The global economy has fallen off a cliff and no one is sure when it will hit bottom. According to the International Monetary Fund (IMF), the world’s advanced economies experienced an unprecedented 7.5% decline in real Gross Domestic Product (GDP) during the fourth quarter of 2008. The IMF projects a similar drop for the first quarter of 2009 and says Euro zone GDP will fall more than 4% for the year. In 2009, the world economy will contract for the first time since the Great Depression.

The world’s largest economies are particularly challenged. GDP in the United States has contracted at an annual rate exceeding 6% for the last two quarters. The IMF forecasts that Russia and Japan will see GDP shrink by a similar amount through 2009. Japan’s export-driven economy will experience its first-ever trade deficit and the country will likely experience a dangerous deflationary spiral.

Fragile Tourism

Travel and tourism are particularly sensitive to macroeconomic developments.  The United Nations World Tourism Organization (UNWTO) reported a year-on-year drop in international tourist arrivals for the second half of 2008.  Asia and Europe experienced particularly steep declines of 3%.

The current year got off to a frightening start with international travel agents and tour operators reporting substantial declines in reservations for the coming summer season.  The US hotel industry is suffering massive losses as both occupancy and room rates dive precipitously.  In New York, March revenue per available room (RevPAR) dropped 35.5% on a year-on-year basis.  RevPAR in Orlando and Miami declined by 28% and 29%, respectively.

Two Canadian provinces, New Brunswick and Prince Edward Island, finished 2008 with average hotel occupancy at a paltry 45%. Both provinces are forecasting further demand deterioration this year. Some Canadian urban markets are faring even worse. Annual hotel occupancy for Niagara Falls’ 10,000 hotel rooms was just 38% with no improvement foreseen this year.

Asian powerhouse markets have also been devastated.  Chinese and Indian hotels reported March year-on-year RevPAR declines of 35% and 40%, respectively.  The Thai market, complicated by political unrest, witnessed a RevPAR drop of 37%.  While globalization ignited the twentieth century international tourism boom, it also eliminated firewalls that could have contained the economic contagion ravaging the travel and hospitality industries.

The Upside of a Downturn

With so much gloom on the economic horizon, many business executives are suffering from managerial catatonia. Conventional wisdom dictates that opportunities abound in surging markets, while recessions oblige businesses to hunker down and weather the storm. In contrast, Professor Don Sull, my colleague at London Business School, has become a guru of sanguinity by suggesting that the most lucrative business opportunities are present during economic downturns.  Professor Sull’s research argues that it is significantly easier to implement organizational change and instil better practice in stressful recessionary markets than in boom times. He explains how managers can harness a downturn to identify lucrative investment opportunities, renew a sense of urgency, justify unpopular decisions and overcome complacency (www.donsull.com).

Applying Sull’s hypothesis to the tourism industry during the gravest financial crises of the last century can be an insightful exercise.  Entrepreneurs, investors and managers have frequently identified silver linings in dark economic clouds.  The following three examples illustrate how travel and hospitality professionals have seized opportunities during economic recessions of the past.

Case 1: The Waldorf-Astoria

Hotelier Lucius Boomer opened New York’s Waldorf-Astoria on October 1, 1931, in the midst of the Great Depression.  Towering 42 stories above Park Avenue with almost 2000 rooms, it was the largest and most expensive hotel ever built.  With equity markets in shambles and a quarter of the US population unemployed, few were the fools who expected the hotel to remain open for long. Stock markets had been declining for two years and there was no end to the economic turmoil in sight.

In spite of the gloomy discourse, the opening of the Waldorf-Astoria manifested how the Great Depression had radically altered a fundamental business paradigm. Boomer focussed on depressed costs to attain a competitive advantage. He capitalized on the idle construction sector to negotiate favourable building contracts.  The cost of previously expensive finishing materials had plummeted, permitting use of the finest marble, granite, hardwood and brass.  Unemployed artisans and craftsmen were brought from Europe to work on the hotel interiors at a fraction of their pre-Depression wages.  In the end, a palace was built on a pauper’s budget.

President Herbert Hoover inaugurated the Waldorf in a radio address on the eve of its grand opening. “Our hotels have become community institutions,” said Hoover.  “They are the central points of civic hospitality … The erection of this great structure has been a contribution to the maintenance of employment and an exhibition of courage and confidence to the whole nation.”

The Waldorf-Astoria was also an extremely lucrative investment.  By the mid-1930s the hotel was filling its suites with presidents, royalty and captains of industry.  While the value of the Waldorf’s real estate, management contract and goodwill are debatable, it is probably the most valuable hotel in the world today.  In the end, it was the economic conditions of the Great Depression that permitted the Waldorf to have been built in all its glamour and glory.

Case 2: Carnival Cruise Lines

Most tourism professionals would hesitate to consider the economic turmoil of 1974 the ideal business climate in which to found a capital-intensive enterprise in an industry sector heavily dependent on discretionary spending by retired senior citizens.  Following the breakdown of the Bretton Woods system, US GDP was contracting and inflation exceeded 12%.

