Global Economics

Global Travel Takes a Dive


Although experts forecast an uptick during the summer, the decline for 2009 may be 4% to 6%, and it's expected to last

From sun-soaked Mediterranean beaches to the upscale hotel districts of Tokyo, the global recession has caused a steep decline in tourism worldwide. During the first three months of this year, the number of international visitors to the world's top 50 tourist countries was down 8.1% from the same period in 2008, according to the Madrid-based World Tourism Organization, an arm of the U.N.

Travel experts forecast a slight uptick during the summer vacation months, so that the decline for the full year may be no more than 4% to 6%. Still, that's a big change from 2008, when international travel rose 1.9%. And no one expects recovery soon. "The terrorism attacks on the U.S. and SARS epidemic caused short but deep declines in international travel," while the current decline will be "shallow but extremely long-lasting," says Frances Tuke, public-relations manager of London's Association of British Travel Agents (ABTA). "Those of us in the travel industry anticipate 2010 to continue to be painful."

The problems aren't only being felt by tourist destinations: Travel companies also are reporting declines in business. German giant TUI (TUIGN.DE) saw first-quarter revenues fall 15.1%, to €3.1 billion ($4.5 billion), compared with the first three months of 2008, and suffered an operating loss of €300 million ($432 million). France's Club Méditerranée (CMIP.PA) reported a €22 million ($32 million) net loss for the six months ended Apr. 30 on a 4.2% decline in revenues.

Currency Woes

The impact of the slowdown isn't spread evenly around the globe: Some heavily tourist-dependent European countries have been especially hard-hit. Tourist arrivals in Greece during the early months of the year were down 26.3% year-on-year, while Portugal was down 21.3% and Spain was down 16.3%. All three countries traditionally draw hordes of vacationers from Britain and Germany, whose economies are now mired in recession, says John Kester, who oversees analysis of market trends in the WTO's tourism services section.

The strength of the euro currency only makes matters worse. "We've lost a lot of our usual British visitors because the exchange rate between the pound and the euro is so bad that it's no longer a bargain for them to vacation here," says Maria Torneus, who manages the Hotel San Miguel in the town of Nerja on Spain's Costa del Sol. British tourists in the past have accounted for about a third of the hotel's clientele, she says.

European resorts also face increased competition from nearby destinations such as Morocco, Tunisia, and Turkey that promise more bang for the buck—or euro. Tourism in Africa rose 3% during the first quarter compared with the same period in 2008. The ABTA says British visits to Egypt during May were up 49% year-on-year, while travel to Tunisia was up 19%.

A similar trend is playing out in Asia, where international travel to Japan dropped a stomach-churning 27.2% during the first quarter, as visitors from China and other Asian countries opted for less-expensive destinations. South Korea, whose currency, the won, has depreciated while Japan's yen has strengthened, posted a 24% increase in visitors during the first quarter.

Trading Down

China, the world's fourth-most-visited country, is holding up relatively well, with a 9% year-on-year drop in arrivals from January through May. One draw for tourists: Hotel and restaurant prices, inflated last year because of the Beijing Olympics, have now declined to pre-Olympics levels.

France is still the world's most visited country, but it's suffering, too. International airport arrivals and hotel occupancy rates are down in Paris. Even the Riviera, playground of the wealthy, is getting slammed. "The French Riviera represents decadence, glamour, excess. People are embarrassed to be able to afford such expensive accommodation right now and are staying away," says Bastien Anouil, sales manager at Le Méridien Hotel (HOT) in Nice. Anouil says occupancy rates at the hotel, where rooms start at more than $350 a night, started falling as the global recession took hold last year.

While the U.S. suffered a 14.3% drop in international visitors during the first quarter, that mostly reflects a decline in business travel. (The WTO figures don't differentiate between business and leisure travelers.) Moreover, the U.S. is less dependent on foreign tourism than many other countries, since so many Americans vacation at home. The U.S. Travel Assn., an industry group in Washington, predicted in May 2009 that Americans would go on 322 million domestic leisure trips during the summer months of June, July, and August. That's only a 2.2% decline on the 329 million trips taken in the same period last year.

Some cost-conscious foreign tourists are still traveling—but not going as far. Croatia, for example, reports that more visitors are arriving by car from Austria, Germany, and Switzerland and opting for resorts on the Istrian peninsula in the northern part of the country, rather than venturing to Dalmatian coastal resorts farther south.

Package Deals

Others are turning to camping and caravaning as an alternative to pricier vacations. "We have a 100% occupancy rate for the month of August, the highest since we started 18 years ago," says Alan Hammond, who runs Orchard Camping in the Suffolk countryside in Britain's East Anglia. "People of all classes are looking for a bargain deal," he says. Why jet off to a foreign country when you can pitch a tent for about $25 a night?

To fight back against the slowdown, the travel industry is also pushing budget trips and all-inclusive packages that bundle airfare, accommodations, and even meals under a single attractive price. "The travel industry is expecting 2010 to be another hard year," says the ABTA's Tuke. "Now is the time for innovation—learning to adapt so we can thrive in an economic downturn."

For a look at which countries are suffering the most from the global decline in tourism, see our slide show.


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