Economic aspects - Tourism Industry trends

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The World Travel and Tourism Council (WTTC), representing a number of the larger companies in international tourism (especially airlines, international hotel groups and travel agents and tour operators), has carried out in-depth economic studies on a world basis. Its research claims to demonstrate the lack of government appreciation of the size and importance of the tourist industry and even more significant its enormous potential for growth. The forecasts for growth far exceed those for any other major trade. However, the WTTC has warned of the challenges as well as the opportunities and the need for government appreciation and action if these forecasts are to be achieved. Like good signposts, they can only point the way ahead. They do not take one step towards reaching the goal. Generally most forecasts predict long-term growth in GDP and thus discretionary incomes (see Table 14.2, [dead link]). Leisure time, education and other demand determinants are already favourable in the world’s developed countries. New emerging markets in Asia and the Far East are growing fast. However, there are uncertainties about future growth. Social and environmental fears could impede expansion in certain travel flows. There are new influences causing instability and a much more volatile market for many now essential travel services and tourist trips.

Travel and tourism in the EU is estimated to produce more than ECU 966 bn
(US $1.2 trillion) of gross output in 1996 (WTTC, 1996). This includes:
1 ECU 532 bn (US $639 bn) of personal travel and tourism consumption
(13.4 per cent of total) within the EC by residents.
2 ECU 197 bn (US $236 bn) of capital investment.
3 ECU 100 bn (US $120 bn) of government expenditures to provide services
to the EU travel and tourism industry.
4 ECU 9 bn (US $11 bn) of foreign trade surplus earned from international
visitor spending.
This output makes the EU the largest regional producer of travel and
tourism in the world, followed by the combined US/Canadian (i.e.
Northern American) market. EU travel and tourism is expected to grow at
a real compound rate of 2.7 per cent per year until 2006, to ECU 1.7 trillion
(US $2.0 trillion) in gross output.

In 1996, EU travel and tourism is estimated to produce 12.6 per cent of GDP.
This compares with a world GDP level of 10.7 per cent.
The WTTC claims that GDP is a much better indicator of travel and
tourism’s net worth to the EU economy than usual measures like visitor
counts, bed nights or even visitor receipts, since GDP is an economic fact
which can be compared to the other sectors of the EU economy. Input/
output measures certainly enable the tourism industry’s contribution to the
economy to be properly measured by government.

Travel and tourism will generate an estimated 19.4 million jobs in 1996 in
the EU, across a broad spectrum of economic activities. The industry
accounts for 13.1 per cent of the workforce, providing one in every eight
EU jobs.
Globally, travel and tourism is expected to yield 212 million jobs in 1995
– 10.7 per cent of world employment, or one in every nine jobs.
EU travel and tourism is expected to create 2.5 million new jobs over
the next 10 years. This includes jobs in hotels, restaurants, airlines and car
hire companies, as well as indirect jobs in hotel construction, aircraft
manufacturing, auto servicing and government travel and tourism
Jobs generated by travel and tourism pay wages 2.6 per cent higher than
the average EU industry. In 1996, per capita wages and salaries for EU travel
and tourism are expected to total ECU 23 568 (US $28 312).
WTTC comments that as the industry which invented computerized
global distribution systems and which manufactures and operates the most
sophisticated transportation equipment ever built, travel and tourism is a
high-tech employer.
In addition, travel and tourism also produces a large number of the lowtech,
entry-level service jobs which are so important in addressing structural
unemployment, particularly in city centres and rural areas where these
problems are often most severe.
These overviews by the WTO and the WTTC are useful and practical.
However, in a competitive and fast-changing world they need to be
complemented by projections from each trade sector, and the public sector
operating at local, national and international levels. Both the trades and
the local authorities deal with the grass roots problems of operating and
developing resources and services in a period of expected continuing
high-level growth. These local and sector trends studies are needed as a
basis for strategic plans. Other threads illustrates the practical nature of such
work, which is an essential basis for the marketing plan.
The International Hotel Association (1996) published a White Paper on the
Global Hospitality Industry, ‘Into the New Millenium’, based on intensive
research by Professor Michael Olsen of the Virginia Technical Institute and
State University.
The research identified five events shaping the future of the lodging
1 Capacity control
2 Safety and security
3 Assets and capital
4 Technology
5 New management.
These factors are likely to affect the whole of the tourism activity, as lodging
is such a fundamental part of the whole.
‘Capacity control’ relates to the development of global reservation
systems, so that the individual business can lose control of the sale of its
own inventory – rooms, seats in restaurants or on transport, tickets to
attractions, etc. New partnerships and alliances are beginning to develop on
a worldwide basis.
The study suggests a likely shortage of both private and government
capital, with corresponding competitive pressures on performance and
New management will be tested, as technology will require new skills.
The most important challenge will be the ability to handle ‘the speed of

