Industry Analysis and TrendsTravel and Tourism

The Importance of the US Travel Market

The US is an important travel market. In terms of spending, it is the most important outbound market in the world. In 2016, US travelers spent an estimated US$988.7 billion on domestic and outbound travel, according to Statista.com. And it is expected to reach US $1.15 trillion by the year 2020. This makes the US the largest travel market in terms of expenditure and the second largest market in terms of outbound arrivals (behind China).

US travel expenditure
Source: Statista.com

The US is a lucrative source market for many overseas destinations and even for destinations within the US. Consider that:

 

  • The US has a population of over 319 million, the 3rd largest in the world.
  • The US market is not very experienced in foreign travel and there is still a tendency to travel abroad in groups and seek out establishments and locales that offer something foreign.
  • Americans are becoming increasingly demanding and experienced travellers with a number of special interests, for example adventure, cruise and honeymoon travel.
  • The US still has a relatively small number of paid holidays (1 in 4 private-sector workers in the U.S. do not receive any paid vacation or paid holidays).

 

The US Overseas Travel Statistics

The U.S. resident outbound market totaled 74.0 million in 2015, up nine percent from 2014. Travel to overseas countries (32.8. million) increased seven percent, to Canada (12.5 million) up eight percent and travel to Mexico (28.7 million), singly the largest outbound market, was up 11 percent.

 

The top five destination countries visited by U.S. residents in 2015 were: Mexico (28.7 million) and Canada (12.5 million), followed by the overseas countries of the United Kingdom (2.9 million), Dominican Republic (2.8 million) and France (2.4 million). Nine of the top 10 destinations visited by U.S. travelers posted increases in 2015.

 

A Resilient Market

History shows that the American travel market is quite resilient. From terrorism to recession, there is always a rebound, albeit a bit slower than other countries and travel segments.

 

The unprecedented terrorist attacks on the US on September 11th, for example, had profound impacts on the travel and tourism sector worldwide. The travel and tourism industry has been resilient, consistently recovering from the Gulf War in 1991, the Asian financial crisis in 1997, the Kosovo Conflict in 1999, the terrorist attacks of September 11, 2001 and the global economic recession of 2008-2009. Within one year of a major crises, the American tourism sector typically recovers.

 

Global Significance of Tourism

Tourism is one of the most remarkable economic and social phenomena of the last century and is very likely to keep this position for the current century. Every year a bigger portion of the world population takes part in tourism activities and, for the majority of countries, tourism has developed as one of the most dynamic and fastest growing sectors of the economy.

 

The number of outbound travelers the world over reached a remarkable 1.186 billion in 2015 with a growth of 5% as compared to 1.133 billion in 2014, according to the United Nations World Tourism Organization. Receipts from international tourism grew to US$1,260 billion in 2015, with an increase of 4.4% over 2014.

 

Paid Holiday

A very important determinant of travel is paid holidays. Americans have the least number of annual vacation days (12) compared to all major outbound markets. The Germans, for example, have 30 (thirty) days of paid holidays, more than double the number of annual vacation days of Americans.

Comparison of Paid Holidays by Country

 

Country Annual Vacation

(days)

Public Holidays

(work days)

Germany (West) 30.0 9.0
Germany (East) 29.8 7.0
Luxembourg 28.0 10.0
Austria 26.5 9.5
Hungary 26.0 11.0
Netherlands 25.3 7.1
Sweden 25.0 9.0
Finland 25.0 8.0
Czech Republic 25.0 8.0
France 25.0 7.0
Denmark 25.0 7.0
United Kingdom 24.4 8.0
Malta 24.0 14.0
Slovakia 24.0 10.0
Spain 23.0 14.0
Portugal 22.0 10.0
Greece 22.0 9.0
Poland 20.0 12.0
Cyprus 20.0 12.0
Belgium 20.0 11.0
Italy 20.0 11.0
Ireland 20.0 9.0
Estonia 20.0 8.75
Latvia 20.0 8.0
Lithuania 20.0 6.0
Slovenia 20.0 5.0
Japan 18.0 13.0
United States 12.0 10.0

Source: Deutschland in Zahlen 2008, Institut der Deutschen Wirtschaft Köln, 2008

 

The low number of paid vacation, among others, may be one of the reasons that US travel intensity is very low. In fact, US travel intensity is one of the lowest among developed market economies, at 21% or 67 million travellers.

