America will remain the biggest travel and tourism economy sector in the world. It will remain that way for the next 10 years. As for benchmark, the US will hold on to its position. However, there are other economies emerging very fast. Extreme fast, in fact.
In an exclusive interview with Jean-Claude Baumgarten, president of the World Travel and Tourism Council, he warns the US to take heed of cues. “In the past, when America sneezes, Europe catches a cold and the rest of the world dies of pneumonia. Today, the US sneezes, the rest of the world goes shopping,” he cracked.
In a changing world, new stars are being born.
There is a rapidly expanding economic growth in emerging markets such as China, India, Russia and the Middle East. Improved monetary policy, with quick and decisive response by central banks to economic situations, and strong corporate profitability outside the financial sector characterized these booming markets.
The hundred million Chinese will travel overseas. In India, there is a strong middle class developing very fast. “Of the 1.3 billion Indian population, 200 M households have the same standard of living most people in the West have. This creates a huge market, not only overseas but also domestically,” he said.
Tourism from China is expected to continue to grow strongly. It is forecast to reach 100 million in traffic by 2020. Travel spends will have reached the $ 80 billion mark.
Question is, without the US being an approved destination for China, just how can it benefit from the exploding Chinese tourism?
Baumgarten said, “Just remember, when the Japanese started traveling overseas in the early 70s, they went to neighboring countries such as South Korea, Taiwan or Thailand; the circle got larger and larger with the Japanese going to San Francisco, Los Angeles and Hawaii. Travel developed gradually as they did not tour in groups anymore but as individuals, moving towards the FIT types. The same phenomenon will happen with the Chinese. Not all destinations are approved. Not all destinations have signed up bilateral agreements with the Chinese government. But this too will change most probably in the next five years with perhaps most countries of the world having the Approved Destination Status (ADS). The Chinese now doing group travels in neighborhood destinations such as Hong Kong and Macau will slowly go elsewhere as the Japanese did. They will be traveling all over the world.”
On spends, how much budget can an average Chinese afford on a trip? “The SARS tragedy affected Hong Kong. The epidemic could have been limited to Hong Kong, but the Chinese government immediately opened access to Hong Kong to the mainland Chinese. Almost overnight, the travel and tourism economy was rescued. Hotels were full. From that instance, the Hong Kong Tourist Board realized that the average expenditure the Chinese has is far greater than the average American. So although one can say there are a lot of poor people in China or India, a large middle class is booming.
Disposal income is definitely there in abundance. To Macau for instance, around 120,000 Chinese go to gamble every weekend. Times are changing. Not all the 1.3 billion Chinese will travel. But within this society, there is a sector building up which is the market for travel and tourism,” said Baumgarten.
The Middle East is emerging as the fastest-growing tourism destination. Though the WTTC head said the spike is no longer confined to Dubai; there will be others catching up such as Abu Dhabi, Bahrain, Oman, Kuwait and maybe, Lebanon, just as soon as things settle down. If the political tension eases, Syria will be in the running.
Meanwhile, the US is still the biggest tourism economy. Definitely, the world is looking to the States as to how it manages travel and tourism, as well as how it can benchmark against the US. However, the US is no longer alone enjoying the windfall. There are other big markets growing at phenomenal rates. “Very interesting thought, there used to be a time when the US was the sole driver of tourism. Now, we have multiple drivers and markets setting the stage. This is good today, because we don’t rely on only one market. We can now build up a global travel and tourism strategy,” he said.
The US economy has slowed down. What’s new? “America goes up and down fast. Right now, we are in the lowest stage. If there’s a recession, I believe it will be a short one. I think it will turn the corner, latest by the end of the year, if there’s real recession. To me, this is just a slowdown in the global economy and in travel and tourism. Business travel is an absolute necessity at the global front. With leisure travel, disposal income has changed. Travel has become a high priority. Most probably, people would delay buying a new car rather than traveling. Regardless, the US domestic market is very strong. The country has the biggest local market in the world, with only over 15 percent of Americans traveling overseas. The domestic sector will not disappear despite the cash-strapped, depressed economy. People may not spend weeks traveling, but perhaps only eight days. People may travel only three weekends, instead of five. US’ domestic market will go on but will not face any meltdown,” said the WTTC chair.
In terms of visitors, he warns that if the US government does not adapt a more ‘user-friendly attitude towards foreign inbound travelers (with visas, immigration clearance, airport security checks etc., the list goes on), the world will go somewhere else. There are a great number of other destinations including emerging star destinations that can absorb this traffic. Many don’t require visas, are a lot friendlier at entry point, and of course, travelers do have so much choice.
“America should understand it’s truly a competitive world today. It should launch serious promotions. It is no longer sufficient that large tourism companies and travel corporations spend on promotion. The US government should spend money to create a destination and to change the trend of people not wanting to go to the States because, “It’s too complicated,” they say, according to Baumgarten.
Despite foreign exchange topping the US dollar for the most part, there is elasticity between difficulty to go to a country and buying power. Difficulty to go to a place is overpowered by big incentives to go to the US. Times and tides are changing, Baumgartner’s message to US tourism: Beware.