The history of tourism is one of lumpy expansion, periods of massive
growth interrupted by periods of recessions and stagnation. Equally
dangerous at least in the shorter term is the common situation of lack of
coordination and harmony in development programmes, especially the
gap between transport improvement and accommodation levels. In the
period of earlier revolutionary growth in air transport, with the introduction
of the wide-bodied jets, the hotel stock in many European countries
had been largely provided for a period of passenger ships and
The problem was made easier to solve by great technical advances in
building, development and operating practices. In developing countries it
can be the case that accommodation expansion increases faster than
transport. The rapid growth of tourism in China was greatly hampered by
the lack of good transport within China itself. The same was true for a
time in India, where the domestic airlines were greatly restricted in
Each separate trading sector must take into account the international
situation, the national position and the situation of the sectors themselves,
which together provide the necessary total supply of services for the visitor.
They are in fact partners, independent of each other but at the same time
interdependent. Even in a fully competitive market-oriented economy there
is an essential place in tourism for a collective as well as a competitive role
by both public and private operating sectors. But the machinery for
coordination is poor.
This is necessary at the horizontal level, for example cooperation between
government departments responsible for important aspects of tourism
activity in the future. Similarly, tourism authorities when making their
projections for massive future growth must take into account considerations
of infrastructure, especially transport infrastructure.
Currently in Europe, transport infrastructure in roads and aviation is a
major issue, with inadequate preparation for traffic to double in the next
Most forecasts assume that these essential tasks of the public sector will be
carried out effectively and that conditions for successful operation by
industry will as far as possible be created by the state. The immense world
potential for continuing substantial growth in tourism, especially international
tourism, seems to be well established. The main determinants of
demand are largely favourable. On the supply side, the trading sectors
through increasing technology and operating efficiencies are able to reduce
prices in real terms, and make it ‘easier to buy’, to meet market requirements
and contribute to traffic growth.
But as always there are problem areas and challenges which threaten
growth. Forecasts are at best measures of potential demand. Economic,
technological and social pressures are not only expanding at a rate never
known in the world before, but this expansion has given rise to a
volatility in demand. Traditional behaviour patterns can no longer be
relied upon. The as yet unknown effects of economic structural change
on a grand scale could alter the outcome very considerably. Consumer
preferences, the attitude to spending as opposed to saving, or to living
on credit, can alter rapidly with major impact on an open marketoriented
Government have shown in recent years a tendency to withdraw from
tourism intervention, leaving too much development to market forces.
Future growth is indeed a challenging prospect. This will require a high
degree of planning and management skills in the public as well as the
private sector, and major development of marketing distribution and
reception services.
Coordination of the wide range of interests in government as well as in
the operating sectors, especially in strategies, will be essential if the outcome
for profitable sustainable tourism with its immense advantages is to be
favourable. The crucial factor will be the recognition by governments in the
developed world that their largest trade and employer deserves a priority in
policies commensurate with the great potential benefits offered. The
operators – the industry – also have a key task to create an effective voice for
tourism and systems for collective as well as competitive action in preparing
for the future.

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