In the face of this economic ataxia, Ted Arison purchased a distressed cruise ship for one US dollar and the assumption of $5 million in debt.  In November 1974, with the Dow Jones Industrial Average down 45% from its previous year high, Arison registered the Carnival Company as owner and manager of Carnival Cruise Lines.

At the time, it was difficult to understand why Arison, a savvy businessman, would purchase a near-bankrupt cruise company on the heels of the Arab oil embargo. Petroleum prices had recently quadrupled and a cruise ship could burn up to 200 litres of fuel per minute.  On the surface, the deal made no economic sense.  Arison had different ideas, however. He was about to revolutionize the cruise industry.

Arison targeted a younger market segment (25-40 year olds) that had considered ocean cruises a leisurely pastime for the geriatric set.  Carnival’s ship was redecorated in a flashy neon-esque style. An onboard casino and discotheque were added. Marketing imagery turned away from elegance and genteelness in favour of youthfulness and frivolity. Micky Arison, Ted’s son, made sales calls on dozens of travel agents, employing a casual youthful style to convince them that cruises would be the next big holiday trend for young adults.

Within a year, Carnival was operating at 100% capacity.  It went on to become the world’s largest cruise line. By identifying opportunities in a downturn, Arison’s one dollar investment made him a multibillionaire.

Case 3: Emirates Airlines

Following the September 11, 2001, terror attacks in the United States, the global travel industry came to a screeching halt.  Airlines and hotels were besieged with reservation cancellations. Looking longer term, air carriers began to cancel aircraft orders.  Share prices for Boeing and EADS (Airbus’ parent company) plummeted.

Ahmed Bin Saeed Al-Maktoum, Chairman of the Emirates Group, sensed an opportunity where his competitors saw a threat. No one knew how long the downturn would last but Sheikh Ahmed knew that Emirates was well positioned for growth in the long term.  At the lightly attended Dubai International Air Show in October 2001, the Emirates Chairman negotiated with Boeing and Airbus for an enormous aircraft order.  In an attempt to defend market share as order cancellations poured in, the two manufacturers offered deep discounts.

Emirates ended up splitting the order between the two companies, buying US$15 billion worth of airplanes. While the purchase was more than originally anticipated, Sheikh Ahmed later explained that fire-sale prices resulting from the economic downturn were too attractive to forego.

While delivery of the aircraft would take place over several years, client and investor confidence was immediately apparent.  In the airline industry’s worst ever year, the Emirates Group finished the 2001-02 fiscal exercise with net income representing 8% of revenue. The airline paid a substantial shareholder dividend and a bonus payment of 3 weeks salary to all employees. While competitors laid off large numbers of staff, Emirates did not make a single employee redundant and paid salary increments in full. Among numerous awards, Emirates was voted “Airline of the Year 2002” by 4,000,000 Internet users in the second annual Skytrax Research Study and Best Cargo Airline to the Middle East by Air Cargo News. By considering long-term strategic opportunities, Emirates seized the upside of a downturn.

So where are the opportunities?

Some hospitality businesses are less affected by broad economic strife than others. In comparison to many restaurant companies, McDonald’s Corporation has held up well over the last year. It is ranked as the fourth best performer on the Dow Jones Industrial Average. Its share price is down just 9% compared to the DJIA average of -38%. The company had sufficient confidence in its short-term performance to increase its 2008 fourth quarter dividend by 32%.

McDonald’s is capitalizing on Starbuck’s misfortunes to launch McCafe, a quick service restaurant concept offering cappuccinos, lattes and mochas. With Starbuck’s closing nearly 1000 units, McDonald’s is betting it can attract consumers specifically to purchase specialty beverages rather than just as a support for its food offerings.

Lucrative long-term investment opportunities also exist in the lodging sector. While the number of portfolio and single asset hotel transactions has dropped significantly over the last year, investors with access to capital have been purchasing properties at deep discounts.  The United Kingdom, in particular, has witnessed the liquidation of premium hotel assets at prices that would have been shocking two years ago.  Distressed companies like Royal Bank of Scotland and hospitality giant Mitchells & Butlers have been obliged to sell hotels to generate desperately needed cash.

In a market frozen by the credit crisis, Britain’s Travelodge has been on a buying spree, picking up six properties (650 rooms) from Menzies for £85 million, seven Swallow Hotels (669 rooms) for £70 million and five independent hotels (500 rooms) for £35 million.  Travelodge is opportunistically fleshing out its geographic coverage with aspirations of dominating the British budget sector when the country emerges from its current downturn.

New Eyes

In challenging economic times it is difficult for business leaders to see the light at the end of the tunnel. Indeed, it is even harder to identify opportunities at hand. As such, failure can be a self-fulfilling prophecy.  A Chinese proverb advises that “If we don’t change our direction, we’re likely to end up where we’re headed.”

