Print Preview : IPK Int'l: Εconomic downturn will create new winners and losers in travel and tourism

IPK Int'l: Εconomic downturn will create new winners and losers in travel and tourism
Internet bookings will surge. Demand for online virtual meetings will gather pace. Domestic travel will stay stable or grow, as will demand for low-fare flights. Destinations adjacent to big travel markets will do not so badly. Long-haul travel will fall sharply. And the most pain will be felt in the business travel and MICE sectors.

Those were the predictions for 2009 unveiled by IPK International’s CEO, Rolf Freitag, in an ITB World Travel Trends Update, at the ITB Convention in Berlin. Based on 500,000 travel interviews in 58 countries around the world, IPK delivered a wide-ranging forecast. In the predictions, IPK suggested that 2009 will see travel declines in most markets, with 2010 neutral and small growth likely in 2011 and 2012. Freitag said: “We’re in a full global economic crisis, not a small recession. Consumer greed of the last few years has turned into consumer fear.”

IPK’s worldwide interviews suggest that 40% of Europeans will change their travel plans due to the economic crisis. Some 66% of Americans and 60% of Asians plan to make some kind of change. Freitag said this change means they will likely to switch to domestic travel, travel for shorter periods of time, choose cheaper destinations, or spend less while on holiday. European and North American markets will be more adversely affected compared with other regions of the world. IPK predicts that China, India and all of Latin America will record GDP and travel demand growth, even in 2009. However, those growth figures will be smaller than the precedents set over the last ten years.

Freitag pointed out that over 50% of global travel demand emanates from Europe. Within Europe, in 2008, the Russians, Dutch and Poles recorded much higher than average outbound travel rates. However, the strong devaluation of the Russian rouble and Polish zloty suggest that such strong performances are unlikely to be repeated in 2009. While Turkey, the USA, Austria and the UK all received strong growth in arrivals numbers from European travellers in 2008, IPK predicts they are unlikely to do so again this year. In households that earn more than 20,000 euros a year, travel will remain a high priority, according to IPK. However, households earning less than 20,000 euros are much more likely to adjust travel plans towards cheaper and/or domestic trips.

Freitag pointed out that travellers are increasingly using the internet, not just to find information, but to book and pay for holidays. And the internet as a travel tool will continue to grow in 2009. To help them face the economic downturn, which is likely to go on longer than previously predicted, Freitag said companies should reduce costs, go on a price-cutting offensive, enter into partnerships with the public sector, communicate new attractions more aggressively and intensify e-marketing and e-sales initiatives. Companies with good asset security can take advantage of low interest rates to borrow money and invest for the upturn, which will come eventually, he said.

The World Travel & Tourism Council (WTTC) today revealed the results of its 2009 Economic Impact Research at its annual ITB Berlin press conference. “This year, the task of assessing travel and tourism trends and drawing up forecasts has been more challenging than ever because of all the uncertainties,” Jean-Claude Baumgarten, WTTC President and CEO, announced at the launch. Given the significant deterioration in travel and tourism activity through the second half of 2008 and the bleak macroeconomic picture forecast for 2009, WTTC’s latest research suggests that Travel & Tourism Economy GDP will contract by 3.6% in 2009. And it is expected to remain weak in 2010 with only marginal growth, of less than 0.3%, currently expected - on what will already be a weak 2009.

“Lower fuel costs will of course make a difference,” said Baumgarten, “as will lower general inflation, which should reverse part of last year’s squeeze on households’ spending power. But given how widespread and deep the current recession is, it is inevitable that Travel & Tourism will continue to be affected.”

“Indeed, as a relatively cyclical industry, its contribution to world GDP is expected to fall further in the next two years - from 9.6% in 2008 to just over 9% in 2010,” Oxford Economics’ Managing Director, Adrian Cooper, added. “Job losses are likely to be significant, with employment falling by around 10 million over the next two years towards 215 million in 2010, before recovering thereafter.”

A key message from WTTC’s research is therefore that a critical contributor to global job creation and poverty alleviation is going into reverse - “a fact that policy-makers would do well to recognise and take into account in their short- to medium-term strategies,” said Baumgarten.

“This is no time for rhetoric,” Baumgarten stressed. “The industry is not expecting a bail-out, or hand-outs. But it needs a supportive framework from government to help it weather the current storm. And governments would also do well to recognise Travel & Tourism’s potential to help kick-start the economy once the current crisis eases.”

Looking beyond the current crisis, Travel & Tourism is expected to resume its leading role in driving global growth, creating jobs and alleviating poverty. “Emerging economies are expected to be the main engines of growth,” said Baumgarten, “generating hundreds of millions of new travellers from among the growing middle classes in countries like China, India and Brazil - boosting international travel, but also creating an increasingly vibrant domestic tourism sector.”

Overall, the Travel & Tourism Economy is forecast to grow by 4% per annum in real terms over the next ten years, supporting 275 million jobs by 2019 - ie 8.4% of all jobs and 9.5% of global GDP. “This means that Travel & Tourism will continue growing in importance as one of the world’s highest priority industries and employers,” Baumgarten said. Theodore Koumelis - Friday, March 13, 2009