Travel and Tourism Industry of USA at a Glance
| Executive Summary | Over the five years to 2020, the Tourism industry has experienced largely slow, but steady revenue growth. The major sources of industry revenue include traveler accommodations, transportation, food and beverage services and recreation, entertainment and shopping. These areas are all highly influenced by consumer spending trends. Over the past five years, travel spending has increased in line with the overall healthy economy and increasing per capita disposable income levels, benefiting industry operators. However, the global spread of the COVID-19 (coronavirus) pandemic in 2020, along with the subsequent economic downturn, are expected to result in drastic revenue declines in 2020. As a result, over the five years to 2020, industry revenue is expected to decline an annualized 9.1% to $590.7 billion. The industry is expected to be significantly affected by the global spread of the coronavirus in 2020, with both industry revenue and profit declining at unprecedented levels. Industry services are substantial and significantly varied, ranging from accommodation services to travel to amusement parks and campsites. However, almost all major industry services require some form of in-person interaction. Such activities and services have experienced the greatest setbacks amid the pandemic, with travel restrictions from the Centers for Disease Control and Prevention (CDC) advising consumers on international and domestic locales to avoid and nonessential business closures resulting in many operators unable to generate revenue for portions of the year. Thus, in 2020, industry revenue is expected to decline 38.7%. |
Travel and Tourism Industry of USA Performance
| Key External Drivers | Domestic trips by US residents This industry relies on the number of domestic day trips and overnight stays. The more consumers travel domestically, the more likely they are to spend on tourism-related activities. Domestic trips by US residents are expected to decline in 2020; however, as international visitors become increasingly sparse, operators are expected to cling to remaining domestic demand. Consumer Confidence Index The Consumer Confidence Index measures consumers’ feelings regarding their current and future financial prospects. Changes in consumer sentiment have a significant influence on travel intentions, demand and expenditure. Trade tensions and the rapid spread of COVID-19 (coronavirus) have contributed to economic uncertainty in 2020. Thus, in 2020, the Consumer Confidence Index is expected to decrease. Inbound trips by non-US residents This industry is sensitive to changes in the number of nights international visitors spend in the United States. The longer a tourist stays in the United States, the more money they are likely to spend. The emergence of COVID-19 has resulted in the number of inbound trips declining rapidly, as consumers become warry of unnecessary international travel. Thus, in 2020, inbound trips by non-US residents are expected to decline significantly, posing a potential threat to industry operators. International trips by US residents Outbound US resident travel representing a potential opportunity for industry operators, as consumers willing to spend on tourist activities are more likely to do so domestically. |
| 00000000 Performance Over the five years to 2020, the Tourism industry has experienced largely slow, but steady revenue growth, as consumer spending, inbound trips by non-US residents and domestic trips by US residents increased for much of the period. The major sources of industry revenue include traveler accommodations, transportation, food and beverage services and recreation, entertainment and shopping. These areas are all highly influenced by consumer spending trends. Over the past five years, travel spending has increased in line with the overall healthy economy and increasing per capita disposable income levels, benefiting industry operators. However, as consumers spent more, industry operators experienced significant increases in both internal and external competition, prohibiting greater revenue gains. Moreover, the global spread of the COVID-19 (coronavirus) pandemic in 2020, along with the subsequent economic downturn, are expected to result in drastic revenue declines in 2020. As a result, over the five years to 2020, industry revenue is expected to decline an annualized 9.1% to $590.7 billion. COVID-19 setbacks The industry is expected to be significantly affected by the global spread of the coronavirus in 2020. Industry operators rely on a steady stream of visitors, both foreign and domestic, to keep operations afloat. Moreover, industry revenue growth closely mirrors and is influenced by general consumer spending trends. Industry services are substantial and significantly varied, ranging from accommodation services to travel to amusement parks and campsites. However, almost all major industry services require some form of in-person interaction. Such activities and services have experienced the greatest setbacks amid the pandemic, with travel restrictions from the Centers for Disease Control and Prevention (CDC) advising consumers on international and domestic locales to avoid and nonessential business closures resulting in many operators unable to generate revenue for portions of the year. Moreover, the unemployment rate is expected to skyrocket in 2020, leaving many consumers without reliable sources of income. Thus, consumer confidence is expected to plummet, resulting in significant reductions in discretionary spending, such as travel and leisure expenditure. Operators catering to primarily international tourists or operating establishments that contain many indoor or public social spaces are expected to fare worst, as inbound trips by non-US residents are expected to decline 78.9% in 2020, and visitors, domestic and international, avoid establishments with high risk for spread of the virus. Operators running establishments that are primarily outdoors, or can adapt to become so, or that rely more predominantly on domestic visitors, such as historic sites, campsites and national parks, are expected to fare relatively better. Still, airlines, accommodation establishments and entertainment facilities generate the bulk of industry revenue and are expected to experience significant setbacks in 2020. As a result, industry revenue is expected to decline 38.7% in 2020 alone. Travel trends Prior to 2020, domestic trips by US residents increased at a steady rate. With continuously improving technologies, US air travel is more affordable and safer than ever. Additionally, higher disposable incomes during much of the period made leisure travel possible for more Americans. New information systems also enabled businesses to serve clients over larger areas. Conversely, the number of inbound trips by non-US residents experienced volatility over much of the past five years, as the value of the US dollar similarly fluctuated, resulting