Surplus Trend Line 1988 - 1998 (Trade Balance)
The final receipts and payments figures for 1996 reveal an enormous surge in international visitors spending, resulting in total travel receipts of more than $90 billion and a very healthy surplus in the travel and tourism account, generating a new record surplus of $26 billion, up 18 percent over 1995. The upswing in performance as compared to the preliminary estimates released in March 1997 came from greater than anticipated volumes of travelers from European countries, Oceania, and, to a lesser degree, Japan, when year-end figures of arrivals to the U.S. were developed. The spending associated with these travelers accounts for the notable increases in receipts and also the positive balance for the travel account.The Contribution of Key Tourism Markets to the U.S. Travel Surplus
Japan remains an essential component of the surplus, making up 60 percent of the positive travel trade balance. The surplus with Japan, however, did not keep pace with the overall increase in the surplus, up only 9 percent compared to 1995.
The greatest growth contributors to the surplus were the European markets. The surplus with Europe grew a staggering 78 percent over 1995, to reach $3.9 billion after two years of declining growth. Key to this growth was outstanding performance in Western Europe and notably in the UK (50%) and Germany (15%). [Balance of trade figures for other individual countries will be available later this year from the Bureau of Economic Analysis.] Eastern Europe actually causes the overall surplus for Europe to drop. A deficit of $421 million was noted. This deficit was, however, reduced by one third from its 1995 level.
The surplus with Canada topped $3 billion in 1996, up about 8 percent. For Mexico, the balance of trade in the tourism account shows a very deep deficit, $2.9 billion dollars, which increased by 17 percent or more than $400 million deeper than 1995. This deficit is the greatest the U.S. has with any country. The two serve to zero each other out such that the surplus from overseas travelers to the U.S. mirrors the overall balance of trade.Future Threats to the U.S. Travel Surplus
While the U.S. enjoys a healthy balance of trade in the tourism account, and a rosy prospect for strong surpluses from key markets, the dependence of this surplus on the Japanese traveler is worth noting. Should travel preferences change, economic conditions decline, or the exchange rate become more unfavorable for the Japanese traveler, the U.S. might witness drops in the level of arrivals from this key market or tighter spending patterns. Currently the Japanese traveler is one of the highest per capita spenders to the U.S., with an average expenditure within the U.S. of $164/day (1995).
In fact, our dependence on Japan's contribution has been key for many years, including those years before the U.S. posted a surplus in the travel account. As early as 1984, Japan provided $1.3 billion to the balance of trade, at a time when the U.S. posted a $7.4 billion deficit. The only other countries to provide positive contributions to the balance of payments were Canada, Venezuela, and Australia. In 1989 when the U.S. first recorded a surplus of $5.2 billion, Japan accounted for 139% of the surplus, obviously offsetting deficits from other markets. In the intervening years, Japan has provided a low of only 48 percent of the surplus in 1993 to a high of 64 percent of the surplus in 1995.
Other key markets are witnessing erosion of their share of the surplus, due in some cases to lower spending in the U.S. or greater spending by U.S. travelers in those countries. Canada is a prime example, as well as the dominance of Japan's share of the surplus.
While the current forecast calls for a surplus that remains well above $20 billion per year, several factors can erode the surplus. A stronger U.S. dollar has a two-fold effect: an unfavorable exchange rates for visitors, diminishing receipts, and a better exchange rate for US residents traveling abroad, favoring payments. The outcome would be a smaller surplus.Receipts and Payments for Key Markets
Focusing on the receipts and payments that provide the nation's travel surplus, travelers from Canada produced an 8 percent increase in receipts over 1995. This is consistent with the increase in arrivals from Canada, up more than 4 percent for the year. More favorable exchange rates towards the end of the year helped spur travel and spending in the U.S. Canadian visitors of one or more nights spent $6.8 billion in the U.S. and another $1.3 billion on transportation to the U.S., including travel by car.
It's interesting to note an equal increase in payments by U.S. residents traveling to Canada. That does not follow the travel pattern, however, which shows a very slight decline (less than one percent) for the period and consequently must be a true increase in U.S. resident spending in that country. More than $4.6 billion was spent by Americans visiting Canada with less than $400 million on transportation. In fact, American traffic to Canada is much more reliant on auto travel than are Canadians to the U.S., who rely more on air travel.
In the case of Mexico, a moderate recovery was noted, with receipts up more than 8 percent over 1995. At the same time, travel from Mexico to the U.S. increased in 1996, up 6 percent, linking spending to increases in overall travel. It should be noted that the 1995 period suffered a stunning 39 percent decline in receipts so this increase is still relatively insignificant. There is a very long way to go to recover to pre-devaluation levels from December 1994. The fall of the peso has continued into 1997, currently trading at 7.9 pesos/US$, so buying power has diminished even further, making real increases in receipts unlikely for the immediate future. Spending within the U.S. by Mexican visitors of one or more nights totaled $3 billion with $600 million additional on transportation to the U.S.
It seems that U.S. residents are spending more freely while in Mexico, with payments up 12 percent. 1995 recorded a very small decrease (down 1 percent). Total travel to Mexico from the U.S. increased about 6 percent in 1996, to 19.6 million, with the greatest increases in travel beyond the border, where visitor spending is greatest.
Within European countries, the United Kingdom exhibited stellar performance in 1996, with an increase in receipts of more than 10 percent, to come just shy of $9 billion in total receipts. This puts the U.K. as our number two market in the generation of travel receipts. However, U.S. travel to and spending in the U.K. are competitive and the surplus with the U.K. is only our fourth largest, trailing Canada and Germany.
Recent recovery in travel from the German market brought a surge in receipts that causes our balance of payments to come in positive, with a surplus that is just short of $3 billion.
France shows a small deficit in the travel account as U.S. residents spent slightly more than in France in 1996 than was spent by French traveling to the U.S. The same was true for the Netherlands and Italy, both posting modest deficits. The Netherlands registered receipts above $1 billion for the first time in 1996.
The only key country to post a decline in receipts in 1996 was Venezuela, with a startling 10 percent drop. This decline is linked to the 11 percent shortfall in arrivals from this important, nearby country during the year. This poor performance, coupled with modest gains in receipts from Italy, results in Italy moving well above Venezuela in terms of receipts.
Poor performance from Venezuela and outstanding increases in receipts from the U.K. also cause the U.K. to move above Venezuela in terms of the surplus.Revisions to 1995 Receipts, Payments and Travel Surplus
The balance of payment data for 1995 were also revised. Receipts for 1995 totaled $82.5 billion of which $63.4 billion was spent within the U.S. This spending supported about 975,000 jobs in the U.S. economy and about $8.5 billion in total taxes. The increase in receipts brought a similar increase in the surplus, which topped the $22 billion mark in 1995. Payments were largely unchanged.
Here are a number of tables and charts which illustrate the make up of the travel surplus, the importance of Japan in our balance of trade, and spending patterns of travelers from key arrivals markets for the U.S.
|1996 Travel Surplus/Deficit*
|COUNTRY/REGION||% of TOTAL
*Including fare payments to air carriers
1996 Total Travel Receipts*
*Including fare payments to air carriers