Financial Crisis in Tourism
Alexander Technological Educational Institution of Thessaloniki
Financial crisis in Tourism
|Student: |Professor: |
|Mr. Samaras Giannis |
1. Financial crisis in Tourism- Introduction 2
2. How the crisis affects tourism 3
3. A Strategic Approach for the Global Tourism Industry to Overcome the Global Economic Crisis: A 10-Point Plan for Tourism Recovery 5
4. Money-saving trends in tourism 6
5. References 9
1. Financial crisis in Tourism- Introduction
Tourism is especially vulnerable to economic uncertainty and volatility for a simple reason. Most travel and tourism involves discretionary expense. During tough economic times people conserve their cash to cover the essentials of life, food, shelter and family necessities. However, this does not mean that tourism stops. The trend that we have learned from past crises whether we refer to past economic crises or the global tourism scare resulting from the events of 9/11 is that people continue to travel but they will travel differently from the way they do during times of economic buoyancy. Those tourism and hospitality businesses which will survive and indeed thrive in the months ahead are those which can adapt because there are always winners and losers in any outbreak of economic volatility.
In the short to medium term there is almost certain to be a trend of travelers spending less on travel. Those tourism and hospitality businesses which can adapt to service travelers on a tighter budget will do well. The demand for the luxury end of the market is likely to decrease while demand for either low cost or perceived good value products and services is likely to grow. Airlines and hotels especially need to rapidly adapt to this trend. In the currency shakeout which has occurred in recent weeks, destinations with “favorable” exchange rates may benefit. Ironically the surge in value of the US dollar and the Euro may stimulate Americans, Europeans and Japanese to resume travelling overseas. The growth of Chinese and Indian outbound travel may slow but will continue because these economies are still growing. There is likely to be a growth in domestic travel or short haul international travel as people choose to stay closer to home. If governments seek to help bail out industries they could help the global tourism industry by reviewing the plethora of crippling departure and other obscure taxes which have inflated the cost of international air travel.
However, gloomy some pundits have depicted the current economic environment most people worldwide will continue earn income from their jobs. Most will want to take a vacation, and weddings, honeymoons and illicit affairs will still continue. People will want to get away from home, make a religious pilgrimage and travel will remain part of the way people do business.
The tourism industry will have a rough ride over the months ahead but those who think and act strategically and have to ability to adapt their business model quickly to the new realities will overcome this challenge.
The tourism industry is projected to grow about 6.9% annually for the next 10 years, from 5.7 trillion dollars in 2010 to 11.1 trillion dollars in 2020. Its rapid growth and ample job creation are powering the global economy. The global tourism industry is expected to expand its workforce from 260 million in 2011 to 320 million by 2021. Tourism is a great way to create jobs in an era of growth without employment. Also, tourism earns 82.3% of its revenue in foreign currencies, far exceeding the overall industrial average of 67.4%. It is a good source of foreign money, which is why other nations are eyeing tourism as a solid revenue source.
Accounting for 6.7% of the world’s gross domestic product, tourism represents 30% of the worldwide service export and employs 75 million people. The importance of tourism is underlined in every economic crisis. When Asia was experiencing an unprecedented region-wide economic hardship in 1997, Malaysia developed new tourism resources by promoting its cultural assets and eco-tourism packages, and attracting sporting events. A 43% increase in foreign tourists has helped Malaysia overcome the crisis. In the latest financial crisis, the United Kingdom saw its people travelling locally instead of overseas, which resulted in its tourism industry growing to 115 billion euro in value and hiring 2.6 million more people per year. It is no wonder that the world is looking for ways to further bolster the tourism industry. But where should the industry head in the future?
The tourism trend is shifting toward green or eco-friendly tourism. People’s mental paradigm toward tourism is fast shifting away from self-satisfying tourism based on consumption to green ecological tourism. The key agenda of the 19th UNWTO General Assembly was “sustainable tourism,” reflecting people’s rapidly changing outlook toward green tourism, one that embraces nature and sustainability. Green and eco-friendly tourism has been a hot topic in the west for quite some time. Since the 1990s, green and ecological tourism has shown 20%-plus annual growth, roughly triple the growth of other tourism areas. The share of ecological tourism in the global tourism market is also expected to balloon from 7% in 2004 to 25% in 2012.
