How the Dip in Tourism Depresses the GDP

Called “the White Lotus effect,” a tourism boost has hit Thailand. With Season 1 in Hawaii and Season 2, Sicily, now Thailand is the third place to enjoy elevated luxury hotel demand because of the HBO series.

Sadly, though, hotel demand could be dipping in the United States

U.S. Tourism Demand

Focusing on the U.S., The Washington Post reports a drop in travel:

Correspondingly, the number of international visitor arrivals has declined:

Plunging by almost 12% from the same time last year, international visits are down substantially. A tourism research firm suggests the reasons are isolationist rhetoric, border policies, and safety concerns.

Our Bottom Line: Tourism and the GDP

With U.S. international tourism spending at approximately $2 trillion, we are talking about diminishing an 8.5% slice of our GDP.

As economists, knowing that the major components of the GDP are consumption, investment, and government, we can take the next step to everyday spending. The data tells us that the impact is primarily direct and indirect.

Starting with Consumption, the ripple from hotel spending is most obvious. From rooms to memories, and meals, tourists create demand. In addition, we’ve seen that with Taylor Swift, more tourism even increased the demand for omelettes. Next, the indirect impact, also on Consumption spending, could be gasoline purchases as we saw with fewer Canadian tourists driving to the U.S.  After that, we can add how hotel employees spend their income.

Then, moving us to global GDP investment, Semafor tells us that U.S. hotel chains expect an uptick in African tourism, especially in Egypt, Nigeria, Morocco, Ethiopia, and Cape Verde:

However, Semafor added that the outlook might not be as rosy as the numbers suggest because of conflicts, investment constraints, and construction costs.

And finally, although the data is dated, still we can see the countries whose GDPs are more tourism dependent. Combined, the total touches $11 trillion:

My sources and more: It is always nice when disparate sources converge on the same topic as The Washington Post and Semafor, here and here did for the tourism industry. Although gated, I did get some data from the World Travel & Tourism Council.