US destinations report tourism drops. Will it lead to cheap summer travel?

Yahoo

04-05-2025

(NEXSTAR) – As economic anxiety and international tensions mount, some of the country's biggest hotspots are worried visitors won't turn up this year. But their loss could be your gain, travel analysts say, if demand drops so low that deals start to pop up.
A Las Vegas tourism report released this week showed showed visitation and hotel occupancy were down year-over-year. California's tourism board reported steep drop-offs starting in February and March.
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As a result of dropping travel demand, major U.S. airlines are reducing their flight schedules and revising or withdrawing their profit outlooks for the year.
'We came off a strong fourth quarter, saw decent business in January, and really domestic leisure travel fell off considerably as we went into the February time frame,' American Airlines CEO Robert Isom told CNBC.
Consumer reluctance to book vacations would correspond with a new poll that showed many people fear the U.S. is being steered into a recession and that President Donald Trump's broad and haphazardly enforced tariffs will cause prices to rise.
The drop in travelers is both domestic and foreign. The U.S. Travel Association reports international visits were down 14% in March when compared to the same month a year prior. The biggest drops were in visitors from Canada and Western Europe, the group said.
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Michael Feroli, chief U.S. economist at J.P. Morgan, said the travel drop-off could be due to growing anti-American sentiment.
'In recent weeks there have been numerous news stories about tourists canceling trips to the U.S. in protest of the perceived heavy-handedness of recent trade policies,' he wrote in a client note. 'This points to potentially another channel to consider in assessing the effects of tariffs on economic activity.'
Even a relatively small drop in foreign tourism, whether it's because of boycotts or economic uncertainty, would cost the U.S. economy billions, Bloomberg reports.
If demand is dropping in the travel sector, there's a chance airlines, hotel chains and others will drop prices to lure people back in.
Airfare dropped in February and March, according to Bureau of Labor Statistics tracking.
'The fares aren't as strong as they were in the fourth quarter of last year and coming into January and first part of February,' Alaska Airlines CFO Shane Tackett told CNBC. 'Demand is still quite high for the industry, but it's just not at the peak that we all anticipated might continue coming out of last year.'
Before drawing too many conclusions, some industry analysts urge waiting until April data is released to assess if the usually busy spring break and Easter travel seasons also showed price drops.
Nonetheless, airline business writer Brian Summers told The New York Times, 'On the whole, I expect prices will fall and we will see more empty seats.'
If we see the U.S. economy tip into an economic recession this year, that could also make travel — and other goods and services — cheaper.
'In fact, in the 2008 recession, you actually saw deflation for for a couple months where the overall price level was actually lower,' said Tyler Schipper, an associate professor of economics at the University of St. Thomas. 'I think of this being particularly true for things that maybe are more luxury for a lot of households, like travel. So airline travel, for instance, you can see falls in prices around most recessions. And I suspect if we went into a recession, we would still see that again.'
Nexstar's Addy Bink and the Associated Press contributed to this report.
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