Brand USA: Congressional Appropriators and Administration Disagree on Funding Cuts for U.S. Tourism Promotion

December 14, 2017

Brand USA: Congressional Appropriators and Administration

Disagree on Funding Cuts for U.S. Tourism Promotion

The Trump Administration’s FY2018 budget proposed

eliminating the government’s annual grant to Brand USA, a

public-private effort to promote the United States as a travel

destination for foreign visitors, and using the money instead

for homeland security. That proposal has not been adopted

by Congress, in part because specific authorizing legislation

would be required to effect this change. As a result, neither

the House-passed nor Senate Appropriations Committee

draft of the Department of Homeland Security (DHS)

appropriations bill for FY2018 assumes these resources

would be available for other purposes. However, Brand

USA remains controversial, with some critics asserting that

promotion of tourism should be left to the private sector,

and it is possible the Administration will again recommend

ending its federal grant when the FY2019 budget is released

in February.

Tourism Promotion in the United States

Over 75.5 million foreign visitors traveled to the United

States in 2016, spending nearly $245 billion on hotels,

meals, flights aboard U.S. air carriers, and other goods and

services. America’s travel and tourism industry directly and

indirectly supported 7.6 million American jobs in 2016, of

which 1.2 million were supported by international visitors,

according to an estimate by the U.S. Department of

Commerce.

Unlike many countries, the United States does not have a

central agency to oversee travel and tourism. The National

Travel and Tourism Office (NTTO) within the International

Trade Administration of the Department of Commerce is

the federal government’s central point of contact for travel

and tourism. Its main purpose is to provide official tourism

statistics and research.

NTTO is also responsible for coordinating the federal

government’s activities in support of the U.S. travel and

tourism industry through the interagency Tourism Policy

Council established in the United States National Tourism

Organization Act of 1996 (P.L. 104-288). A private-sector

group, the U.S. Travel and Tourism Advisory Board, also

offers guidance to federal agencies on issues of importance

to them, including travel facilitation and visa policy.

Brand USA

Brand USA, formally known as the Corporation for Travel

Promotion, was established under the Travel Promotion Act

of 2009 (TPA; P.L. 111-145). It began operations in May

2011 as a nonprofit public-private entity charged with

promoting international travel and tourism to all areas of

the United States and communicating U.S. visa and entry

policies to overseas visitors. NTTO is the federal

government’s liaison to Brand USA, but the government is

not represented on the organization’s 11-member board of

directors.

The private sector funds half of Brand USA’s spending

through annual cash contributions of at least 30% of its

budget plus in-kind contributions, such as advertising,

tickets, and donated products. The federal government

matches the cash and in-kind contributions with an annual

grant of no more than $100 million. The funds for this grant

come from a fee charged for use of the Electronic System

for Travel Authorization (ESTA), which is required of

international travelers who visit the United States for short

business or leisure stays from the 38 countries participating

in the U.S. Visa Waiver Program.

Each traveler from a visa waiver program country who uses

ESTA is charged a $14 fee, which consists of two parts:

$10 is available to fund travel promotion through Brand

USA, and $4 is used to cover the DHS’s costs of screening

visa waiver program applicants. The $10 travel promotion

fee generated nearly $150 million in 2016. Of this amount,

$100 million, less the $7 million sequester required under

the Budget Control Act (P.L. 112-25) for FY2017, went to

Brand USA, and the remainder was directed to the U.S.

Treasury for deficit reduction purposes. Under current law,

the travel promotion fee is to sunset on September 30, 2020.

Brand USA’s travel promotion and marketing campaigns

include television, print, Internet, and social media

advertisements, as well as promotional events such as

hosting travel agents from other countries. Its promotional

efforts are focused on 14 target markets, which together

account for more than 80% of inbound tourist travel. These

markets include Brazil, Canada, Mexico, China, and Korea.

Figure 1. International Visitors to the United States,

Selected Countries

Source: NTTO, accessed December 2017.

NTTO figures show that the number of international

arrivals fell between 2012 and 2016 from several of Brand

USA’s target markets, including Canada, Brazil, and Japan,

with the volume of visitors down 15%, 6%, and 3%,

respectively. During the same period, the number of

Chinese visiting the United States almost doubled to 3

million annually. China, a high-growth market, has become

a more important source of visitors than France, Australia,

and Germany. Another growing target market is South

Korea; the number of South Korean visitors traveling to the

United States rose to 2 million in 2016, up from roughly 1.3

million in 2012 (see Figure 1).

https://crsreports.congress.gov

Brand USA: Congressional Appropriators and Administration Disagree on Funding Cuts for U.S. Tourism Promotion

Determining whether Brand USA’s media, advertising, and

other outreach activities have directly led to increased travel

to and economic activity in the United States is not

straightforward because many factors affect international

travel, including general economic conditions and currency

exchange rates. Using a proprietary econometric model, a

Brand USA-commissioned study by Oxford Economics

claims Brand USA’s marketing attracted some 1.2 million

visitors in FY2016. This equaled approximately 1.5% of all

visitors to the United States in that year.

