The future of the U.S. lodging industry is expected to be partially shaped by a significant increase in inbound international visitation. From 2000 to 2013, international inbound arrivals to the U.S. increased 37.0 percent and are expected to continue growing, spurred by global megatrends and domestic policy.
The growing global middle class concentrated largely in the BRIC countries, with access to increasing levels of disposable income, will create new levels of demand for international travel. This trend can already be observed in the inbound visitation numbers to the U.S. from China, increasing almost 300 percent from 2000 to 2013, and with Brazil posting a 179.5-percent increase over the same period. The U.S. Commerce Department forecasts total international visitation to the U.S. to increase at a compound average annual growth rate of 3.7 percent from 2014 to 2018, resulting in a further increase of 20 percent over 2013 record levels. This growth includes significant estimated increases from China (139 percent), Colombia (56 percent), India (54 percent), Taiwan (52 percent), Brazil (50 percent) and Argentina (48 percent).
The World Tourism Organization estimates international visitor arrivals worldwide will expand approximately 3.3 percent a year from 2010 to 2030, reaching 1.8 billion by 2030. However, while the overall global tourism market has grown and inbound international visitation to the U.S. has expanded, the U.S. share has actually decreased slightly since 2000, prompting the hotel and travel sector to push for government initiatives to reverse this trend. The most notable initiative is the Travel Promotion Act of 2009 (TPA), which created a public-private partnership known as Brand USA to promote international tourism to the U.S. In July 2014, the House passed the Travel Promotion, Enhancement and Modernization Act of 2014, which seeks to extend many of the provisions of the TPA through 2020.
Another important initiative is the Jobs Originated through Launching Travel Act of 2013 (JOLT) that, if passed, will expedite the visa process and revise the Visa Waiver Program (VWP) to allow a greater number of countries to qualify. Changes to the VWP could result in significant increases to international visitation to the U.S. For example, U.S. Travel reports that admitting just nine countries (Argentina, Brazil, Bulgaria, Croatia, Israel, Panama, Poland, Romania and Uruguay) to the VWP would result in 600,000 additional visits and a more than $7-billion impact to the U.S. economy, supporting more than 40,000 new jobs.
If the expected growth in international arrivals is realized, the U.S. lodging inventory may not be able to fully absorb the increased demand, particularly in gateway cities that primarily attract international visitors. Since the recession, hotel supply growth has been below the long-term historical average of 2.1 percent. PwC forecasts 1.0-percent hotel room supply growth for the U.S. in 2014 and 1.6 percent in 2015.
Operational considerations will be required to cater to this expected increase in international arrivals, including staff with appropriate language proficiencies, an understanding of booking preferences, and technology tools, such as web, mobile and in-room applications in their native languages. Savvy operators are expected to embrace this challenge, as the opportunity to satisfy the projected growth is substantial.