, and i nci d ent al i t e m s . In d i rect and i nduced t ravel -
generated j obs, TIA estimates t hat t he travel and t ourism i ndustry employs about 18
The d ata p resented in this section focus on four industries t hat are d i r ectly
related t o t ravel and tourism, and for which employm ent figures are readily available.
These i nclude hotels and lodging, am usem ent and r e c r e at i o n s ervi ces, ai r
transportation, and t ravel agencies. The em p l o ym ent num bers present ed i n T abl e 4
are l ower than the TIA estimates b ecause they do not include employment in the food
service i ndustry, entertainment, or retail stores. As o f M arch 2003, employment in
hot el s and l odgi n g, am usem ent and recreat i on, air t ransportation, and t ravel agencies
totaled 4.7 million p eople, or about 3.6% of total U.S. employm ent. The hotel and
lodging s ect or had t he highes t employm ent l evel , with 1.8 million j obs, followed by
am usem ent & recreation s ervices , with 1.6 million j obs; air transportation, with 1.1
million j obs; and travel agencies, with 133 thousand j obs (see Table 4 ).
8 IT A, Office of T r avel & T ourism Industries, Highlights of 2001 Data Release, March 28,
9 Data for 2002 are not available by i ndivi dual c ountry.
10 T r avel Industry Association of America (T IA), Tourism Talking Points, May 2003.
Table 4. Employment in Industries R elated
to Travel and Tourisma
Hotel a nd Lodging 1,848 1,900 1,870 1,798 1,811 1,779
12-month c hange 59 52 -30 -72 -100 -32
Amus e me n t & 1,651 1,722 1,722 1,642 1,635 1,627
12-month c hange 57 71 0 -80 -117 -8
Air T ransportation 1,227 1,280 1,266 1,161 1,172 1,144
12-month c hange 46 53 -14 -105 -123 –28
T r avel Agencies 173 170 161 139 145 133
12-month c hange 0 -3 -9 -22 -25 -11
TotalTraveland 4,899 5,072 5,019 4,740 4,763 4,683
12-month c hange 162 173 -53 - 279 -79 - 203
Total Nonf arm 128,916 131,720 131,922 130,791 130,701 130,396
12-month c hange 3,051 2,804 202 -1,131 -1,760 -305
Source: U.S. Departme nt of Labor, Bureau of Labor Statistics.a
Al l quarterly data are seasonally adj u s t ed, with the exception of T ravel Agencies.
Seasonally adj usted data for T ravel Agencies were not available.b
Net c hange i ndicates net c hange from f irst quarter 2001.c
Total U.S. employm ent h as fallen s in ce 2000, but travel-related s ectors h ave
ex perienced some of the h ighest job l osses i n t he country. Data from t he Bu reau of
Labor Statistics (BLS) sho w t h at between 2000 and t he first quarter of 2003,
employment in travel and t ourism relat ed industries d eclined by 389,000 jobs, o r
about 8%. The high est l o s s e s were i n t he air t ransportation s ector, which
ex perienced a d ecline o f 136,000 jobs, o r 11%. In t he same time period, the hotel
and lodging sector lost 121,000 jobs (6%), and the amusement and recreation
services sector has l ost 95,000 jobs (6%). Travel agencies ex perienced the h ighest11
percentage decrease, 22%, o r 37,000 jobs. During the s am e time period, total U.S.
non-farm em ployment declined by 1.3 million j obs, or abo u t 1 % o f total
em pl oym ent . E m p l o ym ent i n t h e t ravel and t ouri s m s ect ors l i s t ed i n T abl e 4
represented n early 30% of total non-farm job l osses.
11 T echnology c hanges (i.e., use of i nternet r es ervations) may be a maj or contributing f actor
in declining number of t ravel agencies and related employment.
BLS d ata for A p r i l o f 2003 continued t o s how workforce reductions in travel
and t ourism related sectors. In April 2003, employment in amusement and recreation
services declined by 41,000 jobs, while empl oyment in hotel and o ther lodging p laces
decreased by 20,000. 12 Employment in air t ransportation also continued t o decline,
with a l oss of 18,000 jobs. If all tourism-related i ndustries are take n i nto account,
incl uding jobs in food service and retail, total j o b losses would be even higher.
