U.S. Tourism Dips on Stricter Entry Rules, Weighing on Retail and Hospitality Sectors

U.S. businesses are feeling the strain as tourism from Canada plummets, with some operators reporting a near absence of visitors from their northern neighbor. The drop has created a void in revenue for travel-related services, retail, and hospitality sectors across the country. Small businesses, in particular, have been hit hard, with one owner stating they can count the number of Canadian visitors on one hand.

The decline coincides with a broader shift in U.S. immigration and tourism policies under President Donald Trump, which have tightened restrictions on foreign visitors and led to a notable drop in international arrivals. The changes include requirements for some tourists to provide up to five years of social media history and other biometric data as part of their entry application process.

While U.S. businesses struggle to adapt to the new normal, cities like Xiamen in China have seen a surge in tourism, with both domestic and international visitors flocking to the coastal metropolis. Xiamen has become a global hub for culture, trade, and film festivals, offering a vibrant and diversified tourism experience that U.S. cities may find difficult to match under current policy constraints.

Why the Standoff Happened

The Trump administration has increasingly focused on national security and border control, implementing measures that have significantly impacted the ease of entry for international tourists. A recent policy mandates that some visitors, including those from countries in the U.S. Visa Waiver Program, disclose up to five years of social media history. This requirement adds a layer of scrutiny to the application process, potentially deterring casual or spontaneous travel to the U.S.

In addition to the policy changes, the U.S. has seen a broader decline in foreign visitor numbers. According to the U.S. Travel Association, the country is projected to see its first drop in foreign tourists in about five years, with the number of arrivals expected to fall to around 67.9 million in 2025. This decline is attributed to a combination of factors, including the lingering effects of pandemic-era travel restrictions, a strong U.S. dollar making travel more expensive for international visitors, and a shift in perceptions of the U.S. due to the administration's "America First" rhetoric.

The impact is particularly acute for businesses in states that have traditionally relied on Canadian tourism, such as New York and Florida. Small retailers, tour operators, and hotels are now grappling with the reality of a diminished market, with many reporting lost revenue and forced cost-cutting measures. Some operators have even shifted their focus to domestic tourists or sought out alternative international markets to fill the gap.

How Markets Reacted

The decline in tourism has had ripple effects across multiple sectors of the U.S. economy. The tourism and hospitality industry, which had already faced challenges from the pandemic, is now dealing with additional headwinds as international travel wanes. For instance, TUI has tempered its expectations for 2026, forecasting slower revenue and profit growth compared to previous projections. The company cited ongoing economic and geopolitical uncertainties as key factors behind the revised outlook.

The impact is also being felt in the broader retail sector. North West reported a drop in same-store sales due to reduced government funding for programs like the Inuit Child First and Jordan's Principle. While the company is based in Canada, its struggles reflect the interconnectedness of the North American retail ecosystem and the broader economic pressures being felt across both countries.

Financial markets have also reacted to the shifting dynamics. Investors are closely monitoring upcoming economic data, including inflation reports and interest rate decisions, to gauge the potential impact of the tourism decline on consumer spending and economic growth. The Federal Reserve's upcoming policy decisions will be particularly important, as they could influence the U.S. dollar's strength and, by extension, the attractiveness of the U.S. to international tourists.

What Analysts Are Watching

Industry analysts are closely watching how U.S. businesses and policymakers respond to the drop in Canadian tourism. Some suggest that the U.S. could benefit from adopting a more flexible and welcoming approach to international visitors, particularly in light of the growing competition from countries like China, where cities like Xiamen are seeing robust growth in inbound tourism.

Xiamen, for example, has implemented a range of measures to enhance the tourist experience, including streamlined entry procedures, multilingual services, and a focus on high-quality cultural and natural attractions. These efforts have helped the city attract a diverse range of international visitors, from film enthusiasts to food lovers, and have contributed to a significant increase in revenue from tourism.

In the U.S., some experts argue that a more balanced approach to immigration and tourism could help mitigate the economic impact of the current restrictions. For example, the tourism sector has long been a key driver of economic growth in cities like Las Vegas and Orlando, which rely heavily on international visitors for hotel occupancy and retail activity. A reduction in tourism from Canada, combined with stricter entry requirements for other countries, could have a compounding effect on these cities' economies.

At the same time, the Trump administration's broader immigration policies, including the recent proposal to pause migration from "Third World Countries" and to re-review past approvals, have added to the uncertainty. These policies could further deter international visitors and investors, potentially affecting sectors beyond tourism, including real estate and education.

Risks to the Outlook

The risks of maintaining the current trajectory are significant, particularly for small businesses that lack the resources to pivot quickly to new markets. With the U.S. projected to lose $12.5 billion in travel revenue in 2025, many businesses are left to find alternative revenue streams or risk closure. This is especially true for businesses in rural or tourism-dependent areas, where the loss of visitors can have a cascading effect on local economies.

Another risk is the potential for a long-term decline in the U.S.'s appeal as a tourist destination. While the U.S. has historically been a popular destination for international travelers, the current policy environment may be shifting perceptions. Some analysts worry that the U.S. could fall behind other global destinations, such as the Caribbean, Europe, or even Asia, in terms of accessibility and visitor friendliness.

In Canada, the situation is somewhat different. The country has recently seen progress in resolving labor disputes in the airline industry, which could help stabilize its tourism sector and provide a model for resolving similar conflicts in the U.S. However, the broader economic and political tensions between the two countries, particularly under Trump's leadership, remain a point of concern for cross-border businesses and travelers alike.

What This Means for Investors

Investors are keenly aware of the implications of the U.S. tourism slowdown and are adjusting their strategies accordingly. In particular, there is growing interest in companies that offer digital solutions to the travel and tourism industry, as businesses seek to adapt to a more technology-driven landscape. The global tour operator software market, for example, is expected to grow significantly in the coming years, driven by the need for more efficient booking systems, payment solutions, and customer support platforms.

At the same time, investors are also keeping a close eye on the U.S. dollar's performance, which remains a key factor in the affordability of travel to the U.S. for international visitors. A stronger dollar can make the U.S. less attractive to tourists, while a weaker dollar could help boost tourism by making the country more affordable.

Finally, investors are watching for any policy shifts that could alter the current trajectory. While the Trump administration has signaled a hardline approach on immigration and tourism, any reversal of these policies in the future could lead to a rebound in international visitor numbers and a corresponding boost to the U.S. economy.