in varying prices for foreign travelers. Families that would otherwise spend liberally on a trip overseas postponed plans or choose to travel domestically, resulting in tempered growth for international tourist arrivals. The trade-weighted index, which measures the value of the US dollar to its major trading partners, has increased an annualized 1.6% over the five years to 2020. Therefore, trips to the United States by international visitors have become relatively more expensive. As a result, operators have offered deals when possible. Nevertheless, tourism activity increased for much of the period. Over the past five years, disposable income levels increased relatively steadily until 2020. Similarly, consumer confidence experienced substantial growth early in the period. As a result, spending among domestic and foreign tourists increased during much of the period, driving revenue growth. The increased activity attracted prospective operators to the industry. However, many of these fledging operators are expected to exit the industry in 2020 due to deteriorating conditions. Thus, over the five years to 2020, the number of industry operators is expected to rise an annualized 0.3% to 356,950 enterprises. Profit trends Over the past five years, as a result of higher domestic demand and more leniency on ticket prices, the average industry operator experienced relatively high and steady profit during much of the period. Moreover, operators in certain areas of the industry, such as accommodations and entertainment, worked to incorporate more automated systems into their operations, thereby curbing wage costs. While wages increased for much of the period, they did so at a slower rate than industry revenue growth, resulting in lower average annual wages for industry employees. The value of wages is expected to decline significantly in 2020, due to operators leaving the industry. As a result, over the five years to 2020, industry wages are expected to decline an annualized 3.1% to $148.5 billion; however, for operators remaining in the industry, wages are expected to increase substantially as a share of revenue, significantly constricting industry profit. Moreover, in 2020, as the industry greatest contributors experience significant setbacks, profit is expected to plummet. Airlines and hotels, two of the largest segments for the industry, are expected to experience significant declines in demand. Moreover, operators in these segments are expected to contend with higher operating costs associated with ensuring the safety of their employees and customers. As a result, industry profit, defined as earnings before interest and taxes, is expected to account for a loss of 4.6% in 2020, representing an unprecedented decline for the industry. Increasing competition The industry operates in an increasingly competitive market. The same can be said of nontraditional destinations in Eastern Europe, such as Turkey and Croatia. This competition has negatively affected the industry, leading to slower growth. Furthermore, a larger number of consumers have begun to take advantage of cost savings, increasing the rate of international travel in turn. Prior to the coronavirus outbreak, the number of international trips by US residents increased substantially. While this growth can be beneficial to airlines, this trend has been detrimental to most operators attempting to lure more consumers. This trend has resulted in severe price competition, offsetting many gains in input savings and consumer metrics, such as increases in per capita disposable income. |
| Historical Performance Data Year Revenue ($m) IVA ($m) Establishments (Units) Enterprises (Units) Employment (Units) Exports ($m) Imports ($m) Wages ($m) Domestic Demand ($m) Domestic Trips (Million) 2011 903,089 294,871 364,692 317,250 5,106,940 N/A N/A 173,460 N/A 641 2012 922,533 299,642 378,894 330,689 5,175,690 N/A N/A 169,770 N/A 645 2013 952,857 313,054 396,636 343,515 5,063,640 N/A N/A 166,360 N/A 648 2014 958,331 327,385 405,591 349,565 5,174,210 N/A N/A 167,733 N/A 665 2015 951,508 361,349 404,273 351,528 5,252,750 N/A N/A 173,837 N/A 698 2016 958,030 362,144 413,488 363,787 5,346,040 N/A N/A 178,486 N/A 722 2017 962,370 352,805 432,637 380,567 5,388,520 N/A N/A 180,098 N/A 744 2018 979,142 348,960 451,662 397,211 5,471,634 N/A N/A 179,249 N/A 780 2019 962,841 349,015 458,533 404,179 5,554,865 N/A N/A 179,614 N/A 813 2020 590,674 153,036 396,690 356,950 4,805,670 N/A N/A 148,516 N/A 306 |
Industry Outlook
| Outlook | Over the five years to 2025, the Tourism industry is anticipated to gradually recover from setbacks incurred in 2020 amid the COVID-19 (coronavirus) pandemic. Travel trends Over the five years to 2025, the industry is projected to benefit from a recovery in the domestic economy. Following unprecedented spikes, the national unemployment rate is expected to decline an annualized 5.4% over the next five years, resulting in rising disposable income levels and a return to spending for many consumers. When consumers are willing to spend more money, they are also more willing to spend on discretionary purchases, such as travel. Other noneconomic factors include individuals’ and families’ available free time to travel, cultural and family links and the age of travelers. Moreover, time spent on leisure and sports is forecast to increase over the next five years. Therefore, domestic trips by US residents are forecast to experience a resurgence, rising an annualized 23.5% over the next five years. Concurrently, the number of inbound trips by non-US residents is forecast to increase an annualized 37.2% over the five years to 2025, as global economies begin to recover from the coronavirus pandemic and tourists across the globe resume travel. Unfortunately, European economies are forecast to stagnate or grow marginally, hindering demand from this region. Similarly, travel from Canada is expected to decrease slightly, predominantly due to rising consumer debt and volatile commodity prices, which have dampened consumer sentiment. Instead, emerging economies in East Asia and South America will likely drive growth. For example, Mexico, South Korea and Argentina have experienced increased disposable income, spurring demand from leisure and business travelers. Though consumers from advanced economies once dominated global tourist arrivals, the share of global arrivals between advanced economies and emerging economies is now fairly equal. Over the next five years, the industry will likely rely on travelers from emerging economies. Additionally, a changing political climate may also have a lasting effect on tourism, as any legislative changes pertaining to inbound travelers could dampen the number of foreign tourists, dampening revenue growth in turn. As a result, operators must remain vigilant, offering deals when possible and encourage consumers to travel to their establishments to maximize revenue growth. Industry landscape Over the next five years, merger and acquisition activity