On September 20, US President Joe Biden’s administration eliminated travel restrictions on foreign nationals and non-residents seeking to enter the US from a list of 33 countries, including the UK and the Schengen Area, China, India, Iran, South Africa, and Brazil. Fully vaccinated adults will be able to travel to the US starting in November, as long as they can show proof of vaccination and a negative coronavirus test. Until now, visitors from these countries could only enter the US after quarantining for 14 days in a country that was not on the US’s banned list. Mexico and the Dominican Republic were popular destinations not banned by the US. Shortly after the US announced the easing of travel restrictions, Argentina decided to open its land borders to all bordering countries, which include Brazil, Bolivia, Chile, Paraguay, and Uruguay.
Our View
The end of travel restrictions in the US is good news for the global economy as the US tries to normalize merchandise and travel flows, helping restore normal cross-border business activity. Given the fact that Americans could already travel to most countries, the Biden administration’s resolution will mainly benefit the local hospitality and tourism industry in the US, while shifting household budgets among higher-income segments in previously banned countries—notably Brazil—who used to travel to the US quite frequently prior to the pandemic. The reopening of Argentina’s borders will also reallocate tourism spending away from Brazil across additional income segments.
Business Implications
B2C companies that successfully premiumized their product portfolios during the pandemic by increasing their share of wallet among higher-income consumers risk to lose some, if not all, of that newly acquired share to services that are coming back online. According to our own category spending data, prior to the pandemic, Brazilians were spending 17.2% of their household budget on transportation, restaurants and hotels, and recreational and cultural activities. With the easing of travel restrictions to the US, we are likely to see a swifter return to pre-pandemic consumer spending patterns among premium segments, likely affecting how much consumers spend on average on high-end products. B2C companies should adapt their go-to-market strategy accordingly.
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