In challenging times, it is critical that managers in the travel and tourism industry recognize existing business opportunities. There is a silver lining in most black clouds.  As illustrated in the three cases presented herewith, the challenge is not seeking new opportunities but having new eyes to identify them.

What is a tween?

“Tween” is a marketing term used to describe preteens ages 9 to 14. Straddling childhood and adolescence, they have a foot in both worlds. When it comes to technology, they rule: they are online longer, adopt and master new technologies faster than adults and participate in a wider variety of online activities. In Canada, 85% of tweens have access to a computer, 82% to a video game system, 25% to an iPod or MP3 player and 16% have a cell phone (this number rises to 26% among 12 to 14 year-olds).

While their favourite medium is still television (50%), 27% of American 9 to 14 year-olds watch it on the internet. Figure 1 lists their favourite online activities.

Purchasing power and influence on family decisions

Spending by tweens has doubled every decade for the past 30 years. In the US today, between spending their own money and influencing their parents’ purchasing decisions, this segment controls or influences approximately US$260 billion in spending. According to the BRANDchild study (conducted by Millward Brown among 2,000 young people ages 9 to 14 years in several countries), tweens influence 80% of their parents’ brand purchases.

In 2005, there were approximately 2.5 million tweens in Canada and their average annual income was CAN$1,155. This means they controlled CAN$2.9 billion of their own money in addition to influencing another CAN$20 billion in family purchases.

It is this financial power that differentiates tweens from earlier generations; never has this age group exercised such influence. The generation is populous enough to ruin a brand it does not like or catapult another to success by adopting it. The influence of tweens is particularly noticeable when it comes to choosing a restaurant, groceries and even cars, but they can also affect travel-related decisions:

• Over 40% of young people believe they have some or a lot of influence when it comes to choosing a vacation destination.
• Although only a small percentage of tweens feel they have a strong influence on hotel choices, 59% believe they have some influence. Also, 20% of parents say they “always or sometimes” ask for their tween’s opinion when selecting a hotel.
• Tweens believe they influence the planning of vacation activities 55% of the time.

They may be plugged in, but do they shop online?

Surprisingly, tweens and teens are shopping online in increasing numbers, thanks to prepaid gift cards. Major companies now offer prepaid credit cards designed especially for young people. The Visa Buxx card is just one example and can be used everywhere Visa is accepted, particularly online!

Receptiveness to advertising

Young people in the United States, Australia and Great Britain see an average of 20,000 to 40,000 commercials per year and spend 60% more time in front of the television than at school. Two surveys conducted by The Harris Interactive Youth and Education Research Group in May 2006 offer more insight into young people’s attitudes towards advertising:

• Tweens attach a great deal of importance to objects and brands “cool.”
• Friends have a tremendous influence on their preferences and they want what their friends have. Their consumer choices are also influenced by advertising.
• More than earlier generations, tweens are very receptive to celebrity-driven advertising.
• Young people say they are most influenced by television commercials (54%), magazine ads (23%) and movie-theatre commercials (19%).
• Advertisements for food seem to attract the most attention from tweens.

Generally speaking, marketing specialists use the strategy of treating tweens like teens. The marketing industry has forced children to grow up faster and studies show that those aged 11 and older no longer consider themselves children.

Ethical debate

There is a major debate concerning the ethics of tween-oriented marketing. By treating these young people like mature, independent consumers, advertisers are taking parents out of the decision-making process and thereby making children more susceptible to unhealthy messages about body image, sexuality, relationships and violence. This is an emotional issue that creates sharp divides. Although the tourism industry is less involved in such marketing, it is important to be aware of the issues.

Some tourism examples

In terms of the tourist experience, tweens are often too old for activities aimed at children and too young for teen and adult activities. Very few tourism-based businesses offer products specifically for tweens. However, some businesses have adapted their products for this segment.

Club Med offers two programs designed for 11 to 17 year olds: Junior Club Med, which supervises young people and organizes group activities (beach volleyball, trapeze, trampoline, sailing, inline skating, tennis, etc.), and Club Med Passworld, an exclusive new zone with special high-tech equipment. Specially-trained counsellors facilitate the discovery of new activities designed specifically for them and encourage their development and socialization.

Some Four Seasons hotels (Atlanta, New York, London, Chicago, Philadelphia and Toronto) have added a youth concierge to their service teams to deal specifically with tweens and teens. These hotels have also conducted focus groups with tweens in the aforementioned cities to identify cool things to do locally. They now have an updated idea of this clientele’s preferences and interests. These hotels also provide special amenities to this customer category, offering things like popcorn, recent magazines and films, an indoor pool, and balanced meals designed especially for them. For its part, the Ritz Carlton in South Beach, Miami, provides a tech centre for tweens and teens.

