The U.S. can’t effectively compete for tourists if there isn’t energy at the federal level toward tackling issues like excessive visa wait times, upgrading outdated airports and staffing the TSA and FAA.
NYC Tourism + Conventions CEO and President Fred Dixon and U.S. Travel Association CEO and President Geoff Freeman discussed a range of long-term issues slowing the growth of the travel industry at the Skift Global Forum in New York City.
(You can watch the full video and read the transcript below.)
Dixon also talked about what the impact of New York City’s crackdown on Airbnb will be on tourism to the Big Apple. Freeman advised the travel industry to lower their expectations about the assistant secretary for travel and tourism’s ability to make their jobs easier. Both touched on why large cities will need tourism to makeup for the loss of office commuter spending as remote and hybrid work becomes permanent.
Dawit Habtemariam: So happy to have you guys here today. So the major topic for today will be the future of travel growth. All right, so as we start, let’s go over some big news happening right now. As everybody knows, the U.S. government is on the risk of shutting down. Unfortunately, U.S. lawmakers have not agreed on a federal budget to fund the government. So if they don’t get a federal budget passed by Saturday, September 30th, the U.S. government will shut down. Geoff, you head the U.S. Travel Association, your ears are on the ground, you know what’s happening in DC. How likely is this going to happen and what will be the impact to the U.S. travel industry?
Geoff Freeman: Well, I think we all read the same news. We see many of the same things and everything you hear about the dysfunction in Washington is true. So our expectation is that a shutdown will happen and unfortunately there isn’t really a light at the end of the tunnel in terms of what’s going to resolve it. And the reason for that is not because you don’t have a lot of people in Washington on both sides of the aisle who are ready to solve the problem, it’s that you have too many, five to 10, who seem to exist to throw sticks in the spokes who want to simply cause problems rather than solve problems. So these five to 10 people are putting their selfish interests ahead of those of millions of travelers and plenty of other people every day. So I expect that they will succeed in getting what they want and it will cause problems.
We know of course, that when it comes to air travel, TSA and air traffic controllers still have to come to work or are still required to come to work. But we’ve seen in past shutdowns that the longer this goes on, people think twice about not getting paid to come to work. And even within TSA, there’s no training, there’s no hiring that can take place during a shutdown and this is the agency with the greatest amount of turnover in government. So we’re very concerned about what is likely to happen. I think it does speak to the dysfunction in Washington and I think it’s incumbent on us to help people understand the consequences of their decisions. We expect the travel economy will lose $140 million a day because of what’s about to happen.
Habtemariam: Fred, so New York City, what will be the impact if there is a shutdown on New York City’s tourism economy?
Fred Dixon: To Geoff’s point, I think it’s going to depend upon how long this lasts. If it’s protracted, all of us will see impacts. Here in New York, we are not as reliant upon large national parks. Certain regions of the country that are reliant upon, certainly outdoor travelers, will feel an outsized impact. We have monuments mostly here in the city of New York, including the Statue of Liberty. Last time the state stepped in to pay the workers at the Statue of Liberty to keep it open. But it will really depend. I mean to Geoff’s point also, we’re watching what will happen at the airports both with TSA and CBP officers. They’re essential. But to Geoff’s point, if it’s protracted, you will have people calling out. So it is yet to be seen, but the impact is real.
Habtemariam: So moving on, so China, so the U.S. has not made a full international recovery, and from the tourism CEOs I talked to, the U.S. cannot make a recovery without the return of Chinese tourism at its pre-pandemic levels. Fred, you just finished your first post pandemic mission to China. Is there a floodgate of Chinese tourists ready to come to the United States?
Dixon: Yeah, it was wonderful to be back. It was great to connect with our partners. The ambitions are big there and certainly at the consumer level, demand is high. Actually, I have a slide. I was able to join the Sea Trip Global Summit, asked for permission to show… Actually the next slide… To show a couple of these data points that they shared with the group. In terms of Chinese outbound sentiment, 60% are ready to travel abroad. So demand is high and the room was full at CTrip’s Global Summit in Beijing.