is anticipated to increase. However, the number of new operators entering the industry is forecast to outpace any consolidation activity, particularly the number of tour operators and travel agents. The number of industry operators is expected to increase at an annualized rate of 5.4% to 463,249 enterprises over the five years to 2025, due to an uptick in travel demand fueling overall growth. Industry employment is expected to rise at an annualized rate of 5.7% to 6.3 million workers during the same period. The most significant change over the next five years will likely be the continued move toward online bookings and reservations that offer relatively low-cost transactions. Major operators are expected to acquire global, regional and local websites to improve revenue and profit performance and capture a larger share of this growing area. This trend will likely result in a need for far fewer travel and customer service agents and brick-and-mortar establishments, particularly independent ones, as online travel information, booking and payment increasingly become the norm. While a resurgence in demand for industry services is expected to boost industry profit, it is expected to remain below pre-pandemic levels. The price of crude oil is expected to increase an annualized 6.5% over the next five years, resulting in higher travel costs. Since operators in the air travel segment make up the largest portion of the industry, fluctuations in purchase costs for them significantly influence the industry’s overall cost structure. Moreover, as airlines and motels struggle to regain losses incurred amid the coronavirus pandemic, many are expected to attract customers with discounts and special offers, cutting into returns. |
| According to the Bureau of Economic Analysis, direct tourism spending relating to the Tourism industry can be categorized into four broad segments, which include transportation, recreation and entertainment, accommodations and food service and drinking places. With the emergence and spread of the global COVID-19 (coronavirus) pandemic in 2020, consumers have become increasingly wary or barred from traveling to certain destinations or by certain modes of transportation. As a result, air travel, both domestically and internationally, is expected to plummet in 2020, as consumers heed the advice of the Center for Disease Control and Prevention (CDC) and avoid visiting certain countries or states with high rates of coronavirus cases. Moreover, as the United States limits visitors and countries limit travel to the United States, inbound tourism is expected to decline significantly. Thus, nearly all product segments are expected to feel the effects, as hotels and motels experience declines in demand amid lessening travel and health concerns and restaurants contend with state regulations regarding dining options. Transportation Transportation, including domestic and international travel, generally accounts for the largest share of industry revenue. This segment includes intrastate and interstate airlines and international operators. Airline tickets are expensive purchases and often take up a substantial part of a traveler’s total budget. The other significant cost associated with most vacations is gasoline used for automobile trips. According to the 2017 MMGY Global study (latest data available), the method of transportation used in 39.0% of domestic vacations taken was automobiles. This is especially true for lower-income groups and families that tend to travel on a tighter budget. Automobile rentals are a relatively low contributor to industry revenue as the majority of leisure travelers use their personal vehicle for vacations. In 2020, transportation is expected to decline as a share of industry revenue, as consumers limit extensive travel amid the coronavirus pandemic. Airlines, which generally generate the largest share of revenue for the segment, are experiencing significant declines in demand, and due to health and safety regulations, many have reduced capacity for their flights to ensure passenger safety. Instead, consumers willing to travel are opting for less expensive means and those that are more personalized, such as car rides, to avoid the spread of the virus. Moreover, travel restrictions and high-risk states have kept many consumers from traveling more extensively, along with declining disposable income levels due to spiking unemployment rates. As a result, in 2020, the transportation segment is expected to account for 39.6% of industry revenue. Accommodation Accommodations can be segmented in three different ways, including by accommodation styles, such as hotels, resorts, serviced apartments, motels, guest houses, RV parks and camping grounds, bed and breakfasts, backpacker hostels or star rating. The accommodation industry has become increasingly fragmented over the past 30 years as the tourism market has become more segmented, with visitors demanding different accommodation depending on various aspects, such as length of stay, budget, travel purpose and travel party. In 2020, the accommodation segment is expected to increase slightly as a share of industry revenue. However, the segment is expected to be significantly affected by the coronavirus pandemic, with demand for the segment’s services declining. Still, this decline is expected to be eclipsed by declines in other segments, resulting in the accommodation segment’s increase as a share of revenue. Still, the segment is expected to struggle, as travel across the board declines and consumers have less need for accommodations. However, as many operators in the segment have increased health and safety regulations, removing nearly all common or shared spaces, consumers have become more willing to enlist such services. The level of this is still expected to be dismal compared with years prior. However, the accommodation segment is expected to account for 24.5% of industry revenue in 2020. Food service and drinking places The food service establishments segment includes quick and full-service establishments, as well as coffee shops and bars. This segment is expected to experience significant declines in 2020, as many food service operators experienced weeks or months of little or no revenue generated amid nonessential business closures. Moreover, depending on the state of operation and the state’s level of exposure, food service establishments have been forced to adapt to shifting regulations quickly. The segment’s operating costs are expected to rise substantially in 2020 due to the changes in regulations, while limited capacity and output are expected to prohibit many from generating adequate revenue. As a result, in 2020, food service establishments are expected to account for 12.8% of industry revenue. Recreation and entertainment The recreation and entertainment segment is a broad service segment and comprises many products and services, such as spending on souvenirs, amusement and theme parks, museums, sporting events and other retail