Downturn and recovery: The outlook for travel

The economy dominated World Travel Market in a way the organisers cannot have imagined when arranging a programme with World ­Responsible Tourism Day at its heart.

Everyone from WTM chairwoman Fiona Jeffery to United Nations World Tourism Organization secretary-general Francesco Frangialli insisted the developing recession should not distract from ­demands to make the industry more sustainable. But there was no denying concern about the downturn.

Frangialli told a tourism ministers’ summit: “Tourism is resilient, but there is a stage of deterioration beyond which tourism will suffer.”

However, he argued: “There will be no tourism tsunami. We are worried, but not in a panic. Tourism flows from emerging countries are ­increasing and the need to travel and the desire for leisure are engrained.”

That was not the view of Professor Peter Keller, an adviser to the UNWTO and director of tourism at the University of Lausanne. He predicted “a slow downturn and a slow recovery”, and warned: “It is unlikely emerging economies will be the driver of the world economy.”

“There will be no tourism tsunami. We are worried, but not in a panic”

On a world scale, the UNWTO does not foresee contraction for the industry next year. Instead, it predicts growth of 0-2% in international tourists against long-term average annual growth of 4.2%.

However, it foresees a hard time for the UK – its World Tourism Barometer survey of the latest figures suggests: “Inhabitants of the UK are in for a very tough 2009.”

That forecast was confirmed by the Bank of England last week when it predicted a 2% decline in the UK economy in 2009.

Economists broadly agree there will be a delay before ­developments in the wider economy feed through to travel. Deutsche Bank chief economist Dr Norbert Walter suggested: “The travel industry lags behind the general economic cycle by six months to a year, although some sectors – for example, the events industry – will be suffering now.”

Yet UK tourism minister Barbara Follett revealed a downturn in tourism was already responsible for half the shrinkage in the UK economy in the three months to September, when the country suffered a 0.5% fall.

Follett told the ministers’ summit: “Half the contraction came from hospitality and tourism.” A large part of that was due to sharp falls in visitors from North America, down 15%, and Japan – down 25% – this summer.

The UK inbound industry will hope those markets ­rebound on the back of the fall in the pound, making Britain a cheaper destination. But both the US and Japan are in recession – while the falling pound poses a major concern to the UK outbound market, ­especially to the US and eurozone countries.

Walter warned the pound would continue to decline against the dollar and the euro.

Fellow economist John Walker, chairman of Oxford Tourism Economics, took a generally upbeat view at a World Travel and Tourism Council summit at WTM, ­despite suggesting: “People feel poorer and 2009 will be a tough year. There will be an ­effect on consumer spending for several quarters.”

He argued: “There will be some recovery in 2010 and that is critical for the industry.”

WTTC president and chief executive John-Claude Baumgarten was similarly ­upbeat, arguing: “Whenever there has been a downturn, consumers have kept travelling. They travel less far, spend less time away and spend less money. But 2010 could see the restart of travel and tourism.”

Walker was particularly ­optimistic about prospects for the UK. “Reductions in UK ­interest rates will continue, and we should see tax cuts and a substantial increase in government spending,” he said.

“Whenever there has been a downturn, consumers have kept travelling. They travel less far, spend less time away and spend less money”

“What matters most to travel is real disposable income and it is likely real ­incomes will rise in 2009. ­Inflation in the UK is going to be negative and wages will be growing strongly.”

However, that view may be undermined by rising ­unemployment and how fast the official UK inflation measure falls from the 5.2% annual rate it hit last month – particularly when the devalued pound will make imports more expensive and mitigate the ­impact of falling fuel prices.

Speaking at the same WTTC summit, Walter was more pessimistic, warning: “This is the onset of the most pronounced global recession this generation or the previous generation has seen. It may be comparable to the inter-war period.”

He suggested only a slim possibility of the industry recovering in 2010, saying: “The correction phase will not be a few quarters, but a few years.

“If governments and central banks do all the right things and there is co-operation rather than devaluation of currencies and protection of industries, we stand a chance of recovery in 2010. But I am not sure governments will do that.”

Walter also suggested the fall in the oil price would not be permanent. “Be assured, if we see a lower price it will be higher again soon.”

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