Finally, the Florida tourism portal lists activities aimed at tweens, like scuba diving, an indoor rink for roller-skating and skateboarding and water skiing.

Be among the first!

Given their economic muscle, tweens will no doubt continue to be targeted by businesses. In addition, since relatively few tourism businesses target this clientele in particular, doing so would probably provide a competitive edge. A few suggestions for reaching this market segment:

• Carefully analyze their likes, dislikes and influences, to offer products and services tailor-made for them.
• Speak their language: tweenspeak is the system of abbreviations, symbols, icons and numerals used for text messaging and in chat rooms. This new language enables them to communicate with each other around the world without even speaking the same language!
• Keep wait times to a minimum. Although no longer interested in colouring, tweens still don’t have much patience.
• Offer cool products traditionally aimed at older customers, but ensure they are closely supervised to reassure parents.

Sources:
- Business Wire. “iGillottResearch Finds Significant Opportunities for Wireless Devices in the Tween Segment,” July 22, 2005.
- De Mesa, Alycia. “Marketing and Tweens,” Business Week Online, October 12, 2005.
- eMarketer. “What Do Kids, Tweens and Teens Do Online?” www.emarketer.com, October 10, 2006.
- Lindstrom, Martin. “Branding Is No Longer Child’s Play!” Journal of Consumer Marketing, Vol. 21, No. 3, 2004.
- Martin, Suzanne. “Advertising to Youth: What Youth Want And What Advertisers Need to Know,” Trends & – Tudes, Harris Interactive, Vol. 5, No. 7, August 2006.
- Media Awareness Network. “Special Issues for Tweens and Teens,” www.media-awareness.ca.
- Shohan, Aviv and Vassilis Dalakas. “He Said, She Said, They Said: Parent’s and Children’s Assessment of Children’s Influence on Family Consumption Decisions,” Journal of Consumer Marketing, Vol. 22, No. 3, 2005.
- YTV, Corus Media. “2002 YTV Tween Report: Special Kidfluence Edition” and “Winter 2006–YTV Kids Trend Report.”

The advantages of loyal customers

In the tourism industry, regular customers are generally desirable for a number of reasons, in particular:

• Marketing costs for attracting loyal customers are lower than those required to solicit new business.
• A repeat customer usually indicates satisfaction with the product or service.
• Customers who regularly return to a destination tend to encourage those around them to do the same.

In economic terms, destinations appreciate repeat visitors because they help stabilize market share, require lower promotional costs, and are less sensitive to price variations and potential service problems. However, another factor comes into play: returning travellers are more familiar with the destination and able to make more informed decisions when it comes to most travel expenses.

The Balearic Islands: A case study

Researchers Joaquin Alegre and Catalina Juaneda, from the University of the Balearic Islands, have attempted to analyze the relationship between consumer behaviour and repeat visits. The study looked at a sampling of German and British tourists vacationing in Spain’s Balearic Islands; many variables were analyzed, such as the number of visits to the destination and motivations like delivery quality.

In particular, the study examined the fact that first-time visitors are initially influenced by external factors, primarily the cost of the trip. Once destination quality proves to be a critical factor, high price is often seen as the best indicator of quality. As for repeat visitors, they are more motivated by factors linked directly to the destination, for example, hotel and service quality.

Not all tourists can be loyal

To clearly understand the context of repeat visits, it is important to realize that some tourism motivations run counter to destination loyalty. For example, for those who see travel as a break from routine (an opportunity for unique experiences and the discovery of new places, new people and other cultures) destination loyalty is not appealing. Travellers fitting this description would generally not be interested in revisiting a destination.

On the other hand, individuals with little tolerance for risk would feel comforted and relieved to return to the same place. This type of traveller usually seeks relaxation, comfort, a familiar environment, and a minimum of uncertainty and risk. Moreover, it takes time and effort to find and research a new destination, and money to set up new routines.

Differences observed

Why do first-time visitors spend more? Even if they have managed to compile a lot of information from travel guides or Web searches, it is very difficult to acquire intimate knowledge of local pricing realities. Given this lack of information (and more importantly, lack of first-hand experience), first-time visitors readily accept prices that may, in fact, not be considered competitive.

The study’s findings show that repeat visits to a destination have an influence on tourist expenditure patterns. The share of expenditures made in the home country of travellers who are visiting for the second or third time is 28% lower when compared to expenditures by new visitors. The difference is even more significant (32%) among tourists who are on their fourth or higher visit.

The impact of customer loyalty on consumer behaviour is even more remarkable when one looks at the amounts spent at the destination itself, during the vacation. Repeat visitors, regardless of how many times they have been, spend 40% less than first-timers.

Other motivating factors

Tourists who attach a great deal of importance to hotel quality tend to spend more on their vacations, both at home before the trip (+49%) and at the destination (+44%). People who consider the quality of their surroundings to be important also spend more, especially at the destination itself (+28%). A similar observation can be made about tourists who return to the same region, with expenditures of 17% more in the destination country.