activities. Historically, the segment has accounted for the second-highest share of revenue, as amusement parks, theme parks, museums and national parks often serve as the primary destination for many domestic and international travelers. Additionally, certain establishments in the segment offer food service and accommodation services, resulting in even greater sums spent at such locales. However, in 2020, certain parts of the segment are expected to experience drastic declines in demand. For instance, amusement and theme parks are expected to decline significantly as a share of industry revenue. Such establishments are generally expensive destinations and include myriad shared public spaces, which prove difficult to sanitize regularly amid crowds. As a result, such establishments have experienced unprecedented declines in demand, with major player Disney expected to experience revenue declines of 85.0% in 2020. However, primarily outdoor establishments, which require few, if any, in-person transactions, such as historic sites, campsites and national parks, are expected to capture the remaining domestic demand. These establishments are generally less expensive than other establishments in the segment, enticing cash-strapped customers further. Finally, while demand for sporting and musical events is expected to remain high, regulations regarding such events remain high, with few in-person events occurring. Thus, in 2020, the recreation and entertainment segment is expected to account for 23.0% of industry revenue. |
| Several factors, including age, income, purpose of travel and origin of departure, can determine the major markets of the Tourism industry. | |
| Major market estimates are based on data provided by the US Travel Association and IBISWorld estimates. Due to the global spread of the COVID-19 (coronavirus) pandemic in 2020, demand from all major market segments is expected to contract in 2020. The contagious nature of the virus has resulted in many consumers, domestically and internationally, becoming increasingly concerned with health and safety issues at industry establishments. For instance, many consumers have postponed or canceled vacations due to health concerns regarding flying or staying in hotels. Moreover, the pandemic has resulted in staggering unemployment rates due to nonessential business closures, tightening budgets and a move to e-commerce on the consumer’s part, as many forego in-person shopping due to health concerns. As the unemployment rate rises, consumer confidence is expected to plummet. Thus, even if consumers feel better about travel and health issues associated with it, many will reduce tourism expenditure due to financial concerns. As a result, markets that generally spend greater sums or who participate in industry services that are generally more expensive, such as international visitors and large business events, are expected to decline as a share of revenue. Meanwhile, domestic leisure travel is expected to capture a greater share of industry revenue, as domestic consumers become the predominant market for industry operators. Domestic leisure travelers Domestic leisure travelers include domestic consumers traveling within the United States for leisure purposes. Over the past five years, the segment has remained a steady source of income for industry operators. During much of the period, consumers experienced higher rates of disposable income, resulting in greater spending on vacations and leisure activities. However, competition for the segment’s spending increased significantly over the past five years, as airlines increasingly offered less expensive international flights. This, coupled with greater funds, resulted in more consumers opting for overseas vacations. Additionally, in 2020, while the segment is expected to increase as a share of revenue, domestic consumers are expected to spend less per visit than in previous years. Due to the economic downturn amid the coronavirus pandemic, many consumers are limiting spending and opting for day trips rather than overnight trips, which require a hotel or other lodging. Still, demand from the segment is expected to keep operators afloat, as many foreign tourists become deterred from traveling to the United States amid consistent coronavirus case increases. As a result, in 2020, domestic leisure travelers are expected to account for 52.5% of industry revenue. Business, meeting, events and incentive travelers Within the business, meeting, events and incentive travelers segment, it is an estimated 50-50 split between general business spending and travel associated with meetings, events and incentive travelers. Historically, the segment has remained relatively stable, as demand from the market is determined less by consumer expenditure and more by business stability. However, in 2020, due to the coronavirus pandemic, the segment is expected to contract. With many businesses adopting a work-from-home model amid the pandemic’s outbreak, few are willing to require extensive travel for their workforces. Moreover, the additional costs incurred due to health and safety standards have deterred many companies from the option. Still, business travel is expected to account for a greater share of revenue than inventive travelers, as certain professions require such travel. Thus, in 2020, business travelers are expected to account for 17.6% of industry revenue, while meeting, events and incentive travelers are expected to account for 12.5% of industry revenue. International visitors International visitors have historically represented the second-largest market segment for the industry. However, in 2020, international visitors are expected to decline as a share of revenue, as the global spread of the coronavirus deters many from visiting. As the pandemic continues to spread, travel warnings and bans have kept a certain portion of the global population from even attempting to visit the United States. Moreover, like domestic tourists, international visitors have become increasingly hesitant to purchase pricey international plane flights or to board airplanes amid concerns regarding the contagious nature of the virus. As a result, in 2020, international visitors are expected to account for 17.4% of industry revenue. | |
