U.S. Travel Industry Fears a ‘Lost Decade’ Under Trump
- Published on 27 March 2017
Like many Washington lobby groups, the U.S. Travel Association was quick to congratulate the new president on his victory last November.
“We are encouraged that Mr. Trump’s extensive business and hospitality background … will make him a ready and receptive ear,” the trade organization said. On the Republican’s inauguration, the USTA’s chief executive officer, Roger Dow, pledged the industry as a “capable, willing partner.”
But almost immediately, things started to go sideways. A steady drumbeat of news and policy proclamations seemed likely to damage America’s $250-billion travel industry and its roughly 15 million U.S. employees.
Initial contacts between Trump and leaders of Australia, Germany, Mexico, and China didn’t go well, resulting in negative publicity in countries that send lots of travelers to America. Then came the majority Muslim nation travel bans, with protests and news coverage that made for a global public relations disaster. The first ban, since suspended by the courts, resulted in the detention of foreign travelers. The second, changed from the first, was frozen before it could take effect. Trump is appealing.
Meanwhile, the White House has instituted an airline cabin restriction on electronic devices for people flying from airports in eight nations. And last week, a U.S. State Department policy was revealed that mandates extra vetting of visa applicants in nations where U.S.-bound travelers must apply for one. This includes inspection of social media accounts for some and is likely to make it more difficult for millions of people to travel to America.
The State Department took action following a March 6 order from the White House to enhance visa screening, a spokeswoman said, declining further comment. “We will keep the public informed about changes affecting travelers to the U.S. as appropriate,” the department said in a March 26 email.
The order doesn’t apply to 38 countries in the U.S. visa-waiver program, but others are going to have to wait. The new policy covers nations with millions of business travelers and international tourists, including Brazil, Mexico, China, Argentina, Colombia, and South Africa. About 15 million annual travelers will be affected, the USTA estimated.
So for Dow’s organization and the industry it represents, what looked like the beginning of a beautiful friendship became in just two months something bordering on adversarial. Even America’s closest ally and next-door neighbor is wavering on sending its kids across the border for a field trip.
Please, Mr. President
The new visa rules may have been the last straw for the USTA. Last week, Dow’s group issued an almost plaintive statement: “Mr. President, please tell the world that while we’re closed to terror, we’re open for business. Imbalanced communication is especially susceptible to being ‘lost in translation’—so let’s work together to inform our friends and neighbors, who could benefit from reassurance, not just who is no longer welcome here, but who remains invited.”
For the Trump administration, the message on travel has so far been clear: An “America First” policy is likely to mean greater travel restrictions and entry barriers, plus the possibility of a physical wall on the border with Mexico. And a trade group once excited to see a golf-resort owner in the White House has instead begun to feel trepidation about his potential impact on a massive sector of the U.S. economy.
“Yes, you are correct that you have detected a change in the tone,” Dow, a former Marriott International Inc. executive, said Friday in an interview with Bloomberg. “Travel is a very fragile thing, and perception is a factor.”
The association is hopeful that, despite the inauspicious beginning, Trump cabinet officials such as billionaire financier Wilbur Ross, the Commerce Secretary, and Secretary of State Rex Tillerson, the former CEO of Exxon Mobil Corp., will help protect the travel economy. “The administration is trying to move very quickly on an agenda they put together,” Dow said. “They’re just coming in, and I think there may be people who don’t understand our industry.”
The USTA regularly refers to the century’s first 10 years as “the lost decade” because of the steep decline in travel to America following restrictions imposed after the 2001 terror attacks, global antipathy toward the subsequent foreign policy of President George W. Bush, and the economic fallout of the Great Recession. Outside the U.S., however, foreign travel continued to increase over the same period.
Trump’s rhetoric and unpopularity abroad is likely to reduce international arrivals by 4.3 million this year, according to market strategy firm Tourism Economics LLC. New York City, Los Angeles, and Miami are all exposed to any declines, being among the most popular destinations for foreign travelers.
To be sure, Dow predicts U.S. arrivals won’t decline as much as after Sept. 11, 2001, at least not yet. For now, he sees a dip of as much as 4 percent. “We haven’t seen the big damage yet,” he said. “What we’re getting is the noise level.”
During the administration of President Barack Obama, America saw international visitors rise, with arrivals increasing from 51 million in 2006 to nearly 78 million in 2015, according to U.S. Travel. Some of that may be attributable to Brand USA, a marketing organization formed by Obama’s Commerce Department to help sell America as an international travel destination.
Brand USA’s CEO agreed with Dow that “misperceptions” created by the two Trump travel bans are injuring the tourism economy.
Dow says he remains hopeful that the president will “clarify” his policies so that international travelers don’t decide to skip America. “Donald Trump understands it, he is a hotel owner,” Dow said. “He understands the international traveler.”
Sears has 'substantial doubt' that it can survive
- Published on 22 March 2017
Sears Holdings (SHLD), the holding company for the two iconic retail brands, warned investors late Tuesday that it can't promise it will stay in business.
It included the language in its annual report while insisting it might still turn things around.
"Our historical operating results indicate substantial doubt exists related to the company's ability to continue as a going concern," said the statement.
While its recent history has been written in red ink, Sears was once one of the nation's most powerful companies, both the Walmart and Amazon of its time. But its once-proud brands have mostly been forgotten by the modern American shopper.
Now Sears Holdings is not even sure it can raise enough cash through loans and debt financing to survive. The company owes $4.2 billion, up from about $3 billion a year ago.