What you see on the right, of course, top 10 destinations been surveyed. You see the United States as number 10. A lot of regional travel, no surprise in Asia first and then when they look to go long haul, it is towards the United States and to Europe. The next slide actually to me was one of the more telling ones.
This is in terms of flight search trends and visa applications. And what you see in the two charts on the right and when gauged for sentiment the United States is number three in terms of regions in the world where they want to travel. And number one, in terms of long haul, which is terrific, that’s what we would hope to see. That’s what we expected. On the right though you see that we are number nine when it comes to actual action. Are they applying for those visas?
Now the caveat, we’re fortunate to have 10-year visas in China, and so that is an advantage. But in terms of new visa applications, we rank nine. So what it says is the Chinese are ready to travel to the United States. They’re taking a wait and see. Flight capacities are not back. We’re at about 50 a week to the U.S. today we were at 300 pre-pandemic. Visa wait times are high. The embassy has assured us though, that they are working on this. It’s a demand issue and a staffing issue and those are going to come down. So we felt very positive about the trip. We felt good about what we were seeing. CTrip was certainly very optimistic. They’re obviously the major player in the market and all of our partners felt the same.
Habtemariam: So Geoff, is the U.S. Travel Association advocating federal government welcome Chinese tourists with open arms. And what about India? I just want to ask about that too.
Freeman: The federal government that’s open or closed, which one?
Habtemariam: One that’s open.
Freeman: We’re actively engaged on this. Extremely engaged. So just to put a little more color on China, before the pandemic, 2.6 million visitors a year spending about $15 billion. I mean there wasn’t another market anywhere close. So to your point that the U.S. can’t recover without China, that is the perception. Now we should also acknowledge that post pandemic, we’ve seen some other markets overperform. India in particular is coming to the U.S. both in numbers, in people getting visas, in numbers we’ve never seen before. So there will be some upside from other markets. But yeah, it’s hard to get back to the level we need to be at and really reach our potential without China online. There are very big issues as was mentioned.
Last year I think we welcomed about 300,000 Chinese versus the 2.6 million before the pandemic. Even now though, where we have people going back and trying to get their visas, those wait times are inching up to 200 days to get that visa. That’s before Fred mentioned the 10-year visas that people in China have. 10 million of those people got those visas in 2014 and 15, meaning we’ve got 10 million people coming up for visa renewals and we already have a system that’s getting a bit overwhelmed. So we’re very concerned about that, we’re very engaged. And I will say on this one, the Biden administration understands the importance of China. Folks at the State Department understand. They understand that these wait times cannot get worse and intend to rush some additional services to the market. But this is a market that in many senses will make or break what we do on the international side.
Dawit Habtemariam: Absolutely. So you mentioned visas. So this visa issue has been going on since last year when borders opened, right? It’s 2023, we’re nine months in and it’s on average, what over 400 days for about some of the US’ top inbound markets like India, Brazil. Do you have any hope that this issue will be resolved in the coming year?
Freeman: So these travelers from India, Brazil, Columbia, Mexico, and other markets, four or five, 700 day waits just to get an interview at a U.S. consulate for a visa. The message to that traveler is all but go away. This is anything but a welcoming environment. And if you just think about it, if you are a leisure traveler or a business traveler, you’re likely to say, “I’ll go somewhere else. I’ll go somewhere else to do business. I’ll go somewhere else for a good time.” And if that’s the case, “I may never come to the US. I may find a connection with this other market.” So it is doing real harm. These wait times, it is the number one, we think it’s going to cost the U.S. economy about $12 billion this year just in these visa wait times.