The study findings also demonstrated the following:

• Repeat visitors are more likely to opt for half-board lodgings, in other words, accommodations that include one or more meals.
• Loyal tourists have a longer length of stay.
• The more times tourists visit a destination, the more they tend to visit the same region.

Lessons learned?

A destination’s positioning should consider the proportion of new to return visitors. When a large percentage of one’s customers are not first-timers, it may be risky to promote services with a large mark-up. According to the study’s authors, increased profitability from unit sales will not be enough to compensate for an eventual decline in the number of visitors from a well-informed customer base.

Obviously, the example presented by the researchers covers only the case of the Balearic Islands (a sun destination) and is based on a restricted clientele, that of British and German tourists. However, the study’s authors conclude that their findings still apply to many destinations.

Sources:
- Alegre, Joaquin and Catalina Juaneda. “Destination Loyalty: Consumers’ Economic Behaviour,” Annals of Tourism Research, Vol. 33, No. 3, p. 684-706, 2006.
- Um, Seoho, Kaye Chon and YoungHee Ro. “Antecedents of Revisit Intention,” Annals of Tourism Research, Vol. 33, No. 4, p. 1141-1158, 2006.

Baffling figures

The World Tourism Organization (WTO) reported that – after declining for three consecutive years – international tourism revenues rose 9% in 2004, while also making it clear that this increase was expressed in local currencies at constant prices, thus neutralizing the effects of exchange rate fluctuations and inflation.

When you look at the 2004 growth of international tourism revenues over 2003 in US dollars (WTO statistics), there is much to be amazed by!

• Worldwide, the increase was 18.8%.
• Asia-Pacific posted an increase of 31.8% and the Middle East 24.8%.
• In Europe, only one country (Hungary) posted growth of less than 10%.
• In Asia-Pacific, a majority of destinations (12 out of 15 countries) experienced an increase of more than 20%.
• Canada can be thrilled with a 21.8% increase in tourism revenues.

However, when you look at the 2004 growth of international tourism revenues over 2003 in euros (WTO statistics), there is much to be disturbed by!

• Worldwide, the increase was 8%.
• Asia-Pacific posted an increase of 19.8% and the Middle East 13.5%.
• In Europe, only two countries (Ukraine and Poland) posted growth of more than 10%.
• In Asia-Pacific, just under half the destinations (six out of 15 countries) experienced an increase of more than 20%.
• Canada did well with a 10.7% increase in tourism revenues.

In light of these statistics, it becomes difficult to compare revenue growth rates among countries. In effect, if the yen gained more ground against the euro over the year than the Canadian dollar did, the growth rate reflects the change in the exchange rate as much as the change in revenues. It would be fairer and more illuminating if the revenue statistics were produced in local currencies and constant prices.

In which category do we want to perform best?

France was the No. 1 destination in the world in international arrivals, but third in tourism revenues. And not only did France post the worst showing in terms of average spending per international arrival among the top 12 revenue-makers, it performed worse than many other destinations as well. Conversely, the US was third in arrivals, first in revenues, and did very well in average spending (Table 1).

Unfortunately, the lack of statistics on such factors as length of stay prevents a more precise picture of the situation. But other interesting points emerge from juggling the statistics (tables 1 and 2):

• The US had 38% fewer arrivals but 45% more revenues than France. The tourist visiting the US spent three times more than in France, or $1,616 US versus $544 US.

• The US and Germany did well in all three categories (revenues, arrivals and average spending).

• In 2003, Australia was the top performer in average spending, according to the statistics (4.4 million arrivals, $10.3 billion US in revenues, average spending of $2,370 US). In 2004, it was in 10th position in revenues, but did not make it into the top 20 in arrivals (the Netherlands was in 20th place, with 9.6 million). It essentially posted the same revenues as Canada, with four times fewer arrivals than Canada.

• Japan and Belgium (2003 arrivals data) were in the top 20 in revenues (in 20th was Malaysia, with $8.2 billion US), but did not make it into the top 20 in arrivals. Their ratio of average spending was obviously very high.

• Although they didn’t make it onto the list of top 20 revenue earners, many countries (Table 2) managed to turn in better performances on average spending than some of the top 20 revenue-earning countries.

• Hong Kong, Poland, Hungary and Ukraine, all in the top 20 in arrivals, fared poorly in average spending, at less than $500 US.

• Despite six million arrivals, Tunisia did not manage to generate substantial economic spin-offs, with average spending of just $318 US per international arrival.

• With average spending of $702 CAD in 2004 (3.3 million foreign tourists and 2.3 billion CAD in revenues), Quebec surpassed the Canadian average.

What should we conclude?

When figures show France can be proud of recording 75 million international arrivals but that it managed to obtain an average spending rate of only $544 US, you have to ask yourself if the statistics speak for themselves, if they should be challenged, if information essential for accurate analysis is missing, if the methodologies were consistent?