2. How the crisis affects tourism
March of 2011 saw the Japanese earthquake, followed by a pacific-wide tsunami and nuclear power crisis, by riots in the streets of London, by the fall of the Portuguese coalition government, by union protests throughout the world, from Madison, Wisconsin to Europe, from revolutions in much of the Arab world, to renewed bus bombing and rocket attacks against Israel, to a no-fly zone imposed over Libya.
From the perspective of the tourism industry, these momentous changes present a major challenge and may have long-term industrial consequences. In fact tourism risk has never been higher and tourism officials must change the way they do risk management. Here are a few factors to consider when seeing the new world of tourism risk management.
Food prices are rising at alarming rates. There is no one factor to account for the rapid increase in the rise of food prices. These price rises are the result of a number of factors: irregular rainfall in much of the world, the high cost of fuel resulting in higher transportation costs, political disturbances in the Middle East, the need to ration food in a post earthquake/tsunami Japan have all contributed to "food sticker shock" and political tension. Restaurants have had to raise prices or lower their service. Transportation companies have been (and will continue to be) hard hit. The airline industry is especially vulnerable. Airlines depend on both the food industry (at least in first class or executive class) and the fuel industry. Already on the margin, airlines can do nothing more than cut services and raise prices. The result of such a policy may create an economic tsunami as the leisure traveler may well decide that travel is simply too expensive and thus the "staycation" (or stay-at-home-vacation) once again becomes a reality impacting hotels and attractions throughout the world.
Furthermore, from a tourism security perspective, the world's security situation has deteriorated. There are few nations today that are not suffering from either political or economically motivated violence. From Mexico's drug wars to most of Latin America's express kidnappings, from street violence from England to the Middle East, the tourism world must face the fact that there is an increase both in the potential for crime and for acts of terrorism. Indeed the current Libyan government, with a great deal of blood on its hands, is not above "punishing" the West by further acts of terrorism.
The international tourism industry must also face the reality that world currencies are no longer stable. It is impossible to predict the value of the US dollar or euro over the next twelve months. This inability to know the value of a currency means that long-range tourism prices are especially hard to predict and the fallout from this monetary instability is already impacting multiple tourism support systems. For example, tourism experts are now noting that hospitals are turning people away (despite their nation's laws) who do not have local insurance or a well-backed credit card.
Despite these numerous challenges it would be a mistake to predict the demise of the travel and tourism industry. Instead this is the time when thoughtful tourism professionals need to be creative and well aware of the multiple disciplinary character of their profession. Tourism officials need much more than simply marketers, that model is soon to die. Instead tourism professionals must take into account a wide range of disciplines that include knowledge of: economic factors, political factors, the price of commodities, the impact of security on their industry, and how front-line customer service interacts with demographic changes, and how weather patterns may impact their industry.
The industry must view the interaction and overlapping of tourism economics, with locale reputation factors and combine these with tourism safety and security. Tourism cannot afford a medical crisis or a food crisis, a natural disaster or a political disaster, conventional wars or acts of terrorism, crime and gang violence and narco-trafficking. Each of these threats is interconnected and in a world connected by both the internet and rapid transportation nothing stays for long in any one place. Instead what impacts one part of the tourism industry in the end will impact the entire industry.
3. A Strategic Approach for the Global Tourism Industry to Overcome the Global Economic Crisis: A 10-Point Plan for Tourism Recovery
The global economic crisis at present finds tourism vulnerable and groping for answers. Yet, as an industry, tourism has demonstrated an increasing capacity to overcome crisis events. It's a positive move that the UN World Tourism Organization is developing a confidence-boosting plan.
At the heart of this particular crisis is the concern of all tourism industry professionals that, because tourism is widely perceived as a predominantly discretionary expense, people will stop spending money on tourism in an uncertain economic environment. There is also a concern that people will spend less on tourism during uncertain times.