| Exports in this industry are <!– /* Font Definitions */ @font-face {font-family:”Cambria Math”; panose-1:2 4 5 3 5 4 6 3 2 4; mso-font-charset:0; mso-generic-font-family:roman; mso-font-pitch:variable; mso-font-signature:-536869121 1107305727 33554432 0 415 0;} @font-face {font-family:Calibri; panose-1:2 15 5 2 2 2 4 3 2 4; mso-font-charset:0; mso-generic-font-family:swiss; mso-font-pitch:variable; mso-font-signature:-469750017 -1073732485 9 0 511 0;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-unhide:no; mso-style-qformat:yes; mso-style-parent:””; margin-top:0in; margin-right:0in; margin-bottom:10.0pt; margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:”Calibri”,sans-serif; mso-fareast-font-family:Calibri;} .MsoChpDefault {mso-style-type:export-only; mso-default-props:yes; font-family:”Calibri”,sans-serif; mso-ascii-font-family:Calibri; mso-fareast-font-family:Calibri; mso-hansi-font-family:Calibri; mso-bidi-font-family:Calibri;} .MsoPapDefault {mso-style-type:export-only; margin-bottom:10.0pt; line-height:115%;} @page WordSection1 {size:8.5in 11.0in; margin:1.0in 1.0in 1.0in 1.0in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.WordSection1 {page:WordSection1;} –> When the regional population is compared with domestic tourism expenditure by region, there is a higher proportion of tourism establishments in the Southeast, which accounts for 24.7% of industry establishments in 2020, which includes Florida, accounting for 9.5% of establishments. Following the Southeast is the Southwest (10.1% of establishments), which includes the Grand Canyon; and, the West (24.9%), which includes California (12.8%). The Travel Industry Association of America also lists the top 10 states in terms of domestic and international traveler expenditure as California, Florida, New York (8.3%), Texas (7.5%), Illinois (5.0%), Nevada, Pennsylvania, Georgia, New Jersey and Virginia. There has not been a significant change in this distribution over the five years to 2020. |
Competitive Landscape
| Market Share Concentration | Concentration in this industry is |
| Key Success Factors | IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are: Ability to quickly adopt new technology: The ability to adapt to new technology, such as developing a website or linking with relevant internet booking and information sites, can help an operator increase revenue. Proximity to key markets: It is essential that operators are located near target markets or that they are easily accessible to these markets. Access to a multiskilled and flexible workforce: Recruiting a multiskilled labor force to service guests’ needs, particularly during peak periods, will likely ensure high visitor satisfaction. Receiving the benefit of word-of-mouth recommendations: Providing a quality experience to guests in all areas will likely ensure repeat patronage and word-of-mouth recommendations. |
| Profit Profit varies significantly among industry players, depending on the type of service they provide and the associated costs of running their operation. However, across industry segments, profit generally fluctuates in line with changes in revenue. Such fluctuation is particularly relevant during economic downturns. It may not be possible to adjust staff and other fixed costs as quickly as desired in the short term or for operators to hold back on their staff retrenchment plans until the severity and length of the downturn become clear. Still, not all operators will have the same experience, due to the vast difference in how operates participate in the industry. For instance, operators in the airline segment generally fair better than their competitors in the industry. However, in 2020, operators across all segments of the industry are expected to experience drastic profit declines, as the COVID-19 (coronavirus) pandemic results in mass declines in consumer demand. For instance, operators in the airline segment are expected to experience substantial declines as operating costs increased in 2020 amid heightened health and safety concerns, while ridership declines significantly, as customers expressed hesitancy to board airplanes and airlines reduced seating. Similarly, hotels and motels have experienced increased operating costs and weakening demand, resulting in many offering discounted rates to entice potential customers. Operators of all sizes are expected to be affected similarly, with giants such as Delta Airlines expected to experience unprecedented profit declines of 243.7% in 2020. Thus, in 2020, the average industry operators’ profit, defined as earnings before interest and taxes, is expected to decline, accounting for a loss of 4.6%. This represents a significant decline from 14.5% in 2015. |
Wages Regardless of the operating segment, nearly all operators rely heavily on their workforce. Thus, the industry is highly labor-intensive due to the need for high levels of customer service, one of the largest areas that operators compete in. Wages are one of the largest expense categories in this industry, especially for operators of hotels and retail establishments, where labor costs can represent more than 25.0% of revenue. Over the past five years, wages represented a relatively stable share of the average operators’ costs; however, in 2020, the industry’s cost structure is expected to shift due to the spread of the COVID-19 (coronavirus) pandemic. Industry revenue and profit are expected to decline significantly in 2020. While wages are similarly expected to decline, they are estimated to do so at a slower rate than revenue, as operators attempt to curb layoffs and furloughs, fighting to maintain their standing workforce. As a result, wages are expected to account for 25.1% of industry revenue in 2020, representing a significant increase from 18.3% in 2015.
Purchases Purchases represent the largest cost incurred by industry operators. However, for some operators, wage costs often outweigh purchases. This segment consists of goods purchased from vendors for use in the provision of goods and services to consumers. Examples of purchases include fuel for aircraft, which can be as high as 35.0% of total revenue for these operators; bed linen for accommodations operators; and food and alcoholic and nonalcoholic beverages for operators in the hospitality industries. In 2020, purchases are expected to account for 25.1% of revenue. Over the five years to 2025, purchases as a share of revenue will likely remain relatively stable, as there are many components involved in the segment, so when one increases, it is likely that another will decrease. This is due to the enormity of the industry and the number of other industries it encompasses.
Depreciation Operators in this industry are required to depreciate assets and other nonannual expenses over a period of time. The cost of depreciation varies between operators and the size and number of the assets involved. The industry’s range of depreciable assets includes bedding equipment, chairs, tables, other furnishings and fittings and equipment. Again, airlines that operate within this industry, given their relatively high capital intensity, will likely have a higher proportion of depreciation charges on aircraft and terminal facilities. Amusement and theme parks are also subject to significant depreciation expenses due to the need to constantly upgrade facilities with new rides and attractions. Depreciation has risen slowly over the past five years as the economy has improved and operators have invested more heavily in their businesses. In 2020, depreciation costs are expected to account for 5.4% of industry revenue. However, as mentioned previously, this figure varies significantly depending on the location and segment a company operates in.