An analysis of the data leads to the conclusion that more arrivals do not necessarily equal more revenues. In this vein, many countries would like visitors to spend more.

In the UK, the Office for National Statistics recorded an 11% increase in tourists in 2004 (27.3 million) compared to 2003, and an 8% gain in revenues (£12.8 billion). Despite these positive results, VisitBritain is obviously working to raise visitor numbers, but in particular to boost how much they spend.

Among the leading destinations, Italy had a relatively poor 2004 compared to 2003. The 2.2% dip in the number of overnight stays (336.8 millions) and the 2.4% decline in the average length of stay (4.06) cast a shadow over the revenue picture.

The situation was similar for tourism professionals in Spain, where “fewer tourists and more profitability” has become the new credo of major hotel chains and others in the industry. Government officials also feel it would be better to have fewer tourists, but for longer stays. Visitors numbers advanced 3.4% in 2004 (53.6 million), but revenue volume did not keep pace, constituting a drop in average spending.

In Quebec, the Association touristique régionale (ATR) de la Gaspésie faced a similar situation: while tourist numbers rose, visitors were not staying as long or spending as much as previously. To counter the problem, the ATR increased its presence in promotional markets, invested in training programs based on the client approach, and launched a “Quality” initiative.

Obviously, the methodology and recording of data can differ from country to country, making comparisons difficult. But beyond the figures, the question remains interesting: is the goal to attract more tourists with all the consequences of that, or is it to increase economic benefits in a perspective of sustainable development?

Sources:

- Alves, Jose. “L’Espagne remet en cause son modèle touristique,” Les Échos, No. 19338, January 27, 2005, p. 26.
- McGrath, Ginny. “Britain Needs Big Spenders,” Travelmole, February 9, 2005.
- World Tourism Organization. “Tourism Highlights,” 2005 edition.
- Voilà.fr. “L’Italie a connu une mauvaise année touristiques en 2004,” [www.voila.fr], February 11, 2005.

• Climate of uncertainty
  The political, economic, climatic and health crises of the past few years have shown us that the travel industry, particularly the airline sector, can become very vulnerable and that no destination is immune from these threats.
• Rising oil prices
  More gas price hikes are expected in the next few years. Since the price of oil affects tourism-based businesses in myriad ways, travel costs will rise. This situation, coupled with risk factors, could lead to an increase in intra-regional travel. Poorer countries will be hurt by higher transportation costs and require special assistance.
• Security procedures to facilitate travel
  A country’s methods of providing security and protection for travellers play an important role in its position in the global tourism marketplace. In the coming years, these methods should be harmonized.
• Increased wealth in both existing and emerging markets
  Economic prosperity drives tourism growth. Existing markets will continue to increase their wealth. Among emerging markets, China and India will experience the most growth. Experts anticipate problems due to overcrowded airline routes.
• Development of both multilateralism and regionalism
  South-South alliances will develop and create more equitable relations. The current trend towards political and economic consolidation in major global regions will restructure the overall globalization movement. Asia will become an economic centre to watch. As a result, tourism, as well as transportation structures and costs, will be profoundly affected.
• Technology in the forefront
  Whether we are talking about developments in communication, the convergence of the Internet, cell phones and television or the rollout of new aircraft models, technology will continue to play a primary role in the evolution of the tourism industry.
• Demographic changes
  Concentrated urban populations and family/work dynamics continue to modify travel behaviour. The populations of large industrialized countries are aging, meaning that more baby boomers will have the time and money to travel. However, some experts have reservations about the amount of discretionary income available to retirees for travel.
• Increased consumer power, thanks to the Internet
  When it comes to accessing information, prices and reservations, the centre of power has shifted from tourism professionals to travellers themselves. Consumers are very comfortable with the Internet and the decisions it enables them to make.
• Improved quality of life as a travel incentive
  Travel is seen as an element that can help improve one’s quality of life, whether it is used for adventure and discovery, personal growth, relaxation or to get a new lease on life.
• Heightened competition
  In an attempt to stimulate economic growth, every city, region and country will be looking for a piece of the tourism pie, creating a context in which branding strategies are key.
• Promotional strategies involving public-private partnerships
  These types of partnerships are especially common in countries with federal or highly decentralized political systems.
• Ongoing mergers and acquisitions
  The hotel industry, airlines, distribution network and tour operators will continue their trend towards consolidation.
• Infrastructure deficiencies
  When it comes to infrastructure, the major Western countries lack the planning needed to respond to the coming international growth. It requires several years’ lead time to expand airports and build more hotels.

• Booming products
  Green tourism, spa tourism and health tourism (surgery and convalescence) are becoming increasingly popular. Although these are examples of segmentation and specialization, mass tourism is in no danger of disappearing.

