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2007: A winning year in tourism

Written by editor

(eTN) – As we begin yet another year, tourism trends do not look bleak, just yet. The sustained growth rate of the past 10 years will continue with full year growth rates estimated at 5.7 percent average. Growth will be driven by the emerging markets and the developing countries.

(eTN) – As we begin yet another year, tourism trends do not look bleak, just yet. The sustained growth rate of the past 10 years will continue with full year growth rates estimated at 5.7 percent average. Growth will be driven by the emerging markets and the developing countries. According to John Kester, chief of market trends, competitiveness and trade in tourism services section of the United Nations World Tourism Organization (UNWTO), 2007 results confirm resilience regarding external factors such as turbulence in financial markets increasing interest rates, tighter credit conditions, rising fuel prices and security and health issues.

Current issues may start to weaken consumer confidence. For the coming year 2008, only a very slight softening in the trade is expected, marking a growth rate of only five percent across the globe.

In 2007, growth was not expected to be quite as dynamic as that of 2006, as patterns have moved generally closer to the trend rates embodied in the 10-year annualized forecast by the World Travel and Tourism Council (WTTC). Robust global growth will continue with GDP growth forecast, moving on a straight line above 4.5 percent, pegged much higher than market exchange rates fluctuating from 3 – 3.7 percent per year till 2008, according to Oxford Economics. The WTTC is not concerned about the significant slowdown because a slightly positive trend may prevail, offsetting the decline for two major reasons, according to WTTC president Jean-Claude Baumgarten.

Mature markets, such as North America and Europe, will travel five to six times a year rather than just two or three times. “Weekend breaks are becoming so popular in Europe; it’s like a movement that redefines lifestyle. If you look at the other side, the new and booming markets are China and India,” said Baumgarten. China’s domestic market alone represents 470 million people a year. China is going to be the second tourism economy in the world in 10 years. India’s domestic market totals 275 million a year. There are 170 million households which have the same average yield as most developed nations today. Another rising star is Russia. The strength of the Russian market is in its growing middle-class whose traffic impact will likely skyrocket, according to the WTTC chief.

Oil price will continue to surge way above $86 per barrel until 2009, expecting slower economic growth marked by higher energy demands across continents marked by nominal prospects of increase in OPEC oil production. “Americans do not want to fly due to the weak dollar, oil price hikes, the hassle factor of getting a passport and stringent airport searches, said Kester.

Price of gas will affect US travelers’ decision-making. Peter Yesawich, chairman and chief executive officer of Yesawich, Pepperdine, Brown & Russell said 53 percent would change plans if gas reaches $3.50 per gallon. “In our survey, about 26 percent will drive shorter distance, 26 percent will save on attractions, 24 percent will not get away from their jobs, while 22 percent will just find things to do at home.”

In the Arab region, there’s a lot taking place. “Focus is not only on the United Arab Emirates, but also all around Turkey or Georgia and a whole new economic zone developing and generating massive travel and tourism there,” Baumgarten said. The Middle East is emerging as a destination with visitor numbers in the region climbing much faster than the world total. True enough, the major stories today is the rise of the Middle East with the share of global overnight stays rising at an upward trajectory until 2016, close to the 5 percent growth level. Tourism share of investments has exceeded regional GDP in the Middle East beginning 2003 until 2016 and is poised to climb.

According to the UNWTO’s Market Trends, tourism’s rising star destinations, receiving over five million tourists include (in order of arrivals) Croatia, Bahrain, United Arab Emirates, Egypt, Turkey, Morocco, Malaysia, South Africa, India and Tunisia. According to Kester, international tourist arrivals post an average growth rate of 4.2 percent per year. The trend will continue with the Middle East region topping the rate at 10.4 percent, but with arrivals at 8.8 percent. Africa follows in closely with international tourist arrival growth at 6.6 percent and international tourism receipts at 10.1 percent increase. There is a considerable variation between regions while Europe currently makes 47 trips per 100 population and South Asia, only one per 100. The fastest growth will be recorded in East Asia and the Pacific (which in 2020 will have reached a level comparable with Europe in the 1980s), the Middle East, Africa and South Asia, forecast the UNWTO analyst.

Tourism faces major challenges such as infrastructure constraints (except for Dubai and China currently heavily invested in infrastructure) and human resources. Baumgarten underscores the pool of talents to tap. “The industry should be looking carefully into people issues being a service industry. We need to seek not only staff but excellent executives as well,” he said. Today’s market counts: China hiring 3.222 million, India 2.715 million, Brazil 1.897 million, Japan 1,869 million as the world’s biggest tourism employers. World population continues to grow, but at a much slower pace. Global total population of 7.9 billion from 2005 to 9.1 billion in 2050, according to the UN Revision Population Database, will require massive labor force. Baumgarten noticed labor will catch up with world population ages 15 to 64 from 2005 to 2050. Some 4.5 million currently employed will increase to 5 million as a result.

Shortfalls in numbers will be compensated by the affluent aging community. Baby-boomers are exploding in numbers. The elderly is bursting into the world population of ages 60+ from 2005-2050. Current total is now above .6 million and will rise sharply to 1 million in the coming years, as reported by the Institute for Intel Economics. Yesawich said there will be 41 trillion dollars to five adults to change hands between now and 2015. Parents of this baby-boomer generation will pass on wealth to be consumed by the leisure travel community in the USA. Yesawich said: “This wealth roughly showed up in the form of real estate acquisitions. This is why one of five of every real estate transaction done in America last year is some form of recreation or resort deal.”

Baumgarten worries less about escalating oil prices, the stock exchange, real estate trends, and uncertainty in the financial markets than violence and threat to life. “They are not the major issues. The only bigger worry we have is the external issue – terrorism and any health-type crisis. Global warming is not going to be here until 50 years from now. What concerns us most is war and terrorism. When the soldiers appear and tourists leave! Another is the possibility of a bird flu and SARS, when the world is caught off-guard for another WHO pandemic crisis,” Baumgarten said.

UNWTO’s Kester thinks the incidence of terrorism will reign side-by-side oil and gas prices, political and economic climate (coyuntura) situation and cyclical trends, as well as a possible return of the bird flu virus impacting tourism destinations – if health and sanitation issues remain unchecked.