The restoration of confidence and prepare to maintain the tourism business must begin at the perceptual and psychological level:
1. A campaign involving all the tourism industry and media partners to enhance the concept that travel and tourism is an essential part of maintaining our wellbeing, no less than food shelter and education. Tourism and leisure should be depicted as a better investment in our well being that stocks and shares. Tourism professionals must work to make the media a major partner in talking up tourism. Tourism can be depicted as a positive investment because, unlike stocks, shares and superannuation, you can see, feel and experience what you get for your money. The industry should seek sponsorship from businesses such as Visa and MasterCard that benefit so greatly form the tourism dollar.
2. There must be focus on value tourism product. It should be axiomatic that high priced indulgent tourism and hospitality product will experience a fall in demand so travellers will need to be convinced of value and security in tourism product.
3. Destinations, hoteliers, airlines, cruise operators, land transport providers, tour operators and attractions all need to create, in concert, incentives for people to travel. Where possible rather than offer economically unsustainable discounts, attractive value added deals are the way to go and air fares combined with add on land product will offer perceived value for money.
4. All businesses must focus on stressing value for their customers. This means they will have to trim any excess fat in their operating costs so they can maintain competitiveness. Rather than just fire staff, some smart deployment of staff with improved selling and marketing training may be a better solution that irreversible sackings. Tourism should have a solidarity message which implies that tourism maintains jobs and the viability of communities all over the world. Dismissing of tourism actually would worsen the economic outlook of the world. Travel keeps the world ticking.
5. In a global level, all the major organizations that work for the industry should and must work in concert. The leadership of hotels, travel agents, wholesalers, airlines, national tourist offices, cruise operators, land transport providers need to work together. WTTC. UNWTO, PATA, IHRA, IATA, UFTA and other worldwide industry bodies need to establish a summit and quickly.
6. Governments all over the world have been bailing out banks and some of the irresponsible financial institutions which were responsible for the economic mess we managed to get into. Governments can greatly help the tourism industry in their own countries and globally by reducing a range of dubious taxes that have contributed to increasing the cost of international air travel. This is a primary goal. Government can be an integral partner in restoring the tourism and hospitality industry as they are in other sectors of the economy.
7. Lobbying the governments to contribute to a global fund administered by the UNWTO in consultation with other major global tourism organisations that would, in concert with the media, promote tourism globally.
8. Every website of tourism associations and individual tourism businesses needs to talk up tourism. An education campaign pitched at travel agents and all front-line travel professionals needs to be developed so that all industry professionals are able to talk up tourism and hospitality to their customers. The involvement of the training and education sectors is vital to both train and provide ongoing performance monitoring and market research at this critical juncture.
9. In each country or region, celebrities should be solicited to talk up domestic or international tourism. People need to understand that globally tourism represents 8 percent of GDP and, if tourism collapses, the unemployment lines will grow longer. On a positive note travel and tourism is good for the economy and there is a key link between tourism and poverty alleviation. At every stage of this campaign the industry must maintain its commitments for a sustainable economy, society and environment all of which depend on tourism being maintained.
4. Money-saving trends in tourism:
National parks will be a top trend for families looking for vacations that will allow them to make some lifetime memories and save a few pennies. In a recent TripAdvisor survey, 73 percent said they plan to visit a national park in 2009, up from 62 percent one year ago.
DEAL: The Family Value Package at Mesa Verde National Park in Colorado includes two nights at the Far View Lodge, daily breakfast buffet for four, a half-day guided bus tour of Mesa Verde's ancient sites, including Cliff Palace, and two children's dinners for two nights. Cost: $339, for two adults and two children ages 11 and younger, www.visitmesaverde.com/
Three quarters of those polled in a Travel Industry Association survey plan to book a package vacation to save cash -- a trend that is particularly popular with baby boomers, according to the U.S. Tour Operators Association. Tour package operators can contract in bulk for accommodations, ground transportation, sightseeing tours, meals and other services. They also provide peace of mind in case a problem arises.