Morgan Stanley estimated t hat t o u ris m-related i ndustries h ave s uffered a
disproportionate number of j ob l o s s e s i n 2 003, accounting for nearly half the j ob
losses i n t he nation over t he first few months of 2003, even though t hey account for
only one in ten p rivate-sector jobs.13
In China and other Asian countries, t he SARS virus h as caused even further job
losses i n t he travel industry. The Finan cial Times recently reported t hat n early one
million t ravel-related j obs (direct an d i n d irect) were l ost i n early 2003 in China’s
Guangdong Province alone due to SARS and the war with Iraq. The article is based
on an International Labor Organization (ILO) report t hat estimates t hat t he SARS
outbreak could cause a t otal job l oss of five million, or 6% of total t ravel-related j obs,
in the worldwide travel a n d t o u rism i ndustry. 14 The ILO estimates t hat countries
directly affect ed by the virus will lose more than 30% of travel -related j obs. Other
countries in the A s i a - P a cific region c ould l ose 15% of travel-related j obs, and
countries in the rest o f t he world could l ose 5 %. Recovery from t he SARS-related
downturn i s underway, but the n et long-term effects are still unknown.
Uncertainties in Travel and Tourism S ectors
The effect of recent political and economic uncertainties o n U.S. t rade in travel
services and on t ravel-rel a t ed employm ent highlight the vulnerability of the t ravel
and t ourism i ndustry t o ex t e r n a l f a c t o r s . These factors h ave t aken a t oll o n m any
busines s activities, but travel and t ourism have been particularly affect ed, i ndicating
that , i n times of uncertainty, s pending on travel and t ourism i s one of the areas most
affected. S ome analysts b elieve that trav el-related i ndustries will recover from t hese
events, as t hey h ave p ast events, such as the 1991 Gulf W ar. Others believe that the
combination o f factors h ave b een very damagi ng to the i ndustry. They believe that
recovery could b e considerably longer for t ravel-related i ndustries t han i t h as in the
past, and that recovery may b e m ore challenging for travel-related i ndustries t han for
the economy as a whole.
Decl i ni ng I ndustr y S al es and P r ofi ts
The airline i ndustry h as been struggling s ince the events o f S eptember 11. Nine
of t h e t en l argest m aj or U.S . ai rl i n e carri ers h ave h ad heavy l osses over t he past t wo
years, with one of those carriers now operating i n bankruptcy. The profitability o f
12 United States Bureau of Labor St atistics, Ne ws , “Employment Situation Summary,” April
13 The Economist, “Another Bush, Another J obless Recove ry,” May 10, 2003, p. 25.
14 Financial Times, “T ourist T rade Fears 5 Million J ob Losses,” M ay 15, 2003.
ai rl i n e com pani es has b een affect ed by t h e combination o f factors, including lower
num bers of passengers and hi gh er fuel cost s. M a n y a i r carri ers h ave h ad t o cut
fl i ght s and redu c e pri ces, and, consequent l y, reduce t hei r earni ngs forecast s . In
March 2003, Standard & P oor’s estimated t hat, even without the potential effects o f
the war with Iraq, t he top t en carriers i n t he United S tates m ay lose about $6.5 billion
in 2003. Domestic ai r l i n e capacity declined 4.4% in 2002, and 3.0% in 2001.15
There are indications that, b ecause of the challenges the airline i ndustry i s facing, t he
airline i ndustry i s potentially ex perienci ng a p eriod o f m ajor structural change.
The hotel industry i s also fa c i ng challenges because of the d ecline i n t ravel.
Business travel has fallen more than 10% since 2000. 16 In 2002, preliminary d ata
indicate t hat t he hotel occupancy rate w as ex pect ed t o d e c l i n e for t h e s econd
consecutive year to 59.5%, t he lowest level s een in more than a d ecade. Another k ey
industry m easure, revenue per availabl e room, h as a l s o d e clined. After the
September 1 1 attacks, the revenue per available r o o m fell by 21.9% in September,
16% in October, and 14.7% in November 2001. Fo r t he entire year of 2001, the ratio
declined by 6.9%. In 2002, the ratio declined for t he second consecutive year, with
The A m eri can S o ci et y o f T ravel A gent s (AS TA) recent l y st at ed t h at t h e d rop
in travel due to security concerns, t he weak economy, and t he SARS outbreak have
been overwhelming for travel agents in th e United S tat e s. Although t he dollar
volume of air sales by travel agencies still accounts for a m ajority of sales, it is
declining considerably. Travel agency s al es of ai r t ravel declined from $76 billion
in 2000 to $57 billion i n 2002, a 25% drop (see Table 5 ). 17 The S ARS v irus outbreak
in Asia may c a u se sales t o fall even further in 2003. Travel agency industry
representatives ex pect a recovery in the i ndustry, but also ex pect the recovery period
to be considerably longer than the 18 m onth recovery time after t he Gulf War.
