Why foreign travelers are avoiding the U.S.

International air travel to the U.S. is declining, down 7% from 2024 with an 8.2% forecast drop in 2025, driven by tariffs and anti-foreigner rhetoric, significantly impacting local economies. Canadian visits have plummeted 25% year-to-date, hurting major tourism hubs like Las Vegas and Minnesota. While some cities report overall visitor increases from other regions, this broader trend of declining international arrivals, particularly from Canada, suggests a sustained headwind for the U.S. tourism sector, despite a White House assertion of record spending.

Analysis

The U.S. is facing a significant downturn in international tourism, presenting a material headwind for exposed sectors. According to U.S. Customs and Border Protection data, international air travel has declined 7% from 2024, with forecasts from Tourism Economics projecting a further 8.2% drop in 2025. The decline is disproportionately driven by a 25% year-to-date reduction in visitors from Canada, the largest source of international tourists for key markets like Las Vegas, which has seen an 18% drop in flights from Canadian carriers. This trend is attributed to political factors, including tariffs and anti-foreigner rhetoric, creating tangible economic drag in tourism-dependent regions. While the White House reports a record $127 billion in foreign visitor spending in the first half of 2025, this data conflicts with the clear decline in arrival volumes. The impact is not uniform, as certain cities like New York and Chicago are reporting modest visitor growth, buoyed by travelers from other regions such as Colombia, Spain, and Japan, suggesting a fragmentation of the market rather than a monolithic slump. The single corporate mention, Airbnb (ABNB), is framed as a beneficiary of this diverted travel, capturing demand from tourists, like Canadians, who are opting for destinations outside the U.S.

Key Decisions for Investors

• Investors should scrutinize holdings in U.S. travel and leisure companies, particularly hotels, gaming, and airlines with high revenue concentration from Canadian tourism, as the 25% drop in visitors from this key market signals a direct revenue risk.
• Consider favoring operators with geographically diversified assets, as cities like Chicago and New York are demonstrating resilience by attracting visitors from a wider range of countries, thereby mitigating the impact of the sharp Canadian decline.
• The trend of diverted travel presents a potential opportunity in non-U.S. travel markets and facilitators like Airbnb (ABNB), which may capture displaced tourism spending, offering a potential hedge against the U.S.-specific downturn.
• Monitor U.S. political rhetoric and immigration policies closely, as these are cited as primary drivers of the tourism slump, making them key leading indicators for any potential recovery or further deterioration in the sector.