Travel turbulence

Despite hosting the biggest sports tournament in history, the US is still in a vacation-destination recession.

According to research group Tourism Economics, the US tourism industry lost out on roughly $16.6 billion last year from international travelers ditching the US—and that number could grow to $21 billion this year. The US government’s harsh immigration policies, deployment of troops in US cities, and the White House’s general antagonism toward other nations are all pushing vacationers to choose other destinations.

Even the World Cup, which is the biggest sporting event on the planet and is bringing an estimated 1.2 million foreign visitors to the US this summer, hasn’t delivered the tourism windfall many hoped it would.

Just look at the numbers: 71 million international visitors are traveling to the US this year, including those coming for the soccer tournament. That sounds like a lot, but Tourism Economics data shows that visitors won’t reach the pre-pandemic record of 80 million until 2029. In fact, many hotels across the country that spent tons of money upgrading in preparation for the event are seeing bookings far below expectations, according to Bloomberg.

Lucrative turbulence

Using basic supply and demand logic, you might expect that fewer visitors flying to the States for the World Cup would translate to lower ticket prices for airlines. But what’s going on in the airline industry right now is not as simple as Econ 101.

Back when the Iran war spiked oil prices, airlines responded by raising fares (eight times, to be exact) after fighting began in late February. By May, ticket prices were a full $100 higher than a year prior.

But passengers have noticed that while oil prices have dropped 40% since their April high, airline ticket prices haven’t budged. The reason, of course, is because companies don’t need to cut airfare: Airlines saw that travelers would be willing to pay higher prices, and now aren’t going to lower them until they have to.

With budget airlines gone (RIP Spirit 💛), there’s even less price competition than there once was. On top of that, some airlines have been keeping prices higher by canceling unprofitable flights, eating into supply and spurring more demand for the routes that remain. That’s been bad news for budget-conscious travelers, and predictably great for these airline stocks: American Airlines has risen 21.47% over the past month, while Delta Air Lines jumped 11.58% and United Airlines surged 19.84% during that time.

With airline prices unlikely to fall soon, expensive travel could just be one more reason travelers put a trip to the USA on the back burner.—LB