Flirting with China and India

Even though China and India are enormous potential markets, there is a long list of countries competing for their business. Over 170 destinations are using their charms to attract Chinese and Indian travellers. Despite these efforts, travellers from emerging markets often follow the same pattern as they start to venture outside their country. They begin by traveling in groups and are most likely to visit neighbouring countries. Afterwards, Europe and North America (particularly the West Coast) are added to the list of destinations and the number of individual travellers increases.

Not everyone behaves the same, however. Chinese travellers like to feel safe by finding people who speak their language and can provide familiar food. As a result, they will be attracted to foreign countries that boast major Chinese communities. As for travelers from India, their travel experiences have made them more likely to travel alone, anywhere in the world.

All the same, those who wish to appeal to these travellers are well-advised to get busy.

Tourism in general likely to continue its upward climb

If we look at the past fifty years or so, although its growth curve may have had a few blips, tourism is not ready to collapse. And yet, even though international demand is expected to grow by 4.2% annually, there are also more and more regions vying for travellers.

Sources:
- Baumgarten, Jean-Claude. President of the World Travel & Tourism Council (WTTC) and a guest lecturer for the Cercle de tourisme du Québec, April 20, 2006.
- Désiront, André. Interview with Jean-Claude Baumgarten following his remarks to the Cercle de tourisme du Québec, April 20, 2006.
- Frangialli, Francesco. “Défis pour un nouveau millénaire,” Le Devoir, April 1 and 2, 2006.
- Sarrasin, Bruno. “Temps de ruptures et continuités,” Le Devoir, April 1 and 2, 2006.

]]> http://tourismintelligence.ca/2006/04/26/what-can-we-expect-from-the-tourism-bubble-in-the-next-few-years/feed/ 0 http://tourismintelligence.ca/2005/09/22/statistics-are-not-always-what-they-seem/ http://tourismintelligence.ca/2005/09/22/statistics-are-not-always-what-they-seem/#comments Thu, 22 Sep 2005 14:46:19 +0000 Michèle Laliberté http://tourismintelligence.ca/2005/09/22/statistics-are-not-always-what-they-seem/ Everyone – those in the industry, government bodies, academics, journalists and more – uses statistics from the World Tourism Organization and Statistics Canada, thereby contributing to the dissemination of this data. However, a closer look at these statistics reveals that things are not always what they seem. Methodological considerations aside, here are a few examples of what these statistics do not tell us!

Canada may no longer be one of the WTO’s top ten international destinations, but… when it comes to the tourism statistics produced by the World Tourism Organization (WTO), the data collection methods differ from one country to the next.

When compiling tourism data, some countries only count tourists, others include both tourists and same-day visitors, while still others report one tourist more than once during a single visit, because the tourist is counted each time he or she stays in a different hotel (see the table below).



If all countries used the same data collection method, the WTO’s infamous international ranking would be much different and Canada’s position would rise. Currently ranked 11th, Canada compiles its statistics using the TF method (see table), in other words, by simply counting the number of international tourists who enter its borders. The United Kingdom and Hong Kong, ranked 6th and 7th respectively, include both tourists and same-day visitors in their numbers (VF method). If Canada used the same method (tourists and same-day visitors) as the United Kingdom (27.7 million) and Hong Kong (21.8 million), it could add the 17.8 million same-day visitors who entered by car in 2004 to its 19 million or so international arrivals and thereby surpass both in the ranking. Germany and Austria, which rank 9th and 10th, employ the TCE method to compile their data, which means that if a single tourist stays in four different hotels during his or her stay, he or she is counted four times.

Tourism receipts: local currencies vs. US dollars

The WTO reports international tourism receipts in US dollars and in local currencies at constant prices. When tourism receipts (in yen, pesos, Euros, etc.) are converted into US dollars, figures can be compared and analyzed and used to create an international ranking. However, expressing receipts in local currencies at constant prices neutralizes the effect of exchange rate changes and inflation. When the US dollar depreciates against a given currency, this situation can inflate tourism receipts converted into US dollars. For example, Spain’s tourism receipts climbed 14.1% from 2003 to 2004 when expressed in US dollars, while they rose only 3.8% when expressed in Euros (the local currency). The same thing was true for Australia. Its receipts jumped 25.5% in 2004 when they were converted into US dollars, but climbed only 10.7% when they were expressed in constant Australian dollars. In addition, international tourism receipts include revenues generated by both tourists and same-day visitors.

Tourist activities

Statistics Canada has developed a special tool for finding out how many people engage in a given activity when travelling, but the Canadian Travel Survey (CTS) and the International Travel Survey (ITS) have different ways of reporting the number of participants. For example, let’s say that three people took a trip together. During their stay, one of them went shopping while the other two played golf.

• ITS – Regardless of which person in the group answers the survey, Statistics Canada will count 3 people as shoppers and 3 people as golfers.
• CTS – If the person answering the survey is the one who went shopping, then Statistics Canada will count 3 people as shoppers and 0 as golfers.
• CTS – If the person answering the survey is one of those who played golf, then Statistics Canada will count 3 people as golfers and 0 as shoppers.

