Whatever hopes the travel industry had in a full recovery to 2019 levels of travel bookings this year have officially been dashed, according to one economist.
"Our pre-inauguration forecast expected international travel to nearly fully recover in 2025 to 2019 levels. We're now pushing that out to 2029," Adam Sacks, president at Tourism Economics, said on a webinar Tuesday. "Now we're looking at a full 10 years between pre-pandemic and what will be full recovery. And, of course, that comes with significant economic losses."
Whether a recession is incoming is still up for debate. Ryan Sweet, chief U.S. economist for Oxford Economics, said there's still a modicum of hope the country can avoid it — assuming nothing else changes in President Donald Trump's frequently evolving tariff plans and foreign policy sentiment.
"The economy overall is vulnerable, but if we get through the rest of this year without a recession, then we should be able to avoid one for the next 12 to 18 months," Sweet said.
The "Trump & the Travel Industry: Key Impacts and Latest Outlook" webinar looked at all of the current factors affecting the U.S. economy and the travel industry, as well as what hoteliers should keep an eye on.
Trickle-down tariff effect
The U.S. economy, which was in a strong place to start the year, has a dark cloud looming over it now, Sweet said, pointing to tariffs driving uncertainty in the market. Currently, the country is facing four shocks — all of which are interconnected. The first shock is tariffs' effects on the market — which have not peaked — that are expected to dissipate as the market settles. But in the meantime, the effects will be profound.
In terms of the goods expected to see price increases, "there's nowhere to hide," Sweet said. In some cases, price increases are expected to be nearly 10%, data from Oxford Economics show — thanks to both direct and indirect impact of tariffs.
"It's going to be noticeable and almost immediately, so by the midyear, you're going to really start to see the inflationary shock," he said. "And generally, when you put 100% tariffs on any trading partner, that's essentially an embargo. So there's not going to be a lot of trade going on between the U.S. and China for the foreseeable future."
One thing Sacks wanted to make clear was that no matter the perceived positive effect of Trump's tariffs bringing more business to the U.S.'s manufacturing activity, which will take years to materialize, it will never compensate for the disruption it's going to cause and has already caused.
"Whatever you may think about the benefits of reshoring and what the endgame of these policies may be, the cost to achieve them is not worth it," Sacks said.
The other shocks the U.S. economy is facing include stress on supply chains and turbulence in the financial markets — both of which are caused at least in some part by tariffs.
At first, supply chains are stressed due to increased activity from the 90-day pause on tariffs, Sweet said, as businesses prioritize stocking up on what they can, putting a strain on port activity. However, that's not where it ends.
"When you reorganize global trade — we're most likely in a paradigm shift, where we're shifting away from globalization and a little bit more towards protectionism — there's going to be hiccups. Things aren't going to go perfectly, and you're going to get supply-chain stress," he said.
Financial market turbulence has unsettled consumers, especially the fluctuating stock market, and, even worse, the uncertainty of what's to come is going to affect how businesses make decisions. Even if they've expressed concern, consumers haven't pulled back on spending, at least not yet.
"I always say, don't bet against the American consumer, but also don't bet against the American business," Sweet said. "They're very agile. They can adapt, but they need clarity. They need the rules of the game laid out for them. And unfortunately, this uncertainty and ebbs and flows in tariffs are creating a lot of problems for business — particularly small businesses."
Current impact on travel
Travel has already been affected, Sacks said. He pointed to a flash study conducted by MMGY that found that while 83% of U.S. consumers still plan on traveling in the next year, 80% of them will change their travel behavior due to current events. About a third of respondents said they will travel closer to home and more than half of U.S. consumers polled believe that Americans won't be as welcomed in other countries due to current policy decisions.
The U.S. is already seeing a decline in international travelers, Sacks said. According to National Travel and Tourism Office data, overseas visitor arrivals into the U.S. in March dropped 11.6% year over year.
"What we see is that the things that have really affected international [travel] — it has as much to do with words as it does with action," Sacks said. "It's not only policy, it is rhetoric, the trade war itself, it needs to be said, it's intrinsically combative. It's called a war."
Not only are Trump's tariffs effecting global sentiment, but the way he speaks of commandeering other countries, reduced support for Ukraine and enforces deportations is driving off travelers.
While domestic travel should still remain strong, maybe even buoyed by Americans staying closer to home, the drop in international travel is "not going to fully compensate for the losses," Sacks said.
"The losses inbound will be significantly greater than the pullback of outbound," he added. "What percentage does it offset? I would be hazarding a guess if I were to say it now, but I would say it'd be a fraction of it."
What to watch
Economists originally predicted U.S. GDP growth of 2% in 2025, but projections have fallen to around 1.2%, Sweet said.
The good news is businesses are still investing, Sweet said, and they are still hiring — if that starts to change, the U.S. could be one step closer to a recession. Consumer spending is also unaffected — for now.
"You don't have to look too far to find evidence that the economy is not in a recession — you can look at the labor market. For example, the unemployment rate is still 4%, that's historically low. We're still creating a decent number of jobs," Sweet said. "Of course, these things are going to change over the next several months. ... Spending is moderated. It's slowed, but the consumer hasn't run for the bunker."
Even if a recession does happen, it's not going to be a recession like we saw from the pandemic or the 2008 financial crisis, Sweet said.
"We've been through a lot worse just in recent memory, and we'll get through this. The economy will come back. I mean, even if we have this little bit of a lull, 2026 is going to be a much better year," Sweet said.