The d ecline i n t ravel agent sales caused b y recent events comes in addition t o
t h e o t h er chal l enges faced by t ravel agenci es i n recent years. Travel agenci es have
been facing increasing competition from on line t ravel s ites s ince the mid-1990s. As
an ex am pl e o f t hi s t rend, a recent pol l s hows t hat t he num ber o f v i s i t o rs who u sed a
t ravel agent t o p l an t hei r t ri p t o Las V egas decl i n ed for t he fi ft h consecut i v e year i n
2002. The p ercent o f t ravelers using t ravel agent assistance for booking travel to Las
Vegas d ecreased 15 percentage points b etween 1998 and 2002.18 Another factor
facing the i ndustry i s d ecreasing commissi ons. Airlines have decreased or stopped
payi ng commissions on most tickets, which has al s o affect ed t ravel agency revenues.
As a resul t o f t hese chal l enges, t ravel agenci es h ave t aken m easures such as m ergi n g
to cut costs, m oving from s torefronts t o home-bas e d b usinesses, and t rimming
15 Standard & Poor’s Industry Surveys (S&P), Ai rlines, March 27, 2003.
16 Barron’s Online, “T ime t o Check in?,” by Dimitra DeFotis, April 28, 2003.
17 U.S. House of Representatives Subcommittee on Commerce, Trade, and Consumer
Protection; T estimony by T he American Soci ety of T ravel Agents ( ASTA), “Trave l and
T ourism i n Ame rica T oday,” April 30, 2003.
18 Travel Weekly, “V isitor Poll Shows Web Influence Growing,”, J une 2, 2003, p. 44.
payrolls. M any t ravel agencies h ave closed altogether. The number o f agencies i n
the United S tates fell 10.5% in 2002 from t he previous year.19
Table 5. T ravel Agency Sales of Air T ransportation
Type of Sale 2000 2001 2002 2000-2002
Dome stic Air Fares 51 42 35 -31%
International Air 25 22 22 -12%
Total Air Fares 76 64 57 -25%
Source: American Society of T ra ve l Age nts, April 2003.
One area i n which demand for t ravel agencies remains high is in the booking of
cruises. Travel agents book approx imately 90% of cruises. Although bookings for
cruises d ropped i n t he first quarter of 2003, the cruise i ndustry m ay be the one travel-
related i ndustries i n which losses h ave not b een as sign ificant , a t l e a s t i n t he short
term. According t o t he ASTA, t he cruise industry reports steadil y i n c r easing
em barkations from North America, but at significantly diminished yields.20 Cruise
lines responded rapidly to the S eptember 11 at t ack s by repositioning vessels from
other parts of the world to North and South American locations. M any U.S. cruise
shi p s are no l onger t ravel i n g t o Asi a, t h e E ast ern Medi t erranean or Afri ca because of
t h e s ecuri t y concerns. 21 Cruise lines also have been off e r i ng steep discounts o n
passenger cruises t o l ure t ravelers back on board. Bookings fell during t he first p art
of 2003, but have increased since M ay. T he lower p rices, however, h ave resulted i n
lower n et income for t he industry.
The S ARS outbreak has s ignificantly affected the regi o n a l e c onomy i n Asia,
which s ubsequently could affect other regions as well, es peci al l y in the t ourist and
retail trade s ect ors. International visitor arrivals to China could continue to fall, as
could i ntra-regi onal v isitor arrivals to China, Hong Ko n g , S ingapore, or Taiwan.
Gl obal Insi ght , an econom i c and fi n anci al forecast i n g com pany i n t h e Uni t ed S t at es,
anal yz ed the possible impact of SARS and estimated t hat t he tourism sect or in Asia
was m ore l i k el y t o b e affect ed t h an ot hers. 22 In the l ong term, t he outbreak will likely
have effects o n o ther sectors o f t he econ o m y, but the full effect may not be known
19 Rocky Mountain News, “T ripped Up; T r avel Agencies J oin Forces, T rim Costs, or Check
Out a s T ourism W oes T ake a Heavy T oll,” April 2003.
