Tourism 2012-01-01 to 2012-03-31
Real tourism spending increased by 3.4% in the U.S. in the first quarter of 2012, when compared with the last quarter of 2011. The two industries with the highest gain from the previous quarter were food services and drinking places and traveler accommodations, with annually-adjusted growth rates of 5.6% and 4.8%, respectively. Moreover, all industries and sub-industries increased from the previous quarter, and overall tourism spending has now increased for the past eleven quarters in a row, even after adjusting for inflation.
Real spending on travel and tourism managed to outpace the rest of the economy in the first quarter of 2012, increasing by 0.85% from the previous quarter while Gross Domestic Product (GDP) only grew by 0.48%. This marks the second consecutive quarter in which tourism spending has outpaced GDP. However, the pace at which tourism output grew decelerated from the fourth quarter of 2011, after increasing by 1.1% from the previous quarter. Interestingly, both real GDP and real tourism output have advanced for the past eleven quarters—or just under three years—showing a positive long-term trend, and suggesting that a “double dip” in the economy is unlikely.
Inflation-adjusted spending decelerated from the last quarter of 2011 in most categories, including traveler accommodations, passenger air transportation, other transportation-related commodities, and food services; although each of these categories still posted gains. Meanwhile, the categories of recreation, entertainment, and shopping not only posted gains but did so at an increasing rate from the previous quarter, with recreation and entertainment reversing direction—as that category declined in the fourth quarter of 2012. Even though the U.S. economy continues to recover, as employment has improved and personal income is rising, the deceleration of growth of overall tourism spending likely caused last quarter’s price hikes. Passenger air transportation contributed the most to price gains in the tourism sector, increasing by nearly 3% from the previous quarter. Moreover, prices of all tourism-related goods and services increased by 1.5% in the first quarter of 2012. Add to this fact the strength of the dollar in that quarter, which likely put a strain on international tourism to the U.S., especially those originating from Eurozone members, further contributing to the deceleration of overall tourism growth.
Moving forward, tourism seems likely to continue its growth trend, as U.S. GDP maintains its rebound. Prices may continue to be a factor, especially as the Fed keeps interest rates low, something they continue to do through late 2014. However, fuel prices were listed as a cause of the airfare price hikes in the first quarter, and since then global oil prices–directly correlated to fuel prices–have dropped significantly. On the other hand, the European sovereign-debt crisis is ongoing, and has leaked into the economy of other nations that rely heavily on European trade, such as China. Therefore, this is likely to hurt international demand to U.S. vacation spots at least through the summer months. Based on this, we expect a modest increase in real tourism spending in the second quarter of 2012, say about 0.5%, putting real tourism output for that quarter right around $692,260 million.