DEAL: Best of Italy -- Insight Vacations' 11-day package -- tours the country's most significant sites. The trip includes first-class accommodations, a gondola ride in Venice, dinner in Rome, four additional dinners and nine buffet breakfasts, motor coach transportation and a professional tour director. Cost: $2,425, www.insightvacations.com.
More than a third of U.S. respondents in a TripAdvisor survey said they will visit an environmentally friendly hotel or resort in 2009. Likewise, 32 percent of respondents said they will be more environmentally conscious in their travel decisions than they were the year before. For a list of eco-friendly hotels, visit www .ecotrotters.com.
DEAL: The Earthcare Package at Pacific Palisades Hotel in Vancouver includes a $50 dining credit at the ZIN Restaurant & Lounge, organic sense bath salts, eco-turndown service with organic chocolates, free valet parking if you drive a hybrid vehicle and a $30 carbon offset credit if you fly in. Cost: From $355 per night,www.pacificpalisadeshotel.com
The cruise industry is offering some of its lowest rates in history. Companies try to fill every ship to capacity to maximize the revenue from shore excursions, onboard casinos, alcoholic drinks and souvenirs, so any vacant cabins are offered at a cheaper rate. Some cruise lines are so desperate, they're posting deals on Southwest Airlines' Web site.
DEAL: Seven-night, Bahamas cruise on the Norwegian Majesty, starting at $284 per person, based on double-occupancy. Various departure dates from Charleston, S.C., Jan. 3 through April 25. Log on to www.southwest.com, click "Special Offers," "Cruises Specials" and "Book Your Cruise Today."
Based on an analysis of hotel-pricing trends, CheapTickets.com projects the most cost-effective time to travel to these destinations in 2009:
» Hong Kong in January.
» Italy in February.
» Brazil in April.
» Greece in November.
Hot seaside retreats
Some of the sunny spot where the dollar still buys a lot, Travel + Leisure magazine suggests these seaside destinations:
Mazatlán, Mexico -- A hot spot during the late 19th century for vacationing German, French and Mexican aristocrats, the Pacific Coast town is experiencing a renaissance with the growth of stylish cafes, boutiques and hotels.
Pranburi, Thailand -- The area's isolation, authenticity and character are attracting travelers in search of the Thailand of 20 years ago, driving many of them to choose it over congested Hua Hin.
DEAL: Hiva Oa Hanakee Pearl Lodge in Marquesas has 14 bamboo-lattice bungalows with woven-palm wall coverings, bark-paper paintings and carved tiki poles. Rates start at $267 per night,
Hotels that are rated as the best in the U.S. for business travel:
Four Seasons Resort, Dallas.
Peninsula Beverly Hills, Los Angeles.
Four Seasons Hotel, Chicago.
DEAL: Travel + Leisure magazine also rates these as a great value for the business traveler: Nine Zero, Boston; Park Hyatt at the Bellevue, Philadelphia; and Inn at the Market, Seattle.
Culinary travel is the top pick for 2009 Specialty Travel Trends and Destinations by the Specialty Travel Agents Association. There is a growing demand for travel that includes local cuisine and wine itineraries. Options worldwide may include learning about food production, local market excursions, cooking classes, wine tastings and farm stays.
DEAL: Women's Culinary Weekend, Jan. 23-25, March 27-29 and July 24-26, Mount Carroll, Ill. The retreat includes gourmet meals, cooking classes, tours of organic farms and stores, shopping and lodging. Cost: $375 per person, based on double occupancy, www.learngreatfoods.com.
Special interest travel
Niche tours are taken by people who share specific interests -- a nature photo tour, for example, or a tour of Anglican cathedrals. It's one of two special-interest travel trends expected to rise in 2009, travel agents for American Express note. The other trend is authentic travel-experiencing a destination more thoroughly through longer stays and cultural immersion, like a trip to Guatemala where the traveler visits the home of a Mayan weaver and picks coffee beans alongside local workers at an organic coffee farm.