20 AST A, pp. 2-3.
21 Intellicruise, “Cruising Outlook for 2003,” December 2002. See [http://www2.i-
22 Global Insight website, SARS Epidemic’s Economic Impact on Asia, und a t ed. See
[ h t t p : / / www.gl oba l i n s i gh t . c o m/ Pe r s pe c t i ve ] .
f o r s o m e time. The tourism i ndustry i s one of the areas that has oft en b een
m e ntioned b y C hinese officials as havi n g b een hi t h ard b y t he out break. A
government official recently quoted government estimates t hat t he SARS outbreak
wi l l co s t C h ina u p t o $3.6 billion i n t ax revenues for 2003 and s low down t he
country’s economic growth by at least 0.3%. The official acknowled g e d t h a t the
outbreak already h ad a n “obvious negative impact” o n t he tourism, catering, and
transportation s ectors, and t hat t he worst was yet t o come. 23 Over time, t he epidemic
may t ake a t oll on other busines s activities and may even affect investor confidence,
resulting i n weaker investment and a decline i n forei gn capital i nflows.
The p reviously-mentioned International Labor Organiz ation s tudy on threats t o
employment in the t ravel and tourism i ndustry analyz es s ome o f t he impacts o f recent
world events o n t ravel-relat e d e mploym en t. The report s pecifically addresses t he
potential impact of SARS on world t ravel, suggesting t hat, if the S ARS virus is not
contained, it has t he potential t o p rofoundly change t he lifestyles of l arge populations,
particul arl y in areas such as public transportation and retail, which are related t o
tourism. The report estimates t hat t he travel and t ourism busines s l ost at l eas t one-
third of its activities i n l ocations directly affect ed by SARS.24 The t hreat of SARS
appears t o h ave d iminished, according t o n ewspaper accounts, b u t t h e ILO report
brings attention t o t he vulnerability of the t ourism i ndustry i f another S ARS outbreak,
or something s imilar, were to occu r. Some newspapers have reported t hat t here is a
possibility of SARS reappearing nex t winter, which i ndicat es that the full effect s of
the outbreak are yet unknown.
Economic Performance of M ajor Tourism
Destinations in the U .S.
The t en most visited t ourism des tinations in the United S tates are: New York,
New York; Lo s Angeles, C alifo r n i a ; M i ami, Fl orida; Orlando, Fl orida; San
Francisco, California; Las Vegas, Nevada; Honolulu, Hawaii; W ashingt on, D.C.;
Chicago, Illinois; and Boston, Massach u s etts. S ome of t hese metropolitan areas ,
such as Orlando and Honolulu, have economie s t h at rely m ore h eavily on tourism
b e cause it is the m aj or source of em ployment and earnings. Other m et ropolitan
areas, s uch as C hi cago and W ashi n gt on, D.C . , h ave m ore d i v ersi fi ed econom i es and
depend less on tourism. Nearly al l of t hese cities ex peri e n ced a decline i n
employment since l ate 2001, with recovery coming at a slower rate for s ome regions
than others. The following paragraphs describe the recent economic performance in
these m etropolitan areas. The economic anal ys is presented b elow is primarily drawn
from t he regi onal economic analys is for t he ten m et ropolitan areas reported by Global25
In si gh t , an econom i c and fi n anci al forecast i n g com pany i n t h e Uni t ed S t at es.
23 Daily Report f or Executives, “China’s SARS Outbreak Proj ected to C o s t up to $3.6
Billion i n T ax Re ve nues f or 2003,”, M ay 20, 2003.
24 International Labour Orga niza tion, “New T hreats t o Employment i n t he T r ave l and
T ourism Industry - 2003,” May 13, 2003.
25 Global Insight, U . S . Regi onal Onl i ne Anal ysi s, [ ht t p: / / www.gl obal i nsi ght .com] , 2003.
! New Y ork , New Y ork : The m ajor industries i n t he New York C ity
m et ro area are fi nance, i n surance, real est at e, and busi n ess s ervi ces.
