Letter from WTM

Published on: November 13, 2009

This past week London once again served as host for the World Travel Market (WTM), which celebrated its 30th anniversary this year. WTM is a showcase for the world’s destinations and top travel suppliers. It also has always been a bit of a bellwether of the health of the travel industry – and this year was no exception.

From my reading of the show, attendance may have been a bit down (though as I write this I don’t know the actual figures). Some rather substantial hotel companies also did not exhibit for the first time in recent memory – including Starwood, Marriott, Four Seasons and Sol Melia, among others. Indeed, the hotel part of the exhibition floor seemed to be hit the most, though it appeared many technology firms filled the booths once occupied by hotels.

Was it the recessionary economy? Well, most likely. But even with some companies missing the show is still one of the largest (if not the largest) in the world, as well as one of the most diversified in terms of the destinations and travel suppliers it attracts.

On the destination front, for example, there was strong participation. And if you’ve never gone to a WTM, you would be astounded at the size and scope of the exhibition booths for such countries as Dubai, Ecuador, Mexico, Turkey and Cuba, just to name but a few. Suffice to say it would take you far more than the full four days of the show to visit every exhibitor.

WTM also serves as a forum for “official” tourism bodies to issue their predictions and forecasts. Indeed, the opening press conference focused on the WTM Global Trends Report, which this year provided trends by destination region. Now I have to admit I don’t always agree with what this report comes up with every year – and you’ll see why in a moment.

Not surprisingly the report, which is produced for WTM by Euromonitor International, found the global financial crisis has taken a toll on travel and tourism, with global arrivals expected to decline 8 percent and a full travel and tourism recovery not expected before 2013 -- a more pessimistic finding than in another report issued by the World Travel & Tourism Council (which I’ll discuss below).

But let’s get back to some of those trends described in the WTM Global Trends Report. For example, the report found what it calls “fun-employment” is on the rise North America. Under this scenario people who have lost their jobs, especially those under 35, decide to use their severance pay and savings to travel, allegedly while they have the time to do so. According to the report, these travelers are cash poor and time rich, and they are aided by widespread discounting of travel products.

Now, I don’t know about you, but that isn’t the trend I’ve been seeing. Those who lose their jobs aren’t going on vacation just yet, at least not until they pay off their student loans and other financial obligations. So something may have gotten lost in the translation across the Atlantic.

For the U.K., the report found an increase in so-called “pop-up” hotels, which are pre-built units incorporated into a steel frame that can be easily demolished. Such companies as M-Hotel.org and Travelodge are building “temporary” hotels in London and elsewhere in the U.K. to attract generation Y, baby boomers and environmentalists, as well as to boost the number of affordable accommodations in the market and stimulate growth in rural areas. I haven’t seen one yet, so I’m not chomping at the bit to stay in one of these structures.

In Europe, the report found that concierge travel services are on the rise for both luxury and mass-market travelers, driven by consumer expectations and new technology. Even mass-market travelers are demanding more personalized services – and suppliers are willing to step to the plate as a way to differentiate themselves and add value to the travel experiences they offer. Virgin Holidays, for example, is offering concierge services to all its customers, and Kuoni, the Swiss travel group, is expected offer such services to all its customers for a nominal fee by the end of 2010.

In Africa, the report finds what it calls the “Obama” effect is boosting visitors to the continent, especially after President Obama’s visit to Ghana earlier this year. What the report calls “roots” tourism offers potential to boost economic prosperity to the region and grow new travel markets.

Indeed, U.S. air traffic to Africa increased by 33 percent in the first five months of this year and the U.S. is Africa’s biggest source market, especially among African Americans, according to the report. This is certainly a trend that I see as being good for Africa and good for U.S. travel agents who embrace it. The African-American community is certainly a growth market for travel.

In Latin America, the report sees the region rebranding itself as a luxury destination. This new investment in luxury infrastructure aims to steal marketshare from destinations in North America and Europe. But it also seeks to cater to the growth in luxury customer base in Brazil and other parts of South America. The 2014 World Cup and 2016 Olympic Games, both now set for Brazil, are said to be an impetus for tourism infrastructure development, especially on the high end of the market.

Those are just some of the trends in WTM’s report, but I’ll end this by focusing on another report that has mixed news for travel and tourism. Since its founding, the World Travel & Tourism Council (WTTC) has served as a global lobbying organization to get world governments to recognize the vast economic value of travel and tourism, including in particular as a generator of employment. Indeed, coming from a country with well over 10 percent unemployment right now, I just wonder why our own government continues to fail to see the tremendous potential in travel and tourism.

For the long-term, the WTTC continues to see a steady growth of travel and tourism averaging about 4 percent per year worldwide. But in the revised report issued at World Travel Market, the WTTC now says it expects travel and tourism’s contribution to global gross domestic product (GDP) to slip further in 2009. It also says the recovery will be slower than it first thought.

WTTC said that while there are tentative signs the economic cycle is now turning, driven by government economic stimulus plans, reviving credit markets and recovering asset prices, recovery is expected to be gradual -- and a second dip into recession early next year cannot yet be ruled out. Indeed, the travel and tourism economy GDP is now forecast to decline by 5.5 percent in 2009, up from the 3.5 percent drop WTTC forecasted for the year last January. Travel and tourism GDP in 2010 is likely to be flat at best.

This is not good news for those expecting a full recovery by 2010. However, WTTC’s definition of a full recovery also means matching travel and tourism levels in 2007, which was one of the industry’s best years. And that full recovery is forecast to happen in 2011. On an anecdotal basis, almost every supplier and destination I spoke with at WTM said bookings were picking up and rates were getting firmer.

Nevertheless, we are not out of the woods yet. “Travel and tourism clearly continues to face challenging times,” said WTTC President Jean-Claude Baumgarten, “especially if the tentative recovery under way loses momentum or if the H1N1 influenza pandemic were to intensify and become more virulent.”

That’s why WTTC is leading the charge for world governments to be even more supportive of policies that support travel and tourism. Baumgarten said policy-makers need to be wary about placing extra burdens on the travel and tourism sector, such as additional taxes and fees, when profitability is already under severe pressure. “If the challenging times facing travel and tourism are ignored by governments,” Baumgarten said, “then its role in employment creation and poverty reduction could be seriously undermined.”

James Shillinglaw is editor in chief of TravelPulse.com.