Of course President Trump’s travel ban is bad for the hotel industry

Not too long ago, I was harangued for opining on then-presidential-candidate Donald Trump. I learned, back then, that when you take a position, be ready to face the blowback. Well, at the risk of being censured again, I feel forced to launch myself back into the political fray; this time taking aim at now President Trump’s seemingly desultory travel ban by executive order. To be sure, I am not condemning Trump, here; enough people have already assumed that mantle. Instead, how will his executive action—no matter what happens to it from here on out—impact the travel and hospitality industries?

The Order

Let’s recap. On January 27, at 4:42 pm EST—a time that people are thinking about how to while away their weekends—President Trump, true to his campaign word, barred citizens of seven predominantly Muslim countries—Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen—entry into the U.S. for 90 days. He also suspended entry of all refugees to the U.S. for 90 days and barred Syrian refugees indefinitely.

The Trump administration was not going to get this through the Friday news dump without any reaction—that was made clear. The ensuing response was swift and it was loud. We saw the swarms of protesters descend upon the nation’s international airports, decrying the order with resounding resolve; we saw the federal judge grant what actually was an eleventh-hour emergency stay for citizens of the affected countries who had already arrived in the U.S. and those who were in transit with valid visas; we saw the administration reverse course on green-card holders from the seven impacted countries, allowing them to enter the U.S.; we saw it all and the world saw it, too. Oy vey!

This travel ban, no matter who was affected, was a mind-bend. At one point, I thought—sardonically, yes—could I fly to Los Angeles and make it back to New York without scrutiny? Well, imagine how any traveler coming or thinking about coming to the U.S. might feel. The point is this: The optics of Trump’s travel ban executive order are bad for the travel industry and bad for the hotels that play a key role in the travel supply chain. I have no doubt that non-U.S. citizens, from countries not listed on the travel-ban list, will think twice before coming to the U.S. for vacation, maybe even for business. Google, for instance, recalled some 100 traveling staff in light of the travel ban—which illustrates the repercussions not just for U.S. travel, but global travel.

While not on the same scale, President Trump’s executive order has echoes of when President Obama, in 2010, railed against lavish corporate spending by the likes of AIG and made the caustic statement that people should not “blow a bunch of cash in Vegas” during a recession. The White House later clarified the president’s statement—that the president believes in a strong tourism industry—but damage had been inflicted.

Global Response

Words and actions matter, and they can have a deleterious effect directly and indirectly. Those opposed in the U.S. reacted strongly to it, and were not alone. They were joined by many countries—allies of the U.S.—in distaste for the travel ban.

“The necessary and decisive fight against terrorism in no way justifies a general suspicion against people of certain beliefs, in this case people of the Muslim faith or from a certain origin," German Chancellor Angela Merkel said. "These actions, according to my beliefs, are against the core idea of international aid for refugees and international cooperation."

In Britain, Foreign Secretary Boris Johnson called the ban as "divisive and wrong," while London Mayor Sadiq Khan said the move was "shameful and cruel."

Back in the States, the response to the order from the U.S. Travel Association, a non-profit organization representing and advocating for all components of the travel industry, was fairly tame and ambivalent. "People all over the world want to visit the U.S. and the U.S. travel community strongly supports efforts to ensure that visitors to this country are unimpeachably legitimate. In doing so, it is imperative we find the right balance between security and facilitation, and we stand ready to support the administration and Congress to achieve this goal,” said U.S. Travel Association President and CEO Roger Dow.

"We recognize the new administration's desire to review visa issuance protocols with respect to countries that have a heightened risk of terrorist activity or weak law enforcement cooperation with our government. We urge the administration to conduct this review quickly, and trust that it will yield an even more secure travel security system that protects international travelers and welcomes them into our country to conduct business and to enjoy our cities, attractions, national parks and landmarks."

So far, statements coming from the major hotel companies have been scarce. Airbnb, for one, came out strong in opposition to the travel ban. The home-sharing site offered to help by providing free housing to anyone affected by the ban, applying to refugees or anyone else who is denied the ability to travel to the U.S. and is not in their city or country of residence.

"Not allowing countries or refugees into America is not right, and we must stand with those who are affected," said Airbnb CEO Brian Chesky.

Tangible Impact

Only two full days since the executive order was signed, there is already negative fallout for the hospitality industry. A Monday note from RW Baird said the following: "Hotels [are] underperforming following President Trump's travel ban executive order. Hotel stocks are significantly underperforming today (the brands less so than the REITs) after fallout over the weekend from President Trump's executive order."

Baird had been preparing for something akin to this. In a November 9 post-election note, it highlighted "border control" as a potential risk to hotel fundamentals and stock prices, "especially in light of the previous administration's efforts to open our borders to foreign travelers, an action that resulted in inbound international travel becoming a strong secular tailwind for hotel demand."

The note went on: "Global travel patterns are being disrupted, especially in major urban markets in the United States—primarily where the full-service-focused hotel REITs own properties, which explains their relative underperformance today. While none of the seven countries this executive order affects is a top-50 inbound international market to the United States, we see broader negative implications to inbound international travel trends to the United States over the near-to-intermediate term as foreigners could become incrementally reluctant to travel to the United States."

The End Game

Keeping America safe is, of course, in everyone’s interest. Whether or not this travel ban will have any impact in doing so may not ever be qualified. Yet, a decree like this has a halo effect; in the eyes of the global traveler, it makes the U.S., at least by some degree, a less desirable place to visit. And, as Baird wrote, "foreigners could become incrementally reluctant to travel to the United States." And that has a domino effect, impacting the hotels that depend on the business of the global traveler—from luxury hotels down to economy. 

"America is a proud nation of immigrants and we will continue to show compassion to those fleeing oppression, but we will do so while protecting our own citizens and border," Trump said in a statement issued by the White House. It’s not a nonsensical stance. Let’s just hope it’s impact doesn’t damage the U.S.’s otherwise hospitable reputation—not to mention its travel industry.