As a popular tourist d estination, tr avel and t ourism p lay an important
role i n the l ocal economy. Since 2000, the m etro area has
ex perienced economic difficulties, and, conseq u ently, decreas ing
employment levels. Employm ent i n s ervice-providing secto rs,
which i nclude tourism and travel rel at ed s ect ors, represent ed a
significant portion of t he decline over t his time period, with a l oss
of 37,300 jobs. Employm ent i n t he m etro area i s ex p ected to
i m p rove gradual l y t h rough 2005, wi t h m u ch of t h e rebound ex pect ed
in service i ndustries.
! Los Angeles, Calif ornia: Lo s Angeles has a broad-based economy
and ranks am ong t h e n at i on’s t op t h ree m et ro areas for em p l o ym ent
in the s ervi c e i ndustry, of which t ravel and tourism related sectors
are a part. Other major industries in the area include aerospace,
busi n ess s ervi ces, and m anufact uri n g. Ent ert ai nm ent s ervi ces
industries, such as W alt Disney and U n i versal Studios, are among
Lo s Angeles’ m ajor emp l o ye rs. Employment in the Los Angeles
metro area d ecreased 1% in 2002. W h ile most service s ectors h ave
been showing a slow recovery in 2003, leisure and other s e r v i ces
have been the s ource of most recent j ob gains i n t he area. In 2004,
the economy i s ex p ected to grow to a m ore s table position.
! Miami, Fl orida: Major i ndustries i n t he Miami m etro area include
heal t h -care s ervi ces, t ransport at i o n s ervi ces (ai rl i n e and crui se shi p
com p ani es), and bi om edi cal m anufact uri n g. Three o f t he t en l argest
em pl oyers i n t he M i am i m et ro area - A m eri can Ai rl i n es, R oyal
Caribbean, and Carnival Cruise Li nes - are i n t r a v e l and tourism
related s ectors. Miami’s employm ent l e v els d ecreased 0.7% in
2002, but have been improving in 2003. Much of the growth i s due
to service-producing s ectors, incl u d i n g leisure and hospitality
services. Although employm ent l evels are ex p e c t e d to increase
through 2004, the M iami metro area’s unemploym ent l evel remains
! Orlando, Flori da: The economy o f Orlando, Fl orida i s h ighly
concentrated in the t ourism i ndustry. The Disney t h e m e parks,
Unive r s a l S tudios, and Sea W orld and o ther attractions bring i n
nearly 40 million t ourists a year. Travelers to the area are
responsible for m ore t han $15 billion i n d irect spending in the l ocal
economy every year. T ourism h as contributed to a s tr o n g service
sector as well. About 43% of employment in the area i s i n s ervice-
related j obs, i ncluding hotel s a nd lodging, and amusement and
recreat i o n s ervi ces. A ft er a n u m b e r o f years o f econom i c growt h ,
the O rlando economy ex p erienced a downturn i n 2001 and 2002.
The economy i s ex p ected to recover i n 2003, with stronger growth
projected for 2004. The s trongest growth i s ex p ected to come from
the s ervice sector, which is ex p ected to average 2.6% in employment
growth for t he period of 2003 to 2007. U.S. residents are ex pected
to start t raveling again, especi ally within the United S tates, which
would b enefit Orlando’s economy.
! San Francisco, Californ i a : T h e p rimary industries i n t he San
Franci sco m et ro area are i n m ultimedia, biotechnology, a n d f i n a n c i a l
services. The area also has a strong tourist i ndustry. One o f t he ten
major employers in the area i s i n ret ai l t rade, a tourism-related
sector. The area has p lans for a major t erminal for cruise s hips,
whi ch wi l l i n cl ude bert hs desi gn ed t o accom m odat e t wo crui s e s hi ps
simultaneously, and retail and entertainment space. In addition, the
area has p lans for ex p anding professional s porting event s which is
ex pect ed t o i n crease v i s i t o rs t o t h e area. The S an Franci sco
econo m y h a s not perform ed wel l i n t h e l ast few years, m o st l y
because of the s lowdown i n t he high -tech industry, and not because
of issues related t o t ourism. In the first quarter of 2003, the l eisure
service s ector was one of the few sectors t hat s ho w e d s igns of
stability. P rojections indicat e t hat employm ent growth rat es in the
region will not return to positive numbers until 2004. Service
industries are ex pected to be a s ource of economic growth in coming
! Las Vegas, Nevada: Gaming an d t o u r i s m are the dominant
industries i n t he Last Vegas economy. Over 25% of the work force
is directly involved i n t he hotel and gaming i ndustry. Seven o f t he
l argest em p l o yers i n Las Vegas are hot el s and casi nos . T he
Septem ber 11 events resulted i n a co n s i d erable decline i n visitor
volume. After a growth rate of 10.5% i n 1999 and 6.0% in 2000,
visitor volume decreased 2.3% in 2001. Recovery has been slow.