Competition for International Tourists

A challenge for Brand USA’s travel promotion efforts is

that it is now much easier to visit many parts of the world,

including Asia and Africa, than it was a few years ago.

With a greater proportion of international tourists coming

from Asia, these travelers, for example, may not seek

destinations that require trans-Pacific flights. That may

partly explain why the United States has lost market share

as a destination in recent years. The U.S. share of

international travelers shrank from 7.5% in 2001 to 6.3% in

2010 and 6.1% in 2016.

Figure 2 shows that since 2003 (after the September 11,

2001, terrorist attack), the number of international visitor

arrivals to the United States declined in two years, 2009 and

2016. In 2016, 75.6 million foreign visitors traveled to the

United States, down 2.4% from the record high of 77.5

million in 2015. Canada and Mexico are the largest source

markets for international visitors.

Figure 2. International Visitors to the United States

Source: NTTO, accessed December 2017.

NTTO figures for the first six months of 2017 show total

international arrivals to the United States from all countries,

including Canada and Mexico, shrank about 4% from the

same period in 2016. Among the factors affecting inbound

travel are the steep appreciation of the dollar against many

key currencies, which makes it more expensive for travelers

to vacation in the United States, as well as tighter entry

requirements and immigration policies.

NTTO forecasts U.S. visitor volume will reach 94.1 million

in 2021, lower than the Brand USA goal of 100 million

international visitors by the end of 2020.

U.S. Travel and Tourism Industry

Foreigners spend, on average, far more on their U.S. travels

than Americans do. In 2016, an average foreign visitor

spent about $4,400 domestically on travel activities,

according to the U.S. Travel Association, a travel industry

advocacy group. Average spending per Chinese visitor was

$6,900 in 2016, the highest of all international visitors.

Nonetheless, in 2016, domestic travelers accounted for 84%

of total travel expenditures, the association reports.

Using a government dataset, the Bureau of Economic

Analysis reports that foreign visitors account for a

disproportionate amount of U.S. travel and tourism

spending. International visitors are estimated to have

accounted for 25% of tourist spending on lodging, 27% of

tourists’ food and beverage demand, and 24% of total

passenger air transportation demand in 2015.

Tourism exports—a measure of foreign visitors’ spending

in the United States—have grown strongly over the past

decade, except in 2009, when they plunged 11% from the

previous year due to poor economic conditions in Europe

and elsewhere, and last year, when they dropped by 1% (see

Figure 3). The U.S. travel and tourism sector has

maintained an annual trade surplus—$83.9 billion in

2016—with the world every year since 1989.

Figure 3. U.S. Travel and Tourism Exports

Source: NTTO, accessed December 2017.

Issues for Congress

The Trump Administration’s FY2018 budget proposed

defunding Brand USA and making the revenue available to

U.S. Customs and Border Protection (CBP), the agency

within DHS that processes arriving visitors. Although final

full-year funding for FY2018 has not been enacted,

Congress has taken no steps to accept the Administration

proposal.

Proponents of federally supported tourism promotion

activities, including industry groups like the U.S. Travel

Association, argue that ending Brand USA would harm the

U.S. economy because the strength of the U.S. dollar,

stricter travel rules, and other homeland security and

immigration policies have made it more complex and costly

for foreign visitors to enter the United States. Without

Brand USA, supporters assert, state tourism marketing

efforts would grow more expensive and would not reach as

many potential visitors, which could be especially harmful

for major tourism destinations heavily dependent on

international visitors, like California, Hawaii, and Florida.

Opponents have questioned the efficacy of the Brand USA

program. Some Members of Congress have criticized Brand

USA for what they consider a history of waste, abuse,

patronage, and lax oversight. Others maintain that federally

supported tourism advertising is an inappropriate subsidy to

a private industry.

Michaela D. Platzer, Specialist in Industrial Organization

and Business

https://crsreports.congress.gov

IF10791

Brand USA: Congressional Appropriators and Administration Disagree on Funding Cuts for U.S. Tourism Promotion

Disclaimer

This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to

congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.

Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has

been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the

United States Government, are not subject to copyright protection in the United States. Any CRS Report may be

reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include

copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you

wish to copy or otherwise use copyrighted material.

https://crsreports.congress.gov | IF10791 · VERSION 3 · NEW