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Tourism and Hotels
Major Industry Trends
Spending on tourism and hotels is closely related to the economic cycle. Certainly, spending on leisure
activities such as holidays tends to be one of the first things that consumers cut back in times of economic
hardship. The travel and hotel industry is further affected by reduced demand from the business sector, as
travel is one of the first areas that the corporates axe when the economy slows.
The United Nations World Tourism Organization (UNWTO) says that international tourist arrivals for
business, leisure, and other purposes grew by 4% in 2012 to reach 1.035 billion, according to the latest
UNWTO World Tourism Barometer. Emerging economies (4.1%) grew faster than advanced economies
(3.6%), with Asia-Pacific showing the strongest results, reflecting their superior economic growth over the
period. UNWTO says that growth is expected to continue in 2013 at only slightly below the 2012 level (3-4%)
and in line with its long-term forecast.
International tourist arrivals to Europe, the most visited region in the world, were up by 3%; a very positive
result in view of the economic situation, and following a strong 2011 (6%). Total arrivals reached 535 million,
17 million more than in 2011. By sub-region, Central and Eastern Europe destinations (8%) experienced
the best results, followed by Western Europe (3%). Destinations in southern Mediterranean Europe (2%)
consolidated their excellent performance of 2011, and returned in 2012 to their normal growth rates.
Asia-Pacific (7%) was up by 15 million arrivals in 2012, reaching a total 233 million international tourists.
South-East Asia (9%) was the best performing sub-region, largely as a result of the implementation of
policies that foster intraregional cooperation and coordination in tourism. Growth was also strong in North-
East Asia (6%), as Japanese inbound and outbound tourism recovered, while it was comparatively weaker in
South Asia (4%) and in Oceania (4%).
The Americas (4%) saw an increase of 6 million arrivals, reaching 162 million in total. Leading the growth
were destinations in Central America (6%), while South America, up by 4%, showed some slowdown
compared to the double-digit growth of 2010 and 2011. The Caribbean (4%), on the other hand, performed
above the previous two years, while North America (3%) consolidated its 2011 growth.
Africa (6%) recovered well from its setback in 2011, when arrivals declined by 1% largely because of the
negative results of North Africa. Arrivals reached a new record (52 million) as a result of the rebound in North
Africa (9%, compared to a 9% decline in 2011), and the continued growth of Sub-Saharan destinations (5%).
Results in the Middle East (#5%) improved after a 7% decline in 2011, yet the region recorded an estimated
3 million fewer international tourist arrivals in 2012, despite the clear recovery in Egypt.
Top Tourism Destinations
Among the top 10 tourist destinations, receipts were up significantly in the first nine months of 2012, with
Hong Kong (China) gaining 16%, the United States (10%), the United Kingdom (6%), and Germany (5%),
according to UNWTO. A significant number of destinations around the world saw receipts from international
tourism increase by 15% or moreJapan (37%), India and South Africa (both 22%), Sweden and the
Republic of Korea (both 19%), Thailand (18%), and Poland (16%).
Although the highest growth rates in expenditure abroad among the 10 top markets came from emerging
economiesChina (42%) and Russia (31%)important traditional source markets showed particularly good
results, according to UNWTO. In Europe, and despite economic pressures, expenditure on international
tourism by Germany held well at 3%, while the United Kingdom (5%) returned to growth after two flat years.
In the Americas, both the United States and Canada grew 7%. On the other hand, France (#7%) and Italy
(#2%) registered declines in travel expenditure.
Smaller markets with significant growth, according to UNWTO, were Venezuela (31%), Poland (19%), the
Philippines (17%), Malaysia (15%), Saudi Arabia (14%), Belgium (13%), Norway and Argentina (both 12%),
Switzerland and Indonesia (both 10%).
The Role of Tourism in the Global Economy
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Travel and tourism are significant contributors to the world economy. The OECD points out that international
tourism has been growing at a slightly faster pace than the world economy in recent years, and has played a
critical role in sustaining economic growth and employment, and in generating foreign currency receipts for
countries. In OECD countries, the employment growth rate in the hotel and restaurant industry was above
2% every year from 2000 to the start of the global downturn, and by 2011 had recovered to similar levels.
This is more than a percentage point above total employment growth, and demonstrates the importance of
the sector in job creation. During the last 20 years, the growth rate of non-resident tourist arrivals in OECD
countries, while 1.6% below the worldwide rate has averaged 2.8% a year, well ahead of the average OECD
country growth rate of 2.4%.