In April 2003, visitor volume was 1.5% below t he April 2002 levels,
but up slightly since t he begi nni ng of 2003. Hotel o ccupancy rates
in April 2003 were 86%, 1.5 percentage points b elow a year earlier.
Despite the s lowdown, ex pansion p lans for hotel and casino
operations i n La s Vegas continue. In 2003, ex isting hotels p lan t o
add 3,800 rooms, while s e veral o ther hotel ex pansion p rojects are
planned for coming years. The Las Vegas metropolitan area
ex perienced above-average economic growth for s everal years, with
the average annual rate for the years 1997 to 2002 regi stering 4.5%.
Employment growth rates b egan to improve in the l ast p art o f 2002.
In t h e l ei sure and hospitality sect or, employm ent registered s ome
growth in 2002, wh i c h h as continued i nto 2003. Employment
growth is ex pected to continue to increase i n 2004. Visitor volume
also is ex pected to increase as t he economy recov e rs, which will
i n crease em p l o ym ent i n t he servi ce-provi di ng sect ors.
! Honolulu, H aw aii: The Honolulu m etropolitan area encompasses
the entire i sland o f Oahu, and accounts for over 75% o f H awaii’s
non-farm jobs. Tourism i s t he major i ndustry i n t he metro a rea’s
economy, with three o f Honolulu’s n ine l argest employers i n
t o urism-related sectors . T w o e m p l o ye rs , O u t ri gger H o t el s & R e s o rt s
and K yo -ya C o., are i n hot el servi ces and ret ai l s ect ors. The o t h er,
Hawaiian Airlines, i s an airline company. Other industries i n t he
metro area i nclude food p r o c essing and commercial real es tate.
After 2001, Honolulu’s economy ex p erienced a s lowdown, with the
t ouri s m rel at ed sect ors a m o n g t h e m ost affect ed. T ouri s m s ect ors
ex peri enced a d ecl i n e i n em p l o ym ent after the September 11 t errori st
attacks, but, s ince October 2002, employment growth has b een
recover i ng. In M arch 2003, empl oyment levels in the s ervice-
providing sectors h ave i ncreased to levels nea r t h ose i n l ate 2000
and earl y 2001. The unemploym ent rat e i n Honolulu was 3.2% in
March, 2003, well below t he national rate o f 5.8%.
! Washington, D.C.: Washi n gt o n, D.C. i s a major destination for
tourists and business t ravelers. The concentration o f convention and
conference locations in the m etro area draws a considerable amount
o f a c t ivity. W ashington recently completed a large convention
center and opened 1 2 n ew hotels i n 2002. The completion o f t h e
new W ashington C onvention C enter i s ex p ected to provide the l ocal
economy with $1.4 billion i n annual earnings. As the n ation’s
capital, the economy i n t he W ashingt on, D.C. metro area h as a h igh
number of government jobs. In addition t o t he government sect or,
service-related s ectors account fo r a substantial portion of economic
activity in the area. Service-related i ndustries, along with the s trong
government sector, account for m ore t han 75% of the m etro area’s
non-farm em p l o ym ent . T he S ept em ber 1 1 t errori st at t acks caused
a s lowdown i n t he Washingt on, D.C. metro area’s economic activity
immediat el y following the attacks, but there wer e s o m e s igns of
recovery in the first half of 2002. The l eisure and hospitality sector
is one of the b est p erforming s ect o r s i n t he local economy.
Employment in this sector increased 2.1% for t he 12-month p eriod
ending in April 2003.
