Tariff Tensions Could Hurt US GDP As Canadian Tourism Cools: Goldman Sachs
A 10% decline in Canadian travel may result in 2 million fewer visits and $2.1 billion in lost spending to the U.S.
That’s according to Goldman Sachs analyst Lizzie Dove, who recently conducted a deep dive into Canadian tourist exposure for airlines, cruises, lodging, and theme parks.
Canada, she notes, accounts for 26% of U.S. international tourism. In March — three months after President Donald Trump dissed then-Canadian Prime Minister Justin Trudeau by calling him "governor" and Canada as "the 51st state" — there was an 11% year-over-year decline in tourism.
A “pullback in Canadian tourism is the most likely channel to create a modest drag on US GDP,” Dove wrote.
In 2024, approximately 20.24 million Canadian tourists visited the U.S., making up over a quarter of international air travel. Mexico followed with around 17 million visitors.
A 10% drop in Canadian tourism could reduce U.S. spending by $2.1 billion and slightly impact GDP growth, Dove added.
U.S. airlines have limited exposure to Canadian transborder markets, with United Airlines Holdings Inc. (NASDAQ:UAL) having the highest at 1.4% of total flights.
Carriers like Allegiant Travel Co. (NASDAQ:ALGT), Frontier, Southwest, and Spirit do not operate direct routes to Canada but may still feel demand softness in border cities, said the analyst.
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Allegiant, for instance, serves U.S. border cities that rely on Canadian travelers, with these routes comprising 1.6% of its 2024 flights.
Florida, California, Nevada, New York, and Texas are top destinations for Canadian tourists, meaning airlines operating heavily in these states could see an impact.
JetBlue Airways Corp. (NASDAQ:JBLU) has 58% of its capacity in key Canadian tourist cities, though a large portion of this is tied to New York, which only accounts for 13% of Canadian visits.
United and Allegiant have recently reported weaker demand from Canadian travelers. In response, United accelerated the retirement of 21 aircraft.
The overall U.S.-Canada air travel market has seen route cuts at twice the rate of non-Canada flights, with 210 basis points of Canadian growth being slashed since January.
Allegiant, despite not flying to Canada, reduced flights from Plattsburgh by 20 percentage points due to weaker demand from Canadian travelers, significantly more than the 4.4-point cut to its broader network. However, reductions were smaller in Bellingham and Niagara Falls, at 1.7 and 2.0 points, respectively.
U.S. hotel corporations have minimal exposure to Canadian tourism, despite the high volume of Canadian visitors. Hyatt Hotels Corp. (NYSE:H) has the highest exposure among major hotel chains, while Wyndham Hotels & Resorts Inc. (NYSE:WH) and Choice Hotels International Inc. (NYSE:CHH) are the least affected due to their reliance on drive-to bookings.
Wyndham sees only 1% of its U.S. room bookings from Canadian travelers. Over 90% of guests drive to its hotels. Similarly, Marriott International Inc. (NASDAQ:MAR) estimates just 1% of U.S. room nights come from Canada. Some 96% of its bookings originate from domestic travelers.
Hyatt, with a stronger focus on luxury and resort properties, derives approximately 2% of its U.S. bookings from Canadian visitors. Hilton Worldwide Holdings Inc. (NYSE:HLT) also sees 1-1.5% of its U.S. room nights booked by Canadians, with 2% of its total rooms located in Canada.
Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) has the highest exposure to Canadian tourism among cruise operators, though overall reliance remains low.
An estimated 5% of NCLH's revenue comes from Canadian travelers, followed by Royal Caribbean Group (NYSE:RCL) at 4% and Carnival Corp. (NYSE:CCL) at 3.5%.
Hotel companies rely more heavily on domestic and business travelers, while cruise lines see slightly higher engagement from Canadian tourists.
Florida saw approximately 6 million international visitors in 2023, with around 1.3 million coming from Canada. Theme parks with high international attendance could feel the impact of a decline in Canadian visitors.
Comcast Corp.’s (NASDAQ:CMCSA) Universal theme parks are the most exposed, with around 30% of attendance coming from international tourists.
Walt Disney Co. (NYSE:DIS) typically sees international visitors comprise between the high teens to low 20% of total guests, while United Parks & Resorts Inc. (NYSE:PRKS) has lower exposure at around 7%, down from pre-pandemic double-digit levels.
The financial impact extends beyond ticket sales. International visitors tend to spend more on park-related purchases, including hotel stays and in-park amenities, Dove said.
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