By Callum Keown

Foreign tourists are snubbing the U.S. as President Donald Trump's tariffs regime takes hold. America's airlines, cruise operators, and hotels can handle that but if the boycotts become reciprocal it could hurt travel stocks.

The number of overseas visitors to the U.S. in March fell 11.6% year over year, according to data from the government's International Trade Administration $(ITA)$. Visitors from Western Europe plunged 17%, while those coming from Mexico -- excluding by land -- dropped 23%.

Canadians are also cutting back on trips to the U.S., with return trips by car dropping 32% in March, Statistics Canada said. Flight bookings from Canada to the U.S. are 75% down in April compared with 2024 levels and more than 70% lower for every subsequent month through September, according to travel data company OAG.

Several Canadian and American travel associations joined forces Wednesday to form the Beyond Borders Tourism Coalition in a bid to resolve the situation. "Each country counts the other as its most significant trading and travel partner--with the recent declines impacting businesses and communities on both sides of the border," it said in a statement.

There are several factors behind the slump in visitors, according to Oxford Economics analysts. "Policies and pronouncements from the Trump administration have contributed to a growing wave of negative sentiment toward the U.S. among potential international travelers," they said. "Heightened border security measures and visible immigration enforcement actions are amplifying concerns," it added.

Reciprocal Risk

The risk for U.S. travel stocks, which have been hammered this year, is that the boycotts become reciprocal -- something of a buzz word of late.

For now, that doesn't seem to be the case. Americans are still traveling overseas in strong numbers. More than 6.7 million U.S. citizens returned from trips overseas by air in March, a 5% increase on the previous year, ITA data showed.

That resilience enabled Delta Air Lines and United Airlines to post solid international revenue growth in the first quarter, despite a drop in inbound travel. United said passenger bookings from Europe are 6% down in the current quarter from last year, while bookings from Canada are 9% lower, when it reported earnings earlier this week. But only 20% of the carrier's international revenue comes from passengers based outside the U.S.

The other 80% is largely made up of wealthy Americans traveling around the world. "The high-end consumer, the more wealthy consumer, the one that takes the global vacations and wants to sit in a premium seat seems to be less impacted so far," United's chief commercial officer Andrew Nocella said on the company's earnings call. He added that the discretionary consumers who are feeling the pressure were less likely to travel to Rome or Tokyo to begin with anyway.

American Express' earnings Thursday provided more evidence of that as the credit card company's affluent customers increased spending. "We had the highest number of travel bookings that we've ever had, and that includes a high in international as well, international bookings from our travel-related services," CEO Stephen Squeri said on the company's earnings call.

Delta is in a similar position to United with 80% of its international sales originating from the U.S.

Raymond James analyst Savanthi Syth said this split "provides some insulation from loss of inbound travel related to recent White House policy/rhetoric." She rates Delta a Strong Buy but noted the potential for weakness due to tariff uncertainty.

Cruise Control

Cruise operators Royal Caribbean, Norwegian Cruise Line, and Carnival may also be protected from mounting U.S. travel boycotts. Stifel Research analyst Steven Wieczynski noted that around 85% of Norwegian's passengers are from North America -- with just 5% of its total passengers coming from Canada. "We believe with Norwegian sourcing so many passengers from North America, it should reduce the volatility around 'U.S. backlash' from other countries," he said in a note earlier this week. He has a Buy rating on the stock with a $36 price target.

UBS analyst Robin Farley said 3% to 4% of Carnival's business is sourced from Canada, with Royal Caribbean also having a single-digit share.

Hotels may also avoid severe damage. For example, Farley said around 80% of Marriott International's guests globally are from the country that the hotel is in, though some European countries have higher visitor rates. International visitors account for around 5% of the company's U.S. room nights -- and the vast majority of those are from Mexico and Canada, he added.

So American travel companies are well placed to shrug off the growing trend of tourists avoiding the U.S. for now. But if Americans turn their backs on international travel, either in retaliation or as a response to a recessionary environment, then the sector's stocks could start falling again.

Write to Callum Keown at callum.keown@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 21, 2025 00:01 ET (04:01 GMT)

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