Rent Rent is a crucial cost for the industry. Industry operators generally compete based on location, as consumers spring for convenience. Thus, in 2020, rent costs are expected to account for 6.3% of industry revenue. However, rent costs vary significantly based on what aspect of the industry operators participates in.
Utilities Utilities include the cost of operating industry facilities and fueling industry vehicles. These costs, similarly to rent, can vary significantly depending on what portion of the industry an operator participates in. In 2020, utility costs are expected to account for 2.0% of industry revenue
Other Costs Other costs account for 47.9% of revenue in 2020, and this segment has remained relatively stable over the past five years. This segment includes miscellaneous expenses, such as insurance and administrative and general overhead costs associated with providing a service.
While the Tourism industry is diverse, and the level of competition between operators differs depending on the segment they operate in.
A consumers’ product and service needs can also change depending on their trip. The modern tourist is now searching for quality of experiences when traveling, which has led to significant opportunities for new entrants into most industry segments. In some segments, there is a requirement to have liquor and gaming licenses, which can impose an entry barrier in some states. Additionally, the rise in popularity of sites, such as TripAdvisor, which provide customer reviews on popular tourist destinations, including restaurants, sightseeing destinations, hotels and more, have resulted in industry operators increasing the marketing expenses to attract more consumers and reviews through such services.
| Globalization in this industry is |
| Highly globalized The Tourism industry is subject to a high level of globalization, with an estimated 17.5% of industry revenue generated from international visitors in 2020. Additionally, a high number of Americans travel abroad for leisure and business in 2020, which will likely surpass the number of inbound arrivals by non-US residents. According to the World Tourism Organization (UNWTO), international tourism accounts for 30.0% of the world’s exports of services and 7.0% of overall exports of goods and services. The United States ranks first in the world in international tourism receipts and second in arrivals to France. Leading industry operators compete fiercely in a global marketplace with major players, such as Delta Air Lines Inc., United Airlines Inc., Hilton Worldwide Holdings Inc., Marriott International Inc. and the Walt Disney Company, all operating across international borders. The level of globalization varies depending on the market and size of operators. The airlines segment is the most globalized segment of the Tourism industry, although this is not because carriers fly across international borders, but because of the extremely large capital requirements in new aircraft and maintenance facilities. Global operators The level of globalization in the industry has increased, particularly in the accommodation and travel agents’ segments. Global operators in the accommodation segment that have established a presence in the United States to service international travelers have supported this trend. Similar to airlines, large hotel developments have high capital requirements costing hundreds of millions of dollars. As a result, only large corporations have access to the financial resources required. Travel agents and tour operators are globally linked to operators by computerized information, reservations and bookings and online payment systems. Emerging economies growing share The surge in international arrivals from emerging economies is also likely to promote further globalization in the Tourism industry. Visitors from Asia, South America and the Middle East are more likely to choose package deals and organized tours catered to their preferences compared with visitors from Western Europe or Canada. Therefore, local operators often partner with international operators to gain access to the package deal supply chain, thus increasing the level of international involvement. COVID-19 In 2020, with the emergence of COVID-19 (coronavirus), tourism within and outside the United States has been significantly affected, particularly air travel and international travel, as the Centers for Disease Control and Prevention has set in place several travel recommendations to countries with a high level of ongoing transmission. Moreover, several nations have restricted US consumer tourism travel within their countries, due to the continued spread throughout the country. As fewer consumers chose, or are able to, travel long distances, industry globalization is expected to contract slightly. However, since the duration of the pandemic remains to be seen, the longevity of the effects is unknown. Still, as companies across segments of the industry adapt to the new normal, many are expected to cater to tourist attractions a bit closer to home, with less risk of health and safety issues associated with longer or overnight trips. |
Major Travel and Tourism Companies in the USA
While US Airways contributes less to the combined entity’s domestic segment, the airline outperformed its partner in terms of revenue growth over the past five years. The company’s air transport business model remained popular during the period due to its range of destinations and affordable pricing. However, like most airlines, American Airlines Group is expected to experience significant setbacks in 2020 due to the global COVID-19 (coronavirus) pandemic and economic downturn. As of June 2020, the company reported that flights decreased by 76.0% when compared with the previous year. A combination of consumer uncertainty regarding health, safety and spending, combined with hikes in operating costs and reduced seating, is expected to result in monumental declines for the company. Furthermore, in August 2020, the company announced it would cut flight capacity by 55.0% moving forward, suspend travel to 15 US cities and layoff nearly 19,000 employees. As a result, over the five years to 2020, the company’s industry-relevant revenue is expected to decline an annualized 12.8% to $17.9 billion, including an estimated decline of 57.5% in 2020 alone. However, the company was provided with $5.2 billion in financial assistance through the Corona Virus Aid, Relied and Economic Security (CARES) Act, which is expected to assist the company moving forward. For more information, please see the Domestic Airlines industry and International Airline industry reports (IBISWorld reports 48111b and 48111a, respectively
Brand Names Delta, Northwest
Delta Air Lines Inc. (Delta) is one of the world’s largest airlines. Headquartered in Atlanta, the company has major hubs in Cincinnati, Detroit, Memphis, Minneapolis, New York City, Salt Lake City, Amsterdam and Tokyo-Narita. Delta and its subsidiaries offer service to more than 300 destinations in 57 countries through more than 13,000 daily flights. In 2008, Delta merged with rival Northwest Airlines in a move to become the largest provider of air transport in the United States and globally. The consolidation increased Delta’s market share. In 2019 (latest data available), Delta generated $47.0 billion global revenue and employed more than 90,000 full-time staff members.