The State Department has made some success. We’ve seen markets like Brazil, they’ve reduced wait times by 50%. They’re still 200 days, right? So it is still, I think from a U.S. standpoint, embarrassing. Embarrassing if we want to be competitive. Some of these other markets, Canada just waived visa requirements for 11 countries that are required to get visas to come to the U.S. because they know they can out compete us. The UK now has visa free travel for a hundred markets, we only have it for 42 countries. So time and again, other countries are seeing our weaknesses. And speaking of our weaknesses, what you see up on the screen is a collection of ways, in our opinion, the federal government is utterly failing the traveler. The result here is, the message I think we’re getting from the federal government is we don’t really care about travel and that should be the number one concern for every one of us in this room. We all hear about passport wait times or maybe we hear about visa wait times, but look at things collectively. This is a damning message.
Freeman: That we’ve got to correct.
Habtemariam: So Fred, so how does the Visa issue have you recalibrating your efforts when it comes to attracting tourists from emerging markets like Brazil and India? How do you adjust to the reality of the wait times for visas?
Dixon: We think about it a lot. I mean, New York remains the gateway to the United States in terms of inbound, certainly flight capacity and visitation from overseas. So it is something we follow very closely. There are two good bright spots and Geoff is absolutely right in every point he made. We were just with our colleagues from the State Department. We are nearing a threshold where we have more people in the world today with U.S. visas than ever in history. That is good news. I think that’s due in part to a lot of the work that’s been done by the U.S. Travel Association and others to get tenure visas in as many markets as possible. So as a destination, when we think about the global audience of travelers who have the ability to travel the United States, we are at or near an all time high in terms of visa holders, but that’s good news.
We focus on the positive. We let Geoff do the hard work in terms of lifting the restrictions.
But when it comes to visa restrictions, what we have seen is that the demand is high. It’s a demand side problem for the most part, which is good news as a destination. We need to clear these pipes. The U.S. government is focused on adding more staffing. We saw them deploy workers from China and other markets into India. India this year could set a record for all time U.S. visa approvals. So more visas issued in India this year than any other market. So we are following that closely. We’ve invested heavily in India. I was just there in January, we’ll be back again next January. We see a huge opportunity in the future from India. We’re excited about the airlift opportunities. But in markets like Brazil and Mexico, to Geoff’s point, Columbia, we need to do a better job of making sure that they can access the United States. The demand is high and aspiration is there, so we should take advantage of it.
Habtemariam: So you mentioned earlier, Geoff, about the whole U.S. being less competitive. So I’ve heard from tour operators telling me that over the last decade the U.S. has become less competitive with other destinations, especially against rising ones in Asia and the Middle East. So my question for you, Fred, do you feel as if New York is facing serious competition on the global stage right now?
Dixon: We have been. It isn’t new and everyone is learning the power of tourism to transform communities, to generate revenue, to drive development. We’re certainly seeing that happen in the Middle East. Look what’s happening in Saudi for example. Travelers have more options than ever before. And as countries roll out more welcoming policies, easier access, these are going to be challenges to markets like New York that have long been successful and dominant in this space. We also have to think about funding of promotion. We’re seeing huge budget increases across the board. So we as a travel industry need to coalesce around the impact that we have on community, the way we drive jobs, the way that we have impact on workforce and keep driving that message. But competition has been there and it’s only increasing.
Habtemariam: So Geoff, so one big thing that happened last December was the creation of a new high level federal position called the Assistant Secretary for Travel and Tourism. It’s not been filled yet, but it was created to help make the U.S. more competitive. I’ve heard people in the industry say, oh, this is a game changer. This is going to be great. Do you think it’s going to be a game changer for the U.S. travel industry?
Freeman: You’re setting me up with that question. We were here yesterday when there was a great presentation from Saudi on what they’re doing and the coordinated approach they’re taking. That is real leadership and we see that in some other markets. I think you see some of that in Canada. You see it in the UK where there is a top down strategy to grow the travel economy. We do not have that type of strategy in the United States and we’re not going to have it because we have an Assistant Secretary for Travel and Tourism within the Department of Commerce. This starts at the top. It really does start at the top. It starts at the top in New York. It starts at the top in every market in the country. If we want to be competitive, you got to take a holistic look here. We don’t have that in the US.