It lost $2.2 billion in the fiscal year ending in January and has not turned an annual profit since 2010. Its losses since then total $10.4 billion.
Sears Holdings said its ability to sell assets, such as stores and store leases, could be limited because it needs those assets to pay for pension plans. In January, Sears sold its Craftsman brand of tools to Stanley Black & Decker (SWJ). It is looking to sell Kenmore appliances and Diehard auto parts.
Sears Holdings has been in trouble almost since the 2005 merger that joined the two department store brands.
At the start of 2006, it had 3,400 U.S. stores and 370 more in Canada that it has since sold. By the end of this January, it had only 1,400 stores left, all in the United States. The company still has 140,000 employees, but that too is down sharply from the 355,000 it had in 2006.
Even that doesn't tell the full picture of the decline.
Sears was once the nation's largest retailer and business employer. Long before the ascendance of Walmart (WMT), and decades before Amazon (AMZN, Tech30) was even born, the Sears catalog was how many Americans learned to shop from home for a large variety of items they wanted.
It developed an extensive store network, helping furnish homes as Americans moved to the suburbs after World War II -- and causing trouble for small, locally owned shops.
The company at one time grew to include not just the retail business but a bank, a brokerage, a real estate company and what was then the world's tallest building, the Sears Tower, for its Chicago headquarters.
Kmart had a proud tradition of its own as one of the first major discount chains.
Its history, like that of Sears, stretches to the late 19th century. It became known for its "blue light specials," short-lived sales signaled by a flashing light and a public address announcement.
Kmart also bought many other retail chains that have since gone out of business, including Borders Books and Sports Authority. It filed for bankruptcy in 2002 shortly before Sears bought its remains.
The retail landscape is littered with storied brands that have closed in recent years as brick-and-mortar stores became an albatross in the face of growing competition online.
Just in the last year, Sports Authority and The Limited have closed, and RadioShack and American Apparel are both in their second bankruptcies and in danger of shutting down. Macy's (M), JCPenney (JCP) and Staples (SPLS) have announced widespread store closing plans.
The problems for Sears started well before the growth of online shopping. More than 20 years ago, it began to suffer from competition from low-price competitors such as Walmart, and big-box stores such as Home Depot (HD). It lost its place in the Dow Jones index of the nation's most important companies in 1999.
Then came growing competition from Amazon and other online retailers. Analysts said Sears Holdings did little to invest in either the Sears or Kmart brand, instead trying to cut its way back to profitability by trimming advertising and closing stores.
It announced plans to close 150 more stores in January, and its stock hit a post-merger low in February. Then the stock rebounded when the company announced a deal with creditors to borrow $140 million more and cut at least $1 billion in operating costs a year, along with reducing its debt and pension obligations by $1.5 billion.
The "going concern" warning sent shares down about 12% in early trading Wednesday.
Fed on track to raise U.S. rates twice more this year: Evans
- Published on 20 March 2017
The Federal Reserve is on track to raise interest rates twice more this year after a policy tightening last week, and it could be more or less aggressive depending on inflation and fiscal policies from the Trump administration, a Fed rate-setter said on Monday.
The public comments from Chicago Fed President Charles Evans were among the first since the U.S. central bank lifted its policy rate a notch last week, as expected. It also forecast roughly two more moves in 2017 in a nod to low unemployment and some inflation pressures.
"Three is entirely possible," Evans, speaking on Fox Business Network TV, said of hikes in 2017. "As I gain more confidence in the outlook I could support three total this year. If inflation began to pick up, that would certainly solidify (that expectation). It could be three, it could be two, it could be four if things really pick up."
Asked about U.S. President Donald Trump's promise to boost the economy to a 4 percent growth rate, from about 2 percent in the last few years, Evans said: "Four percent would be really an outsized number."
While that level of growth could be reached "in any given year," he said it was hard to imagine given the economy is already doing well, the labor market is "very strong," and sectors like automobile sales are at all-time highs.
Evans, who is a voter on the Fed's policy-setting committee this year and supported last week's move, also echoed a comment from Fed Chair Janet Yellen on Wednesday that suggested the central bank could try to push inflation, now at 1.7 percent, above a 2-percent target.
"There is room to get inflation up to 2 percent and in fact going beyond 2 percent a little bit to make sure we get there, and that it's a symmetric inflation objective, so that's ok," Evans said.
General Motors Says It Will Rehire 500 Workers Targeted In Scheduled Layoffs
- Published on 17 March 2017
General Motors is slated to layoff 1,100 workers in May, but plans to rehire 500 of them next year. The auto giant said it is moving the production of the GMC Acadia mid-size SUV to Tennessee, which prompted the layoffs at the Lansing Delta Township plant in Michigan. The assembly line here will only produce two models of cars, but said that it will bring back 500 “to give the company flexibility to meet market demand” (via Reuters):
General Motors Co plans next year to rehire 500 Michigan assembly plant workers who are to be laid off in May, citing increased demand for larger vehicles, the company said on Wednesday.
The company said that when it begins full production of the new versions of the two models in 2018, it would "bring back approximately 500 jobs to give the company flexibility to meet market demand."
Last year, pickups and SUVs accounted for 59.5 percent of U.S. auto sales, up from 55.8 percent in 2015.
GM also said it would add 220 jobs at a plant in Romulus, Michigan, that is building 10-speed automatic transmissions, and it would retain 180 jobs by shifting Lansing workers to a Flint assembly plant to support pickup truck production.
The announcement came as U.S. President Donald Trump visited Michigan to announce his administration will review fuel efficiency standards, a move that could help automakers sell more larger models.