In 2016, Delta entered a cooperation agreement with Aerovias de Mexico SA de CV, operating as Aeromexico. The agreement has enabled the companies to better coordinate efforts to expand their offered destinations and flight frequencies. The agreement has also enabled the companies to improve their connecting flight schedules and overall operations. Moreover, the two companies were able to improve on-ground experience by co-locating and investing in airport facilities, such as gates and lounges.
Financial performance While Delta experienced largely stable growth over the five years to 2020, much of its growth over the past five years is attributable to the Northwest Airlines acquisition in 2008, which led to a significant gain in market share over the past decade. Higher ticket prices, which were raised in response to soaring fuel costs, have also spurred revenue growth. Fuel price volatility continues to represent a significant risk to Delta’s business, and fuel costs now represent about 33.0% of the company’s operating expenses. Still, the company reported largely positive growth over much of the past five years. However, in 2020, Delta’s industry-relevant revenue is expected to plummet due to the COVID-19 (coronavirus) pandemic. Amid the spread of the pandemic, air travel quickly became identified as a risky proposition. Moreover, due to nonessential business closures, spiking unemployment rates and declining consumer confidence, demand for Delta’s services decline significantly. While passengers began returning to the sky following the initial wave of coronavirus cases, the company continues to struggle with ticket sales. Moreover, operating costs
Brand Names Walt Disney World Resort, Disneyland Resort, Disney Vacation Club, Disney Cruise Line, Adventures by Disney
The Walt Disney Company (Disney) is a global entertainment company headquartered in Burbank, CA. Disney was founded in 1923 as a cartoon studio and has expanded its operations considerably to include several ventures, such as film production, TV, theme parks, resorts and travel. In fiscal 2019 (year-end September), Disney generated $59.6 billion in total revenue and employed more than 223,000 workers (latest data available).
Disney contributed $325.0 million to the cost of development, while the Hong Kong government, which owns 57.0% of the venture, contributed the remainder. These international operations are considered industry-relevant. Most recently, the company completed the much-anticipated Star Wars: Galaxy’s Edge theme park within its parks in Anaheim, CA, and Orlando, FL. The themed areas took four years to complete. Upon its completion, the parks experienced an uptick in visitors; however, the draw quickly faded, resulting in the resignation of the company’s President of Disney Parks, Western Region.
Financial performance Despite fluctuating demand, Disney’s industry-relevant operations experienced stable growth over much of the five years to fiscal 2020. The company has consistently outpaced the industry over the past five years and has benefited from strong gains in per capita disposable income and a rise in consumer spending. Disney’s financial performance during the period has been driven by higher ticket prices and the growth of in-park food, beverage and souvenir expenditures. However, this revenue growth has been partly offset by a rise in costs, as the company has invested heavily in several of its facilities over the past five years. Moreover, in 2020, the company is expected to experience substantial setbacks, far outpacing the industry as a whole. Due to the COVID-19 (coronavirus) pandemic and nonessential business closures early in the year, Disney’s theme parks remained closed to visitors for a significant portion of the year. In July 2020, the company began opening various areas of the parks in phases; however, due to lower-than-expected capacity and high operating costs, the company has reduced hours and kept certain areas closed. Moreover, reluctance from consumers to travel or stay at the company’s theme parks due to financial and health concerns is expected to hinder late-year growth. Thus, over the five years to fiscal 2020, the company’s industry-relevant revenue is expected to decline an annualized 28.2% to $2.6 billion, including an estimated decline of 85.0% in 2020 alone. For more information, please see the Amusement Parks industry report (see IBISWorld report 71311).
Hilton does not release revenue figures for its franchised and managed locations in its publicly available financials. However, IBISWorld has used revenue-per-available-room (RevPAR) figures and the company’s reported number of rooms to determine the company’s industry-relevant revenue and market share. Over the five years to 2020, Hilton experienced volatile growth, largely due to heightened competition from internal and external operators. Moreover, the company has undergone restructuring and several acquisitions in an attempt to salvage and better market their brands. Still, the company failed to produce steady revenue increases. Moreover, in 2020, the company’s industry-relevant revenue is expected to decline 45.5% due to the COVID-19 (coronavirus) pandemic and economic downturn. While consumer sentiment regarding travel eased somewhat during the year, consumers remain hesitant to travel in the way they did pre-covid. Large-scale vacations and destination trips have largely been forgone in favor of small, day-trip excursions. As a result, demand for hotel services is expected to decrease significantly in 2020, as consumers watch spending and remain hesitant to stay in hotels due to health concerns. Thus, over the five years to 2020, industry-relevant revenue is expected to decline an annualized 13.4% to $573.1 million. For more information, please see the Hotels & Motels industry report
Brand Names Marriott, JW Marriott, Courtyard, TownePlace Suites, Fairfield Inn, The Ritz-Carlton, Springhill Suites, Ramada Inn, Renaissance
Headquartered in Bethesda, MD, Marriot International Inc. (Marriott) is a global lodging company, operating more than 1,900 company-owned establishments and more than 4,400 franchised and licensed properties. The company operates under various brands, including Marriott, the Ritz-Carlton, Renaissance, Courtyard, TownePlace Suites and Bulgari. It also develops and operates vacation ownership resorts under the Marriott Vacation Club, Horizons, the Ritz-Carlton Club and Grand Residences brands, while also running Marriott Executive Apartments. In 2019 (latest data available), the company employed more than 177,000 workers globally, with an estimated 61.0% of the company’s operations based out of the United States.
