Skip to main content

U.S. hotel executives offered some blistering words and dire warnings over a Trump administration budget plan to slash funding to the Brand USA program - a marketing initiative that promotes the U.S. as a travel destination around the world. 

At a lodging conference in Manhattan earlier this month, they chastised the Trump administration's plan to scrap the program, calling it short-sighted and poorly-timed.

"Travel drives the U.S. economy," said Jonathan M. Tisch, chairman and chief executive of Loews Hotels & Co., at the annual NYU International Hospitality Industry Investment conference.

Indeed, in 2016, the travel industry generated $2.3 trillion in economic output through domestic and international visitors, according to the U.S. Travel Association. Without this tax revenue from travel and tourism, each U.S. household would pay $1,250 more in taxes, the Association said. 

The Brand USA program is needed now, more than ever, hotel executives contend. Trump's travel bans, immigration restrictions, "extreme vetting" of travelers from allied countries, and new laptop bans on flights from the Middle East could cause a huge decline in business and tourist travel to the U.S., they said. The Brand USA program needs to let tourists and businesses know that they're still welcome here. 

"When you hear words like 'travel ban,' it puts a big chill" on travel and tourism, said James J. Murren, chairman and chief executive of MGM Resorts (MGM) - Get MGM Resorts International (MGM) Report .

This, in turn, could have potentially dire consequences on tourism, business travel, trade, the U.S. economy, jobs, and, of course, hotel companies and hotel stocks. The industry supports more than 15 million U.S. jobs, with about one in nine American jobs depending on travel, noted Mr. Tisch. 

"Words matter - perceptions matter - and the way the Administration's policies are portrayed to the world matters," Tisch said. "Let me be clear: I'm not raising these concerns as a Democrat or a Republican - I've worked with both parties."

NYC & Company, New York City's tourism arm, forecasts the new travel policies will mean 300,000 fewer foreign travelers to New York City alone in 2017 and cost $600 million in lost revenue.

TheStreet Recommends

"I have to admit - I didn't see this one coming," Tisch said. "If anyone should understand the value of a 'brand' and the need to market it effectively, it should be Donald Trump." 

The Brand USA program, which was part of the Travel Promotion Act of 2010, is a public/private partnership that boosts international travel by improving the image of the U.S. around the world. Every dollar of Brand USA marketing has generated $28 in visitor spending. In 2016, the program generated $4.1 billion in visitor spending, according to site.

"Defunding of Brand USA is a really bad idea," said Kevin Jacobs, chief financial officer of Hilton Worldwide Holdings (HLT) - Get Hilton Worldwide Holdings Inc (HLT) Report . A year ago, Jacobs was a Trump advocate, saying he thought it would be good for the sector if a hotelier was in the White House. Today, he has concerns.

"In theory, I thought it would be good for someone who understands our industry to be in the White House, and I still believe that's the case," he said. "But obviously some things have gone on - some decisions and discussions that are not exactly pro-travel."

There are already signs travel business is slowing. In April, Emirates Airline announced plans to cut flights to five U.S. cities - Boston, Los Angeles, Seattle, Fort Lauderdale, and Orlando - following Trump's restrictive travel policies. Also, the number of people admitted to the U.S. from Libya, Somalia, Iran, Syria, Sudan and Yemen is down about 50% from a year ago, according to the Department of Homeland Security.

Experts expect travel to stall even further as the year progresses.

"We're just getting into the leisure time of the year and it will be much more susceptible to concerns about travel and the way they will be welcomed in the U.S.," said Arne Sorenson, president and chief executive of Marriott International (MAR) - Get Marriott International, Inc. (MAR) Report . "My guess is we'll see those numbers look worse - you'll see more people go to Europe and other destinations where the reception seems to be warmer." 

Industry experts say they understand and support the need for security measures in light of the terrorist activity. But they said it needs to be done in a balanced way. 

"Of course the travel industry supports efforts to remain vigilant in the face of security threats to the U.S.," Tisch said. "But as Colin Powell always said - we need to have both secure borders and open doors."

This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.