! Chicago, Ill i n o i s : Major i ndustries i n t he Chicago m etropolitan
a rea include business and profe ssional s ervices, commercial r e a l
est at e, fi n ance and i nsurance servi ces, and m anufact uri n g. As a t op
tourist des tination, the ret ai l an d transportation s ect ors are al so
major contributors t o t he economy. Two o f t he ten l argest
em pl oyers i n t he C h i cago area, Uni t ed A i rl i n es and A m eri can
Airlines, are in the air transportation i ndustry. Economic growth in
Chicago was slow in 2002 and h as not shown any improvement in
the first months of 2003. The recent p roblems fa c i n g the airline
industry h ave contributed to the d rop i n employm ent i n t he Chicago
a r e a. However, b ecause Chicago h as a d iversified economy, the
regi on is not very vulnerable t o a s l o w d o w n i n one particular
industry o r i ndust r y c l u ster. The recent p roblems i n t ravel and
tourism s ect ors have likel y had only mild effect s on t he city’s
! Boston, Massachusetts: Boston is a m aj or tourist des tination i n t he
United S tates, and t he service s ector has b een a m ajor source of
economic activity for t he area. However, the area’s t ourism i ndustry
did not perform well in 2002, and employm ent i n t he service s ector
c o ntracted by 1.6% in 2002. Other m ajor industries i n t he Bo s t o n
metro area i nclude high -technology i ndustries, educational s ervices,
fi nanci al s ervi ces, h eal t h -care s ervi ces, cons t r u c t i o n , a n d
transportation s e r v i c es. In 2002, Bo ston ex perienced the worst
economic decline i n o v er a decade. The first quarter of 2003
continued t o s h o w contraction i n employm ent, but at a l ower rate
than th e l ast quarter of 2002. The s ervice sector, u sually a m ajor
contributor to economic activity, also ex perienced job l osses. While
the m etro area’s overall economy i s not ex pected to ex p e r i e n c e
employment growth in 2003, the s e rvice sector is ex pected to
ex perience some job growth. In 2004, employme n t i s e x pected to
U.S. Travel and Tourism Outlook
The S ecret ary-General of t he World Tourism Organization believes t hat, in the
long run, the i nternational t ourism i ndustry will recover from t he recent downturn.
He issued a s tatement earlier t his year citing res earch that has s hown t hat t he tourism
industry h as adjusted to previous times o f uncertainty. In t he statement, he mentions
that international t ourism was resilient enough t o r e c u p e r a t e q u i c k l y, e s p e c i a l l y i n t h e
case o f a short and contained war with Iraq . He b elieves t hat t he crises have led t o26
accel erat i n g changes i n consum er habi t s and t he growt h of new l ow-cost ai rl i n es.
A research study by the W orld Travel and T ourism C ouncil states t h at travel and
tourism i n t he United S tates i s ex p ect ed to achieve real growth of 3.8% per annum
between 2004 and 2013. The s tudy also estimates t hat capital i nvestment in travel
and t ourism i n t he United S tates will fall in 2003, but will increase over t he nex t ten
years. The s tudy es timates t he world t ourism m arket t o grow s lightly faster than the27
U.S. market between 2003 and 2013.
The S eptember 11 attacks will have a l ong term impact on the airline i ndustry.
Airlines have faced fina n c i a l d ifficulties i n t he past, but none have been as serious
as t h e t h o s e c a u sed b y t he t errori st at t acks. A num ber o f U.S . ai rl i n es are faci ng
serious liquidity problem s and may have difficulties s urviving another downturn i n
the economy. One o f t he possible outcomes i s a major change i n how the i ndustry
operates. Airlines are under p ressure to ch ange cost structures and operational
strategi es . They m ay make significant changes in order t o s urvive and compete with
profitable l ow-cost carriers. At least one major carrier has l aunched a “ l o w - cost”
ai rline s ubsidiary to lower operational costs, while others are s eriously considering
this strategy. S ome i ndustry ex p erts have called for reregu lation o f t he U.S. airline
industry b ecause of the current crisis. Although t he government h a s n o t taken any
action i n t hat direction, a few anal ys ts believe that , i n t he future, federal regulators
26 World T ourism Organization, News Release, “War in Ir aq may Postpone T ourism Growt h
but will not Cause Collapse,” M arch 21, 2003.