Financial performance Due to the nature of Marriott’s business structure, with its focus on management, franchising and licensing, IBISWorld projects the company’s market share through estimated network sales rather than revenue earned. Over the past five years, the company experienced volatile growth, with strong performance early during the period due to its merging with Starwood Hotels and Resorts in 2016. However, following the strong growth due to the acquisition, the company experienced declines starting in 2018. In 2020, Marriott’s industry-relevant revenue is expected to plummet due to the COVID-19 (coronavirus) pandemic and economic downturn. Hotels are expected to experience drastic declines in demand amid the pandemic, as consumers are hesitant to travel or stay in hotels due to health concerns. Moreover, due to financial insecurity, many consumers who are less discouraged due to health issues are still expected to cancel or postpone vacations. Finally, business functions, such as large meetings and events, are expected to decline, as companies refrain from asking their employees to travel amid the pandemic. As a result, Marriott’s industry-relevant revenue is expected to decline an annualized 4.7% to $494.7 million over the five years to 2020, including an expected decline of 49.8% in 2020 alone. For more information, please see the Hotels & Motels industry report (IBISWorld report 72111).
| Expedia Group |
| Market Share: 0.5% |
| Expedia Group (Expedia) is an internet-based travel website headquartered in Bellevue, WA. The company was created in 2005 when InterActiveCorp spun off its travel businesses as a new publicly traded entity. Expedia is one of the world’s largest online travel services, operating through more than 20 branded websites that include Hotels.com, Hotwire.com, Worldwide Travel Exchange, Expedia Affiliate Network, Classic Vacations, Egencia, eLong and TripAdvisor. These websites enable business and leisure travelers to research, plan, book and manage travel without a traditional travel agent. Collectively, the company receives a total of about 50.0 million unique visitors on a monthly basis. In 2019 (latest data available), Expedia generated $12.1 billion in total revenue. The company employs more than 18,500 full-time and part-time staff, meaning it earns more revenue per employee than its brick-and-mortar competitors. Expedia’s strategic focus is to increase its online presence and sales. Over the past decade, this has been achieved through several acquisitions of established online sites. More recently, the company has expanded its services into new markets and emerging countries, and in 2019 (latest data available), the company earned an estimated 55.0% of its annual revenue in the United States. While consolidation within the airline segmented threatened the company’s operations over the past decade, Expedia responded to the threat by merging with several other major online travel booking sites, including Orbitz Wordlide Inc. and Travelocity, just prior to the five-year period. As a result, Expedia experienced largely positive growth over the five years to 2020, growing to become one of the largest online booking sites. In 2017, the company further expanded its reach, acquiring the majority share of SilverRail, a major rail technology distributor. However, in 2020, Expedia, like most industry operators, is expected to experience significant setbacks due to the COVID-19 (coronavirus) pandemic and economic downturn. The pandemic’s global spread resulted in significant declines in consumer travel, due to financial setbacks and health concerns. As a result, fewer consumers require the services of Expedia, resulting in drastic declines in users and extremely high cancelation rates. As consumers are expected to remain hesitant to travel excessively for the remainder of 2020, Expedia’s industry-relevant revenue is expected to drop a staggering 53.0% in 2020 alone, with the company generating $3.2 million in industry-relevant revenue. |
| The Tourism industry has historically experienced a relatively low level of revenue volatility. However, over the five years to 2020, the industry is expected to experience moderate revenue volatility due to substantial losses expected late in the period. Industry revenue is most affected by changes in per capita disposable income, domestic and international travel and economic, social and geopolitical factors. Over the past five years, the Tourism industry experienced moderate, though largely consistent, revenue growth. Domestic consumers increased their travel activity, as rising disposable income levels enabled greater travel and use of industry services. While inbound tourist activity experienced slight volatility, an increase in foreign tourists additionally buoyed industry revenue. Still, the industry is one of the most highly competitive industries on a global basis, with competition spreading and growing each year. In fact, rising competition, particularly from international destinations, contributed to some volatility early in the period. As domestic consumers found themselves with more disposable income and greater confidence in the financial position, many opted to travel internationally rather than domestically. Still, while this resulted in slightly decreases or slowdowns in revenue growth, the industry experienced little volatility until 2020. In 2020, the COVID-19 (coronavirus) pandemic and economic downturn are expected to contribute to significant volatility in industry revenue growth. Due to the pandemic outbreak, domestic and international consumers limited or halted traffic for significant portions of 2020. While the country has slowly loosened travel restrictions or guidelines, domestic and international travel are expected to plummet in 2020, declining 62.4% and 78.9% in 2020, respectively. Moreover, despite less stringent travel restrictions, unemployment increased drastically, leaving many consumers with little disposable income and low confidence. Lastly, many industry operators experienced periods of forced business closures amid the heightened spread of the virus. Even when permitted to reopen, drastic declines in demand due to hesitant customers kept revenue growth from matching prior years. As a result, revenue is expected to decline 38.7% in 2020 alone, an unprecedented decline in industry revenue over the past five years and historically. | |
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| The level of industry assistance is |