HENDERSONVILLE, Tennessee—The recent weakening of the U.S. dollar, which U.S. Treasury Secretary Steven Mnuchin said “is good for trade,” could also boost international travel spend in the U.S., which lately has been a top-of-mind concern in the hotel industry.
In its November International Trade report, the Commerce Department’s Bureau of Economic Analysis stated that foreign visitor spending in the U.S. declined 3.3% from last year. In addition, some data points on arrivals seem to indicate a decline in inbound travel, although that data is preliminary and as of yet inconclusive.
As a direct response, major travel trade groups banded together to lobby Congress in an effort to increase the country’s share of international travel.
Certainly administration rhetoric and visa restrictions have an impact on travel patterns. But another factor to consider is the price of travel. With 2017 behind us, we can now examine the cost of a room in the U.S. when paid for in other currencies.
Looking at the four major currencies—euro, British pound, Japanese yen and Chinese yuan renminbi—over the last year, the room rate increases of the first six months markedly deteriorated in the latter part of 2017, which correlates with the weakening U.S. dollar.
The average-daily-rate increase in Japanese yen during the second half of the year masked the most recent decline, as seen when looking at December data.
So, whereas U.S. rooms have gotten cheaper in euros, pounds and yuan throughout the year, the run-up in the Japanese currency temporarily made U.S. hotel inventory much more expensive. That said, in December, the trend reversed, and for Japanese travelers, room rates in the U.S. declined. This had been the case for all currencies, especially the euro, which had been declining for more than six months.
The impact is more pronounced on the local level. Here are three markets and their respective December 2017 ADR percent change in local currency:
In other words, all three major destinations—San Francisco, Chicago and New York—were nearly 10% to 15% cheaper than December 2016 when paid for in euros or pounds, and saw substantive discounts when paid for in yen or yuan.
What this could mean for operators is that they could use the exchange rate to their advantage and actually increase their U.S. dollar rates on websites that target foreign guests, while those guests still see a decrease in ADR in their own currency.
It will be important to observe if this trend holds and if foreigners will indeed see a sustained discount in the room rates of U.S. leisure and business destinations when paid for in a currency other than dollars.
Smart pricing, together with a concerted effort from the U.S. Travel Association to generate travel intent, should help stimulate room demand from foreigners that will then aid the industry overall.
This article represents an interpretation of data collected by STR, parent company of HNN. Please feel free to comment or contact an editor with any questions or concerns.