Saturday, May 24, 2025

A marked decline in international travel to the United States is raising new questions about the outlook for travel companies, investors, and tourism-dependent sectors in 2025.

Industry leaders and analysts are closely monitoring this trend, with travel bookings, airline data, and economic signals suggesting that the U.S. may be falling out of favor with international tourists—despite strong domestic travel intent and some bright spots like cruise lines and luxury tourism.

This shift was first publicly emphasized in March by , who told that bookings by European travelers to U.S. destinations were down compared to the previous year. This was despite global increases in travel overall, suggesting the U.S. market may be facing unique headwinds.

Data released from various agencies reinforces Bazin’s concerns. According to a February report by the , non-resident travel to the U.S. was down , and more tellingly, down . Similarly, reports that Canadian travel to the U.S. was in February year-over-year.

Air passenger data from the also supports these findings. Air travel to the U.S. was down year-over-year in March and down from pre-COVID benchmarks. This sustained downturn over multiple months points to more than seasonal fluctuations.

, Portfolio Manager at , says that several overlapping factors are contributing to this phenomenon. These include:

Together, these factors contribute to an environment where international tourists may view other global destinations as more accessible and welcoming than the U.S.

Dragosits, who helps manage Harvest’s travel-focused exchange-traded funds (ETFs) and , says the decline in international travel to the U.S. is already visible in earnings commentary from both airlines and hotels. However, he cautions that the impact varies across sectors and regions.

“The travel industry is inherently cyclical and closely tied to macroeconomic trends,” Dragosits explains. “With economic uncertainty and lower global consumption, especially in non-U.S. markets, travel-related stocks—particularly those heavily reliant on inbound U.S. tourism—may face short-term challenges.”

This includes companies focused on international air routes and major urban U.S. hotels catering to global tourists. However, not all travel companies are equally affected. Dragosits highlights that , a factor which may provide stability for companies like , , and , which have significant domestic operations.

While some travel subsectors face headwinds, Dragosits points to as an unexpected bright spot. Cruise companies such as and have continued to perform well in early 2025. One explanation is that cruises are generally booked up to a year in advance, insulating the industry from immediate economic volatility.

Moreover, many cruises operated by U.S.-based companies travel internationally or embark outside the U.S., reducing reliance on U.S. entry. This appeals to international travelers who are hesitant to enter the country but still want the experience of cruising with a major brand.

The has also shown resilience. According to recent data, high-net-worth individuals are continuing to spend on luxury hotels and flights, relatively unaffected by inflation or currency fluctuations.

Despite declining international arrivals, American consumers appear eager to travel in 2025. A found that while expectations for increased travel spending slightly dipped, the majority of Americans still plan to spend more on travel than in 2024.

In a , of U.S. consumers indicated plans to spend on air travel this year—the highest rate since 2016. This domestic demand could help balance some losses from foreign visitors, particularly in mid-range and budget segments.

Domestic occupancy rates at U.S. hotels, according to , are now at or near , and spending on weekend getaways and national park visits continues to rise, supported in part by remote work flexibility.

From an investment perspective, Dragosits says that remains crucial. Within the Harvest ETFs’ portfolio, holdings include budget, mid-market, and luxury hotels, helping smooth out region-specific or income-level-based disruptions. Exposure to , and allows for greater resilience across travel trends.

For policymakers, these trends emphasize the need to make the U.S. more accessible and welcoming for international tourists. The and may need to reexamine visa and entry processes, while the continues lobbying for initiatives like expanded visa waiver programs and improved airport infrastructure.

Additionally, rising prices from inflation and tariffs—highlighted in consumer reports from the U.S. Bureau of Labor Statistics (BLS)—may require broader fiscal and monetary measures to support economic growth and consumption.

Despite near-term uncertainty, Dragosits remains optimistic about the long-term trajectory of the travel industry. He notes that demographic trends such as the aging of the Baby Boomer generation, the experience-seeking priorities of Millennials and Gen X, and the rise of remote work are all powerful tailwinds for the sector.

“The travel industry has transformed since the pandemic. People value experiences over goods, and the ease of digital booking has made travel more accessible than ever. Long-term, the demand for travel is only going up.”

While 2025 may present obstacles for U.S.-centric travel stocks due to weaker international demand, the broader global travel sector is still expected to grow. The International Air Transport Association (IATA) projects steady passenger growth over the next decade, and hotel groups are expanding in emerging markets to capture new demand.

The recent decline in international travel to the U.S., driven by currency strength, political sentiment, and economic uncertainty, is impacting hotel bookings, airline revenues, and investor sentiment. However, strong domestic travel, continued luxury spending, and growth in cruise bookings provide critical offsets.

For investors, strategic diversification and a long-term view remain key. And for the U.S. tourism industry, addressing global perceptions, improving affordability, and simplifying travel processes will be essential steps to reverse the trend and restore growth.