You look at so many of our challenges are in the Department of Transportation, the Department of State, the Department of Homeland Security, the department of let’s keep people from traveling across the federal government and people in the Department of Commerce are going to be limited in their ability to solve those problems. So it creates a different burden for all of us here in this room. In terms of how we solve problems. You and I were talking before, Dawit, about the fact that in the United States, we seem to have this confidence, some of it is well-earned, that people are going to travel, they’re going to come here, where else would they want to go? And over the years we see it, the U.S. is the most desired nation, but every other country is getting smarter and they’re tapping into some of our weaknesses. And our market share is going down year after year after year.
So it’s a positive step that we have this new assistant secretary position, but it is not a panacea. And all of us have to recognize that. One thing I say as I travel around the country and it’s applicable to a lot of the people here, we have to recognize that travel at a national level is not as embraced the way it may be in other markets. And what it requires from all of us in this room, if we want to see travel increase, is we have to be advocates for the industry in this country in a way that’s maybe different than what you have to do in other countries. We have to participate in making sure that the federal government understands the implications of their decisions and understands the steps, the concrete steps they can take to create better policy. Everyone in this industry needs to be a bigger advocate than they probably are today.
Habtemariam: So we touched on this a little bit on the shutdown aspect earlier, but so U.S. air infrastructure, it’s pretty outdated. I think we can pretty much agree on that. I got to ask, so Geoff, how does our current air infrastructure, our TSA, FAA, how do these parts of the infrastructure impede the U.S. travel industry’s ability to grow in the years ahead?
We did a survey recently and like 25% of the people said they were satisfied with air travel in America. I don’t know who those people are, maybe some of them are here. If you could raise your hand. Wow, we’ve got 23% of all flights right now are delayed or canceled. The experience getting through many of the airports, getting through TSA where lines are getting longer is anything but comfortable. The exception is places like LaGuardia now, who would’ve said that 10 years ago, right?
Dixon: Thank you very much.
Freeman: But you go to a place like LaGuardia and you see the future, you see how you can have a better experience, how throughput can increase the value of investing in infrastructure that we haven’t seen elsewhere in the country. Particularly with business travelers, when you look at leisure travelers, they’re more resilient. They’re taking 1, 2, 3 trips a year. They’re going to put up with the hassle. The business traveler’s not going to put up with the hassle. And they’re the ones who are saying, “I’m going to avoid trips.” More than 50% of business travelers say I would travel more often if the hassle factor were reduced. And the hassle factor combined with the fact that they’ve got alternatives in Zoom and they’ve got alternative in Teams and we’ve seen, we just live through an experiment in not traveling and people are like, “I can do less of this.” So removing that hassle factor is absolutely critical.
There is legislation in a government that’s about to shut down right now that would fund the FAA and provide more resources, make some really important investments, but we’re about to walk away from that if this thing shuts down. So it’s kind of one step forward, one and a half steps back and that’s certainly a concern.
Habtemariam: So Fred, Geoff mentioned LaGuardia, you said there have some good investments. Are there really any good investments that have made tangible impacts on meeting travel demand into New York?
Dixon: Absolutely. I mean, LaGuardia is a great case in point. I mean, Terminal B was built to accommodate 8 million travelers. It was doing almost double that. And so to Geoff’s point about the hassle factor, the overall experience, it was subpar and it was President Biden who made the comment that got the whole thing started, if you all remember a few years ago. Now we have this beautiful new airport, the first new airport build in the country in 25 years. We’re super proud of it. And now can accommodate easily 17 million travelers a year just Terminal B alone. So major investments. We’re up to 77 daily departures from LaGuardia, and that will only grow and we are providing a much better experience to Geoff’s point, and it leans towards the business traveler.
