Why increased restrictions on inbound travel are bad for business

Following the European Parliament's vote to require visas when Americans travel to Europe, Washington is similarly considering the implementation of changes to the U.S. visa-waiver system that could make travel to America more difficult for Europeans.

Secretary of Homeland Security John Kelly said that increased concerns over terrorism should prompt a review of the existing rules. Currently, the program allows passport holders from nearly 40 countries—including the UK, France, Japan, Germany and South Korea—to visit for up to 90 days without a visa. Visitors obtain authorization to enter the U.S. via an automated system before they travel.

Kelly focused on the potential threat from Europe—a major source of tourists and business travelers to the U.S. According to Euromonitor, 14 million European citizens covered by the visa waiver program traveled to the U.S. in 2015. Kelly said he feared ISIS fighters were using the visa-waiver system to sneak into the country.

Visitor Downturn

Following President Donald Trump’s initial January travel ban (which did not apply to European countries), total international travel to the U.S. fell by 6.5 percent according to ForwardKeys, a company that monitors future travel patterns by analyzing flight reservations. Forward inbound bookings also declined.

Last month, the tourism board of New York City reversed its pre-election prediction that the city would see an increase of 400,000 international travelers this year. In fact, the board now expects 300,000 fewer foreign tourists will come to the Big Apple in 2017 than did in 2016. 

Tourism Economics, meanwhile, forecasts a 10.6-million decline in visitors for the U.S. this year and next, or a 7-percent decrease in expected travelers. This would strike a severe blow not only to the hospitality industry, but to the overall U.S. economy, which would likely lose more than $18 billion and about 107,000 jobs.

The drop in visitor numbers is cause for concern in the travel community. In March, following the second travel ban, the Global Business Travel Association polled its U.S. and European members to assess the business travel impact of the revised executive order on travel. Nearly four in 10 (37 percent) of U.S. business travel professionals said that they expected some level of reduction in their company’s travel because of the revised executive order. The sentiment was worse among European travel professionals, with 47 percent expecting some level of reduction in business travel for their company. Additionally, 17 percent of European travel professionals reported that their company has already cancelled business travel to the United States because of the executive orders issued.

Thirty-eight percent of European business travel professionals said their companies would be less willing to send business travelers to the United States in the future because of the executive order, and 45 percent indicated their company will be less willing to plan future meetings and events in the United States.

The GBTA also estimated the loss in business travel bookings from Jan. 28 to Feb. 4 to be as much as $185 million.

More Restrictions?

The implementation of new restrictions on inbound travel would not do anything to improve those numbers—and would certainly not do anything to help the country's travel and hospitality industries. Requiring visas from European travelers would likely meet resistance from the European Union, which has been critical of the country's refusal to grant visa-free entrance to all citizens of the EU (hence the vote to require visas from Americans). Currently, citizens from Bulgaria, Croatia, Cyprus, Poland and Romania cannot enter America without a visa. EU rules call for equal treatment for all Union citizens, and most EU countries are part of the Schengen zone, which allows people to travel freely within member countries without passport checks. 

An endless cycle of increased restrictions on both sides would only hurt international travel worldwide, and would also make hotel investment less appealing. Reduced travel numbers are likely to lead to reduced hotel revenue, and given the number of investors pouring money into international properties, further blocks on travel could lead to dropped development deals around the world. 

In a statement, Dimitris Avramopoulos, the EU commissioner for migration and home affairs, called for a balance between visa-free travel and security. "The road linking the citizens of Europe and U.S. has to remain open," Avramopoulos said. "At the same time, it has to be closed to those who put in danger our security."