The slowdown in tourism is having a noticeable effect on the U.S. retail sector. As travelers reassess their spending on account of inflation, which impacts accommodation and dining costs, U.S. retailers are looking at a possible $20 billion decline in retail spending. This situation emerges amidst changes in travel patterns, where foreign visitors’ numbers are dwindling, and those who visit are tightening their wallets.
Over recent years, the retail sector has occasionally faced similar challenges. Previous patterns showed consistent growth in travel-related retail revenue, but such trends now seem disrupted. Earlier, visitors would engage passionately in purchasing sprees, leading to substantial retail spending. This period of decline signals a shift requiring retailers to adapt to changing dynamics. The current trend is a stark contrast to the past where shopping sprees by international tourists significantly boosted retail figures.
What is Influencing Tourist Spending?
Factors contributing to this decline include stricter immigration policies, discouraging some travelers from visiting the U.S. The report highlights that international visits dropped significantly, particularly air travelers, plummeting by 6.6% in June compared to the same timeframe last year. Additionally, the increase in hotel and restaurant prices due to inflation is leading tourists to adjust their spending habits.
How Are Retailers Responding?
Retailers are acknowledging pressures in the current environment, although the full impact isn’t entirely established. Floris van Dijkum of Ladenburg Thalmann remarked,
“Tourists would come with empty suitcases, and they would go out, fill the suitcases up and then ship those suitcases home.”
He noted a significant shift in patterns, indicating that the decline might be more profound than just a fleeting trend.
Consumers like Annet van der Meer, visiting from the Netherlands, convey a sentiment that echoes this shift, with more of her budget now going to everyday expenses rather than shopping sprees.
“Compared with Europe, it’s unbelievable. Food is very expensive… I think in Europe we pay two times less than here,”
she noted, emphasizing the perceived high costs within the U.S.
While domestic consumers continue to show resilience in spending habits, depicting a 0.6% month-over-month increase in retail sales, the threat looms larger for the retail industry if international visitor spending doesn’t rebound, potentially disrupting financial forecasts for the year.
U.S. retailers may face ongoing challenges if unfavorable policies remain and inflation doesn’t stabilize. The international component considerably influences retail sales and brands must strategize effectively to navigate reduced spending power from international visitors. For U.S. retailers, this could mean pivoting to address domestic audiences more robustly while finding innovative ways to appeal to international shoppers who perceive visiting costs as high.
