Strong Dollar Could Dampen U.S. Tourism

A Commerce Department report showed that foreigners flocked to the U.S. last year to visit famous cities like New York City and Los Angeles. In 2014, the number of tourists visiting the U.S. increased to 75 million, a 7 percent increase from the previous year.

However, the dollar's rally could cause many to look elsewhere for a holiday, as the exchange rate has become increasingly unfavorable for foreigners.

U.S. Visits Decline

Toward the end of 2014 when the dollar began to gain momentum, travelers appeared wary to spend on U.S. vacations. A monthly analysis of the Commerce Department's trade data showed that the increases began to taper off in the fourth quarter, with spending in January falling.

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Tourism Sector Could Feel The Squeeze

As the dollar has risen significantly since the beginning of 2015, companies with an interest in U.S. tourism could feel the pinch in the coming year. Hotels, rental cars and airlines are all exposed to declining interest in travel to the U.S., but their overseas operations could offset those losses.

International Operations In Focus

While a strong dollar is bad for foreigners, it gives Americans more incentive to travel and spend. Hotel chains, like Starwood Hotels & Resorts Worldwide Inc (NYSE: HOT), that have invested heavily in international expansion could benefit from an influx of travelers outside the States. Airlines that carry passengers both domestically and internationally, such as American Airlines Group Inc (NASDAQ: AAL) are also likely to offset losses by taking U.S. citizens abroad or transporting them from state to state.