The EU has also released data highlighting the importance of tourism in many EU member states. In
September 2012, the EU said that the economic importance of international tourism can be measured by
looking at the ratio of international travel receipts in relation to GDP; the data are from balance of payments
statistics and include both business travel and travel for pleasure. In 2011, the ratio of travel receipts to GDP
was highest in Malta (14.0 %) and Cyprus (10.2 %), confirming the importance of tourism to these island
nations; an even higher ratio was observed in Croatia (14.7 %). In absolute terms, the highest international
travel receipts in 2011 were recorded in Spain (43.026 million) and France (38.682 million), followed by
Italy, Germany, and the United Kingdom.
Geopolitical Turbulence Can Have a Dramatic Impact
The revolts that began in Tunisia at the end of 2010 and spread across the Middle East and North Africa had
a devastating impact on tourism, but not everyone lost out. Tourism in Egypt and Tunisia plunged more than
30% in 2011 amid the popular upheavals sweeping the Arab world, according to UNWTO. Tourism fell by
about 80% in Tunisia after the unrest began in the first months of 2011. Egypt counts on foreign visitors for
16% of its GDP and 14% of jobs, while in Tunisia, tourism accounts for 17% of GDP and more than 15% of
jobs, according to the World Travel & Tourism Council (WTTC). However, a marketing campaign targeting
European holidaymakers, in particular, resulted in a 30% rise in the number of visitors in 2012, compared to
the previous year, with almost 6 million arriving in 2012. Tourist numbers also grew in Dubai, rising by 10%
in 2012. Dubai has remained free of unrest, and has used its Emirates airline and strategic location midway
between Europe, Africa, and Asia to persuade transit passengers to spend at least a couple of days there.
It has become a short-break destination in itself. The Arab Spring uprisings have also been credited with
boosting visitor numbers in Spain.
Growth of Budget Airlines
Since first emerging in the mid-1990s, budget airlines have had a dramatic impact on the tourism industry.
Apart from boosting overall numbers, budget airlines have also opened up lesser-known destinations, and
encouraged greater independent travel. However, their impact has not been entirely positive, with some
countries claiming that the advent of budget airlines has hurt the domestic tourism industry. Australian
travel agents have warned that this is the case in their country, for example. Thus, in December 2011, Alan
Dodson, the managing director of travel company Holiday Planet, said he was finding it harder and harder
to market Australia as a destination, with low-cost carriers such as AirAsia and Jetstar offering such cheap
packages to Asia. Spanish tourism officials have also criticized the budget airlines operating across Europe
that fly to the country and its islands, saying the low fares led to tourists who wouldnt spend the savings they
had made on their flights while on their holiday, but would instead spend the duration of their time trying to
get equally cheap accommodation, food, and drink.
Environmental Concerns Pose Long-Term Threat to Industry
One of the biggest international problems grabbing the attention of the media and the political classes is
that of climate change. Air travel, in particular, has attracted the ire of environmentalists, and proved a
useful scapegoat for politicians keen to polish their green credentials. Certainly, governments around the
world have been quick to impose taxes on air travel. To the cynics, this has simply been an exercise in
raising revenue, while environmentalists have called for even higher taxes, and the introduction of draconian
measures to curb air travel. Given the slump in air travel that has occurred as a result of the global economic
slowdown, the immediate urgency to adopt measures to discourage air travel has evaporated. In the long
term, the issue may come back to haunt the industry. However, the aerospace industry is investing heavily
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in technology to boost fuel efficiency, as well as in research to develop alternative fuels. Indeed, it is doubtful
whether anythingeven concern about the environmentcan stop the long-term growth of the industry,
given its potential in countries such as India and China as living standards rise.
Market Analysis
The Global Market
Tourism is now one of the largest industries in the world. According to UNWTO, the export income generated
by international tourism ranks fourth after fuels, chemicals, and automotive products. Furthermore, UNWTO
points out that, for many developing countries, tourism is one of the main income sources of foreign
exchange, and creates much-needed employment and opportunities for economic development. The
industry has also enjoyed staggering growth over the past six decades. The WTO says that from 1950 to
2012, international tourist arrivals grew from 25 million to 1.035 billion.
The industry is expected to continue to grow rapidly in the long term. The WTTC, a forum for business
leaders in the travel and tourism industry, says that, globally in 2011, travel and tourism employed
approximately 260 million people, or 7.6% of total employment, and generated US$6 trillion, or 9.0% of world
GDP. The WTTC anticipates that, by 2021, travel and tourism will generate nearly 300 million jobs, and
account for 10% of global GDP.
More Info
Websites:
International Air Transport Association (IATA): www.iata.org
United Nations World Tourism Organization (UNWTO): www.unwto.org
World Travel and Tourism Council (WTTC): www.wttc.org
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