(By Mani) The recent Spain crisis has escalated fears that the ongoing European issues may hurt the U.S. travel and the financial industries severely.
Tourism and financial services are clearly being affected. European visitors account for around 40 percent of all international visitors to the United States, and the volume of visitors has slowed noticeably over the past few months.
Year-to-date arrivals from overseas through April are currently up just 2 percent compared to a year-over-year gain of 12 percent for the same period last year. Moreover, the number of visitors from western Europe, and the United Kingdom in particular has slowed notably over the past year and actually fell 11 percent in April.
The top U.S. destinations for international tourists include New York City, Los Angeles, Miami, San Francisco, Las Vegas, Orlando and Washington, D.C.
"The slowdown in European visitors is falling heaviest on the East Coast, particularly the destinations in the Northeast and Midwest. Florida has so far proved somewhat more resilient, with continued inflows from Latin America offsetting some of the slowing from Europe," Wells Fargo economist Mark Vitner said in a client note.
However, inflows from Latin America are also beginning to taper off and visitors are not spending as much when in Florida as in the past. The West Coast is holding up somewhat better, particularly San Francisco and Los Angeles. For Las Vegas, the European visitor count has essentially leveled off over the past year.
Spending by tourists has also slowed. The top activities for tourists, dining and shopping, have declined slightly over the past year. Fewer international tourists are also choosing to visit theme parks, while more are opting for low-cost activities such as sightseeing in major cities, visiting historical and cultural sites.
Meanwhile, the impact from Europe's economic and financial struggles on the financial services industry is still playing out. Global financial service providers are scaling back as slower economic growth and heightened uncertainty are creating fewer opportunities for commercial banking, investment banking and wealth management.
"The weakened operating environment is expected to lead to layoffs in the financial sector, primarily in New York City, but to a lesser extent in Boston, Philadelphia and Chicago," Vitner added.
Moreover, the continuing uncertainty surrounding the European banking system is contributing to tighter lending standards, increased stock market volatility and widening credit spreads around the world, which raises the hurdle rate for new investment and further restrains economic growth.
Consequently, regional economies may see a slowdown in international tourism, while the financial services sector is under renewed strain as Europe's financial woes and weaker economic growth weighs on near- and long-term prospects.