JFK, major investments happening over there too. We’re $8 billion project at LaGuardia, it’s a $17 billion project at JFK. Equal investment happening across the river at Newark. And so we see that we need to upgrade our infrastructure. We need to make sure that that welcome ad is out and we’re thrilled with the investments that have happened here on the local level.
Habtemariam: Speaking of infrastructure in general, let’s talk about short term rental infrastructure. So we just heard from Brian Chesky, we’re in New York City, there’s been a big crackdown on Airbnbs in New York. For a lot of budget travelers Airbnb is their preferred choice to expensive hotels. I got to ask you, Fred, do you think this crackdown will make it harder for budget travelers to come to New York?
Dixon: Well, I think you have to just put it in context. I mean, so this year we expect to sell around 37 million room nights in New York, the short-term rental market is about 10% of that. So you’re talking about 3 million plus room nights. So it is a small portion of the market. We have over 700 legal hotels in New York City. We have 10,000 new hotel rooms in the pipeline. Travel costs are going up everywhere, and we certainly see the market demand driving rate in New York. That’s not a surprise. That’s always been the metric here. But no, we don’t see that there’s going to be an outsize impact. The laws have been on the book and what has happened is that the recent local law and the enforcement requiring the registration is going to bring that part of the industry into line with local law and it is welcomed. We think that there are plenty of options in New York and we don’t see that it’s going to have an impact on the city’s affordability or its demand.
Habtemariam: Gotcha. Okay, let’s pivot. So cities and downtowns, so they are major attractions for tourists, but a lot of them really depend on the office commuter. The person who comes in, spends money at businesses, attractions and whatnot. But that group is not coming back as much. And I hear repeatedly from the CEOs of tourism bureaus in San Francisco, DC, LA that there’s high office vacancy rates that’s having an impact at some level. I know your position, Geoff. I know U.S. Travel has been advocating that the Biden administration increased the number of days in the office for federal workers. Why?
Freeman: Yeah. So a couple of things about this. The recovery from the pandemic has not been an even recovery. It hasn’t been even in terms of the segments, it’s really been driven by leisure and it hasn’t been even in terms of the markets, some markets have done much better than others. We hear about the markets that are really struggling. A big part of this is their approach to the cities, how inviting those cities are, how safe those cities are, how clean those cities are. All of these play a factor. We have 140,000 I think federal workers just in the DC area. Having those people in the office creates a more vibrant experience. It’s why we’ve encouraged the federal government to be back in the office, encouraged the Biden administration to do that. For what it’s worth, the Biden administration has encouraged it and nothing’s changing. So they’re running into the same problems that many other employers are running into, but it’s true across the country.
We need to send that message of getting people back in the office. Now there’s a flip side to this, and we had Richard Florida with us not too long ago. He wrote the book, the Creative Class, 20 years ago is really the foremost expert on the state of cities and what it takes to rebound. And he made an interesting point. The dependency of urban markets on spending from travelers is going to increase exponentially post pandemic because you’re not going to have people in office five days a week. Getting the traveler into these markets is more important in ’24 and ’25 and beyond than it ever was before.
I’m hopeful that’s going to create some new opportunities that creates an interdependence between governments and the travel industry that we’ve never seen. It gets them to think a little bit more about how we build environments that are conducive to attracting travel. This has the potential to create a partnership going forward that we’re excited about. How can we work with government to make all markets at a national level, but particularly at a state and local level, more inviting, more welcoming to travelers. That’s only upside for our industry.
Habtemariam: So I’m sorry, I have to ask. So Skift used to have an office on 30th Street. Right now we’re fully remote. We’re thriving. We’re doing very well. I mean, we’re loving it too. So are you saying that if we come into the office, if we get a lease in Midtown, get an office and come take a subway every day, we’ll be helping the tourism experience. Will that be a big contributor for?