A solo traveller is, by definition, a person travelling alone…or is it?

Statistics Canada has a very different definition of solo traveller. According to the CTS, a person is considered to be travelling alone if they are not accompanied by someone from the same household. Therefore, a person is reported as a solo traveller even if:

• he or she is accompanied by a family member (mother, daughter, brother, etc.) who does not live under the same roof,
• he or she is travelling with friends, or
• he or she is on a group tour package.

For the ITS, the method is different. People are only considered to be travelling alone if they are unable to provide any information on the expenditures and activities of the people accompanying them or if they are part of a group. However, as of 2005, the CTS was replaced by the Travel Survey of Canadian Residents, which uses the ITS definition of a person travelling solo.

Statistics will never look quite the same

When the WTO publishes its Top Ten, the data is disseminated around the globe without a word about the differences in collection methods. Statisticians must obviously work with a number of limitations if they wish to make sense of the information they gather. However, a closer look at the methodology sheds new light on the mishmash of numbers known as statistics and the way in which they are interpreted!

Sources:
- World Tourism Organization. [http://www.world-tourism.org/facts/menu.html]
- Statistics Canada, Canadian Travel Survey
- Statistics Canada, International Travel Survey
- Statistics Canada, International Travel, Advance Information, December 2004, vol. 20, no. 12, released February 2005.

]]> http://tourismintelligence.ca/2005/09/22/statistics-are-not-always-what-they-seem/feed/ 0 http://tourismintelligence.ca/2004/05/31/what-do-we-see-in-our-crystal-ball/ http://tourismintelligence.ca/2004/05/31/what-do-we-see-in-our-crystal-ball/#comments Mon, 31 May 2004 16:39:44 +0000 Michèle Laliberté http://tourismintelligence.ca/2004/05/31/what-do-we-see-in-our-crystal-ball/ The pace of everything will only speed up. We see trendy new destinations, enthusiasm for new products, pronounced customer segmentation and new players that shake up a sector of activity. Lots will be going on in the tourism industry.

Overall factors

• Socio-demographics - Populations will be increasingly concentrated in urban areas. By the year 2015, over half of all humanity will live in cities. By the year 2020, nearly 90% of the Canadian population will reside in the country’s 25 largest urban regions. The globalization of the job market will lead to greater geographic mobility.
• Growth period - The largest economic increase in global tourism should occur from 2010 to 2020 with the arrival of emerging markets, such as China and India, and significant growth of close-to-home travel and short trips. 
• Security - Terrorism will be part of the equation, and travellers will adjust. The impact of terrorist attacks will be more local. Security measures will be standardized around the world and their cost will push airfares up.
• Environment - Environmental and social awareness will increase. In tourism, this trend will take several forms like ecotourism, equitable tourism, responsible tourism and sustainable tourism. Certain hotels will become eco-friendly. As certain places sustain damage, mass tourism will decline. 
• Technology - Technology will continue to develop at a rapid pace and involve all sectors of the industry. For example, cellular phones will be used to plan and organize all aspects of trips, and high-definition televisions and computers will provide virtual visits of a destination, with sights, sounds, scents and textures, as if the prospective traveller were actually there.  

Sectors of activity

• Airline industry - With their greater speed and capacity, planes will make available to many travellers destinations that still seem remote. As the world becomes smaller and more accessible, the door will open to affordable long-haul getaways. 
• Accommodation - Hotel rooms with state-of-the-art technology will make it possible to combine business and pleasure, switching focus as needed.  

Clientele and products

• Clientele - International tourists will exceed one billion in 2010, rising to 1.5 billion in 2020. As baby boomers retire en masse from 2010 to 2020, they will represent most of this clientele and shape demand; they’re active, educated, healthy, demanding and more adventurous. Forget the shuffleboard! When it comes to emerging markets, young adults will have the most impact. 
• Destinations - A new hierarchy of destinations will take hold as Asia and India become more popular. Combined with the growth of new destinations (Qatar, Brazil, Slovakia, etc.), competition among countries will be more intense. The various regional economic agreements (EEC, APEC, etc.) will facilitate travel within trade zones, and tourism will become a regional, rather than global, phenomenon. 
• Products - Offbeat ideas will continue to emerge. Products like extreme adventure, learning travel, and even silence and relaxation will reflect customers’ life styles. The demand for quality products will be strong.

Sources:
- Sarrasin, Bruno and Guy-Joffroy Lord. “L’évolution du tourisme international: une analyse prospective à l’horizon 2010,” Téoros, fall 2003, p. 5-9.
- The Thomson Future Holiday Forum, [www.lexispr.com/thomson/report.htm] 2004.

SEE ALSO

Global Megatrends Revolutionizing the Tourism Industry at the Dawn of the Third Millennium
By Michael Nowlis, Tourism Control Intelligence

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