27 World T rave l & T ourism Council, United States: Tr avel & Tourism: A World of
Opportunity, Executive Summary, 2003.
m ay b ecom e m o r e a c t i v e i n overseei ng ai rl i n es. 28 S u ch act i v i t y, however, w oul d
require congressional action. To date, no l egislation has been introduced for airline
In the hotel industry, analys ts believe that the o ccupancy rates and revenues p er
available room may improve in 2003, but are not likely to reach t h e p eak l evel s of
2000 in the short term. In the long term, some analysts predict that demographic
trends in the United S tates will h a v e a favorable impact on the hotel and l odging
industry as s ome b aby boomers reach their p eak earning years and spend m ore m oney
on vacations. Also, the number of retirees will increas e i n coming years and they are
ex pect ed t o t r avel m o re. 29 According t o a recent poll b y P rice W aterhouse-Coopers,
occupancy rat es i n U.S . hot el s a re ex pect ed t o go up t h i s sum m er, surpassi ng t h e
2002 levels but still below t he occupancy rat e for the s am e peri od i n 2001. The
anticipat ed increase i s based on an increase i n drive travel , t he end of hostilities with
Iraq, and an improved economic outlook.30
Legislation a nd Legislative I ssues
in the 108th Congress
The FY2003 omnibus appropriations act (P.L. 108-7, H.J . Res. 2) includes a one-
time appropriation of $50 million for an international marketing campaign to
encourage i ndividuals to travel to the United S tates. The appropriations act calls for
the creation of t he United S tates Travel and T o u r i s m P romotion Advisory Board,
which will be appointed by the U.S. S ecret ary o f C o m m e rce. The act requires t he
Secret ary of C ommerce t o consult with the p rivate sector to award grants and make
direct lump sum p ayments i n s upport o f an i nt ernational advertising and promotional
cam paign c o n s i s ting of radio, t el evision, and print advertising and marketing
The Emergency Wartime Supplemental Appropriations Act, 2003 (P.L. 108-
011) i n cl u d es a provision for $2.9 billion i n assistance to the airline i ndustry. The
Act p rovides grants for airline companies to reimburse them for i ncreas ing s ecurity
costs; ex tends the W ar Risk In surance P rogram; an d p r o v i des funding for
unemployed airline i ndustry-related workers.
Bills have been introduced i n the 108 th Congress to provide assistance to the
airline i ndustry and also to help promote t ravel and tourism i n t he United S tates. One
bill (H.R. 2002) would est a b l i s h a pilot p rogram for t he promotion o f t ravel and
tourism i n t he United S tates t hrough U.S. i nternational b roadcasting.
Regu latory issues regarding t he trav el industry t hat m ay be o f i n terest to
C ongress are rel at ed t o t h e p endi ng rul es and regulations of the S tate Department and
the n ew Department of Homeland Security (DHS). Travel industry associations are
28 S&P, Ai rlines, p. 9.
29 S&P Industry Surve ys , Lodging and Gaming, February 6, 2003.
30 Travel Weekly, “Poll: Summe r Looks Better f or Hotels,” J une 2 2003, p. 21
concerned t hat t he Administration’s new rules and regulations regarding visas and
passport s m ay h ave an effect on t ravel . T he Am eri can S o ci et y o f T ravel A gent s
recently issued a s tatement that while trav el industry o rganiz ations support t he new
security considerations, t hey would like t o s ee the creation of an office within DHS
to provide review and comment on the poten tial for serious travel disruptions that
may arise from p ending DHS rules and regu lations.
In J anuary 2004, DHS plans t o implement the U.S. Visitor and Immigrant Status
Indication Technology s ys tem (U.S. VISIT). According t o DHS, t he plan is design ed
t o m ake entering the U.S. easier for legitimate tourists, students and busin es s
t r av el ers , while making it more difficult to enter t he U.S. illegally due to t h e
implementation of biometrically authenticated doc uments. Travel i ndustry
associations have voiced concern t hat t he program m ay cause delays in the movement
of legitimate travel ers i nto t he United S tates.
Another i ssue t hat t he travel industry h as voiced concerns about is related t o t he
S t at e D epartment’s Visa Waiver Program (VWP) which permits international
travelers from 2 7 countries to visit t he United S tates for up to 9 0 d a ys without the
need for a U.S. visa. The VW P o rigi nally requi red t hat a l l Vi sa W ai v er t ravel ers
possess a m achine-readable passport b y October 1 , 2007. The USA Patriot Act (PL
107-056) acce l e r a t e d t he deadline t o October 1 , 2003, but granted t he S t ate
Department the authority to waive t his requirement until the origi nal d eadline of
October 2007, if the country in question i s m aking an effort to distribute t he machine-
readabl e passport s . T he S t at e Depart m ent has not waived this requirement for any
of the VWP countri es. Travel i ndus t r y a ssociations are concerned t hat t he shorter
deadline could d isrupt travel to the United S tates from s everal countries, i ncluding
several E uropean countries.