Government decisions about transportation and immigration issues can make or break the flow of tourism in and out of the country. Based on actions the government took at the end of 2015, next year promises to be a volatile period of change.
A good example of that is the heated debate this month surrounding the Visa Waiver Program (VWP), which allows citizens of 38 member countries to enter the U.S. without a visa for 90 days or fewer.
The program came under intense scrutiny after the Nov. 13 terrorist attacks in Paris because most of the assailants were citizens of France or Belgium, both VWP countries, and, in theory, could easily have flown to the U.S.
Earlier in December, the House passed legislation to prevent anyone that has recently traveled to Iraq or Syria from using the VWP, in addition to enhanced screening requirements for all VWP travelers. A bipartisan group of senators, meanwhile, introduced a bill that would require all VWP visitors to submit fingerprints and photographs before arriving in the U.S. To pay for the extra security, the bill calls for an undetermined increase in the VWP application fee, which is currently $14 — travelers from countries not in the program pay $160 for a visa application. And the Obama administration made changes to the VWP including enhanced tracking of visitors’ past trips and requiring a review of the program to assess the level of intelligence sharing between each VWP country and the U.S.
In the coming year, travel industry leaders from around the country will monitor how the proposals unfold, and analyze how best to balance the safety of U.S. residents with promoting the continued flow of international inbound travelers, which the industry has increasingly come to depend on.
According to the U.S. Travel Association, travelers from VWP countries account for $190 billion in annual economic output.
Aviation challenges
Many policies impacting air travel will become big issues in 2016, and several of them expose rifts within the industry. Among those are Open Skies agreements, which have pitted American carriers against Middle Eastern airlines, and legislation that attempts to deal with fee transparency and ancillary fees, about which U.S. airlines and OTAs and GDSs disagree.
Another is the Passenger Facility Charge (PFC), a federally regulated tax that funds airport improvements. It currently has the airlines and airports at loggerheads.
Capped by Congress in 2000 at $4.50 per passenger per flight, the decision to raise the cap will be one of many parts of reauthorizing the FAA budget, which expired in September and has been temporarily funded.
Airports and other groups, including U.S. Travel, are pushing for an increase in order to fund what U.S. Travel CEO Roger Dow calls “our severe infrastructure challenges” at airports.
Airlines, which collect PFCs at the time of a ticket purchase, have lobbied to keep the cap at its current level on the grounds that higher fees would make air travel more expensive, and they argue that airports have adequate resources to fund needed improvements without asking passengers to pay more.
The future of the PFC is anybody’s guess. When the issue arose last spring, airlines were increasingly unpopular for making record profits at the same time that passengers were paying record ancillary fees and boarding flights in deteriorating terminals.
But ticket prices have been falling for the last two quarters, and news about major terminal investments by carriers like JetBlue and Delta could swing opinion the other way.
As with many policy issues, the side with better lobbyists is likely to carry the day.
Reining in the states
Many issues that impact the travel industry don’t get huge headlines but are among the most significant to travel advisers. One to look out for in 2016 is what ASTA considers among the biggest threats to its members: state tax issues.
According to ASTA, two subsets of tax issues affect travel agencies. One is the continued push by states to expand sales taxes to include services, because travel agents are considered a service industry.
Eben Peck, ASTA’s senior vice president for government and industry affairs, explained that at least four or five states a year try to expand sales taxes to cover services and that depending on how the bills are written, the worst would impose taxes of 5% to 7% on agencies’ gross sales, “which would put a lot of people out of business.”
The two states where this is a particular concern are Illinois and Pennsylvania, where Peck said ASTA is fighting the move, as it has in other states about a dozen times in the past. So far, ASTA has been on the winning side, helping to defeat every proposal.
Another state tax issue has to do with efforts to tax OTAs and the difference between the net rate they pay for a room and what the consumer pays. These proposals inevitably also snag smaller travel agencies that charge service fees.
Peck said taxing a travel agent’s service fee at 10% would be “disruptive” to their business. A bill to do just that in Maryland earlier this year was vetoed by the governor, but the state legislature plans to override that veto in January.
“While the hot chocolate is still warm from Christmas, we’ll be fighting in Maryland again,” Peck predicted.
As part of the battle, Peck said ASTA is looking to educate lawmakers on the fact that travel sellers are different than other service industries in that they compete with both in-state and out-of-state businesses.
“States should be very careful about killing the goose that laid the golden egg,” he said.
Peck doesn’t expect either tax issue to go away anytime soon.
“As long as states have budget problems, which means forever, and are looking for revenue, I think we’re going to keep seeing these,” he said.
News editor Johanna Jainchill covers policy issues for Travel Weekly.