 

It must be noted however, that the absolute size of the US travel market (67 million travellers), while relatively small compared to its overall population size, is larger than the populations of many top outbound travel source markets such as Italy (59.8 million), France (66 million), the UK (64 million) and Spain (46.8 million). In terms of number of travellers, the US continues to be one of the largest outbound markets, making it a market that is certainly worth targeting.

 

The Top Travel Generating Regions of the US

An examination of US overseas travelers shows that the greatest share of travel originates from the Middle Atlantic, Pacific and South Atlantic regions. Together, these regions account for more than two-thirds of US overseas travelers. The East and West South Central regions supply the least number of US overseas travelers, contributing just 2% as the figure below demonstrates.

 

Breakdown of US Regions

 Source: The National Energy Information Center, 2010

 

The top origin regions/states from which U.S. residents traveled to overseas destinations:

 

  • Middle Atlantic States (New York, New Jersey and Pennsylvania), with a 20 percent share of all U.S. regions, was down eight percent from 2014.
  • South Atlantic States (primarily Florida, Georgia, Virginia, Washington, D.C., Maryland and North Carolina) accounted for 23 percent and travel was up 25 percent.
  • Pacific States (California and Washington) generated 15 percent of outbound travel was down four percent from 2014.
  • West South Central States (mainly Texas) registered a 12 percent share and travel was up 18 percent.
  • Travel from East North Central (primarily Illinois, Ohio and Michigan) accounted for 10 percent and was up seven percent.

US Travel Market Share by Region and Sub-region

 

 

Source: Travel & Tourism Industries

 

California has the greatest overseas travel potential. California has the largest population and the highest number of overseas travellers. The state ranks 5th and 6th in average income and per capita personal income, respectively. Although its unemployment rate is one of the highest, and higher than the national average, its overseas travel intensity ranks 6th at 18%.

 

New York is the second most lucrative state for overseas travel. New York produces the 2nd highest number of overseas travellers, has the 3rd largest population and ranks 4th in per capita personal income. New York’s unemployment rate is the 4th lowest and below the national average. It ranks 2nd in overseas travel intensity at 27%.

 

New Jersey is the third most lucrative state for overseas travel. New Jersey ranks 1st in average income, 3rd in per capita personal income, 7th in unemployment and has an overseas travel intensity of 21%, the 4th highest among the states.

Massachusetts has the fourth greatest overseas travel potential. The state ranks 1st in per capita personal income, 6th in unemployment and has the 3rd highest overseas travel intensity of 24%.

 

Conclusion

We have seen that the US is a significant travel market. It is the third largest country in the world and the richest economy globally. Americans generate the highest travel expenditure in the world and produces the second largest number of outbound travellers worldwide.

 

However, only one in five Americans take a trip abroad. When this is compared with the number one travel market in the world, Germany, which has a travel propensity of 77% (in 2015), it is clear that the growth potential for American outbound travel is enormous. This is further supported by the fact that only 36% of Americans have a passport.

 

For all the abovementioned reasons, the US is a very lucrative travel market. Investment in this market is very likely to pay off in the long term.

 

However, it is important to target marketing expenditure in the states that are most lucrative. The US states are very diverse in terms of income levels, unemployment rates, travel propensities and overall population sizes.

 

Moreover, consideration of the various races, ethnicities and religious persuasions in the US should also be an important factor. For example, different states have different concentrations of African Americans, Hispanics, Jews and Whites (among others). Marketing efforts should therefore be tailored to suit the needs of the predominant racial or ethnic group in the respective states.

 

4 thoughts on “The Importance of the US Travel Market

  1. Great article. I was waiting to come across some links for cheap travel either to the States or within the States. Do you know where I could find them or ways to save money on travel. Thanks for this.
    Peace, Peter

  2. An excellent article Kevon, full of useful, relevant and valuable information. Only 36% of Americans have passports, I find that staggering! I come from New Zealand where almost everyone’s got one.
    My question is with 28 million people travelling to Mexico, that’s almost 1 in 10 americans by my understanding, what are your thoughts on the likely affects (if any) of Trump’s wall?
    Thanks.

    1. This is a great question, Nathan. The wall is meant to keep the Mexicans out. But I do not expect any significant impact on keeping Americans from their holidays. Mexico is a great destination because of its close proximity, cheap flights and accommodation, beautiful beaches, different cuisine and great destinations such as Cozumel and Cancún. So I don’t expect any effect of Trump’s wall on US travel to Mexico.

      Regards

      KW

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