Freeman: Certainly not naive about it. At U.S. Travel, we’re in the office three days a week. We found hybrid to work really, really well. And I think that’s the future, obviously. I think there is though we have to understand if people aren’t coming downtown to work, what’s the effect of that? There’s a spending effect. And it’s not just in the lease you pay, it’s the little restaurants that were right there. It’s the drugstore that’s right there. It’s the dry cleaner that’s right there. If we lose all of that, and in New York we’ve seen some of that pressure, if we lose all of that, how attractive is that to a traveler? I was just talking to someone last week when I was in California and they were saying, you know what, all the hubbub about homelessness and crime, I didn’t feel any of that when I was at the Moscone Center for a week. What I did feel was a lot of boarded up buildings. I didn’t have a place to go to get the coffee. I didn’t have a place to go to get lunch. That’s what I felt.
There is an interdependence between travel and the local workforce and we’ve got to strike that balance. And in a lot of these markets, we’re missing it right now. So please, the message to Rafat, get your ass back in the office. Get in office, come in a few days a week. Let’s give back to this. We have a responsibility.
Dixon: I will add to that. I think what is interesting, what we’ve seen in New York, we have multiple downtowns. When you say downtown New York, what are you talking about? Wall Street was the first to go back and they have been in the office. And so you see a thriving scene downtown. People think about midtown, this is obviously the tourist hub and tourists have actually brought that vibrancy back to the community. But we’ve actually seen is a shift of spending in the neighborhoods, you’re at your home in Cobble Hill in Brooklyn and you’re supporting your local restaurants. That’s where you’re ordering lunch now instead of ordering a midtown. So we’re seeing the spending pattern shift. It’s actually bringing more vibrancy to many of our neighborhoods. So there are some upside impacts. I’m the positive guy if you can’t tell. And so we’re leaning into those.
It’s actually matching our strategy of spreading tourism throughout the city because it is supporting these small businesses in interesting ways. So there’s always a flip side to that. In New York, let’s face it, in the best of times we always had Summer Fridays in New York, right? Those of you that live in New York, everyone heads for the door at noon on Fridays. That’s always been the case here. That’s what happens in big cities. So it isn’t that big of a shift. And what we’re seeing is that, to Geoff’s point, which I think is the great one, tourism and local workforce are so interdependent. The workforce actually had been the foundation of the vibrancy in the past. And today we’re seeing that tourism is filling that gap. So the tourists and the locals are vibing off of one another. They’re bringing vibrancy back to the city, filling the streets, and really helping both sectors recover. When you’re sitting at home in Cobble Hill, you see all the visitors having fun in Midtown and all the Broadway shows you’re missing, it creates FOMO. So there is a new synergy here that I think is being built that we’re excited to dig in on and capitalize.
Habtemariam: We’re low on time. So I guess I’m going to have to ask closing questions. So Geoff, what right now was the biggest hurdle for the U.S. travel industry in order to grow and compete?
Freeman: I try to be the positive guy and it doesn’t work. So…
Dixon: We divide and conquer.
Freeman: Yeah, know who you are. What’s the biggest hurdle? I go back to that slide we put up on the screen, and I say this not in a political way, the Biden administration, I’ve been in Washington nearly 30 years. The Biden administration is the least effective administration I’ve ever seen at working with the private sector. And that’s saying something. So how do you work with business to solve problems? There has not been a partnership, a zeal, a willingness to do that. That’s a big issue. Those are big problems on the screen that are going to take real concerted effort to solve. So when I look at it, I look at the federal government putting in place frictions, putting in place barriers to travel that collectively we have to work together to remove and to do that, how do we get administrations, Biden, or otherwise to focus on this? We’ve got to do more collectively to demonstrate the importance of travel. That’s on us.
Habtemariam: I’m sorry, we’re out of time. I’m sorry, Fred.
Fred: No, he hit it.
Habtemariam: Well, thank you both so much. It’s been a great talk. Thank you.