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A $22 Billion Loss: The Potential Impact of Coronavirus on Foreign Travel to the US

March 17, 2020 by Joe Demski

News coverage around COVID-19 is unavoidable. The worldwide pandemic has upset lives globally and dominated everyone’s attention for weeks. With the situation seemingly changing every hour, experts across industries have come forward with predictions about all aspects of life including from healthcare, personal finance, the economy, and more. Due to the interconnectedness of our economy, a disruption to any industry has ripple effects throughout other industries and geographies. Foreign travel was one of the first industries to be clearly impacted by the emergence of the coronavirus in China, and impact analyses can demonstrate the reach of those affected by this economic turmoil.

International Travel’s Economic Importance

According to the U.S. Travel Association, there were 80 million international arrivals in the U.S. in 2018. These 80 million people generated $256 billion in travel exports (i.e. spending by visitors to the U.S.), and created a $69 billion travel trade surplus (i.e. travel exports subtracted by U.S. resident spending abroad). Travel spending is a remarkable economic driver which supports nearly 1.2 million direct jobs (not to mention the indirect jobs supported through supply chain and household purchasing) and is the second largest American industry export. 

Chinese Travelers

Further research from the U.S. Travel Association demonstrates the importance of the contribution of Chinese visitors to American economy. Chinese visitors make up the 3rd largest group of overseas travelers to the U.S. (behind the U.K. and Japan) and spend among the most per visit of any group. In 2018, the average visitor from China spent $6,500 and 12 nights in the U.S. which resulted in a $29 billion travel trade surplus from China. Travel accounted for 19% of the American exports to China, making it the largest industry export ahead of transportation equipment and electronics. 

The Suspension of Chinese Travel

On February 2, 2020, the U.S. State Department issued a Level 4: Do Not Travel advisory to China over concerns about COVID-19. With that announcement, airlines began suspending flights to China and other areas in Asia. With the ramifications of the travel stoppage coming into view, the International Air Transport Association (IATA) noted the outbreak could result in a $30 billion loss for the global airline industry, most significantly in the Asia-Pacific Region. Airline industry leaders predicted a 4.7 percent decrease in global demand in 2020 as a result of the COVID-19 outbreak and its spread into more countries.

The Economic Impact of Foreign Travel Losses

With decreased flight demand anticipated and losses inevitable, airlines worldwide have begun adjusting expectations for 2020. Southwest Airlines, for example, forewarned that $300 million loss in operating revenue was possible. Figures like that are staggering, but it is also important to note that economic losses extend well beyond the evident businesses.

According to IMPLAN data, air travel contributed $210 billion in output and supported 532,092 employees across various industries nationwide in 2018. Decreased demand in air travel would be felt widely in many industries including petroleum refineries, other transportation services (i.e. transit and ground passenger transportation, rail transportation, etc.), real estate, restaurants, and hospitals because of decreases in supply chain purchases by air transportation businesses, fewer traveler purchases, and cutbacks in household spending due to reduced labor income. An IMPLAN analysis determined that the economic impact of a 4.7% decrease in the industry (as noted by the IATA) would result in a $22 billion loss in overall output across multiple industries throughout the economy.

The Takeaway

Phenomena like natural disasters and global health crises lead to great deals of uncertainty across the board. Economic disruption compounds the harm of the event itself. The airline industry is just one of many industries experiencing direct economic impacts as a result of this pandemic. These direct impacts have wider-ranging indirect impacts on other industries and businesses as households have fewer dollars and opportunities to spend within the economy. While it is nearly impossible to holistically quantify all aspects of the effect of these circumstances, modeling the wider-reaching economic impact triggered by direct impacts felt by specific businesses and industries can be done readily and provide helpful insight about interconnected industries.

Interested in what it takes to create an economic impact report? Check out our guide on crafting one of your own!

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Topics: Data, Economics, Contribution Analysis, Natural Disasters, Tourism, Impact, Coronavirus, Disruption


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