Download 2nd Leisure Real Estate symposium

"Forces of change in world tourism
The role of governments, enterprises and the need for p-p
partnerships"
SETE Annual Conference
Athens, October 2007
Carlos Vogeler
Chairman Affiliate members UNWTO
Kalispera….
Good evening ladies and gentlemen. First of all let me express my
gratitude to SETE and my good friend George Drakopoulos for this
invitation to be with you tonight. Actually in my capacity of
Chairman of the Affiliate Members of the UNWTO, the UN agency
for Tourism, we are very proud to count with SETE as one of our
most active members and with their very active and valuable
contribution to the Affiliate Member’s activities, representing the
non-government sector of the Organisation.
The explosion in world tourism is one of the most remarkable
economic and social phenomena of the last half-century.
The importance of Travel & Tourism
• 12% of international consumer spending
• 10.3 % of world gross domestic product (GDP)
• 234 million jobs (1 in 12 jobs, 8.2 % of total world employment)
• The economic significance and potential of Travel & Tourism is
particularly prominent in the developing world
• Most new jobs in developing economies are created in tourism
industries
• Diversifies economic activity and enables the creation of wealth
and jobs in rural areas
• Positive effects in the balance of payments for inbound countries
• Multiplier effect in the economy impacting other sectors
With only minor interruptions, the proportion of the world
population taking part in tourism activity has risen year on year
through the last three decades, and for many countries tourism
has developed as one of the most dynamic sectors in their
economies in terms of foreign exchange, earnings and job
creation.
Tourism is a major force in globalisation and one of the world’s
largest industries, generating 12% of international consumer
spending and 1 in 12 jobs worldwide.
It is the leading industry in many countries, as well as the fastest
growing economic sector in terms of job creation worldwide. In
2006, the sector generated 10.3 percent of world gross domestic
product (GDP), providing 234 million jobs, or 8.2 percent of total
world employment.
The economic significance and potential of Travel & Tourism is
particularly prominent in the developing world. Most new jobs in
developing economies are created in tourism industries. In
addition, travel & tourism helps diversify economic activity and
enables the creation of wealth and jobs in rural areas
It brings very positive effects to the balance of payments by
earning foreign currency and produces a multiplier effect,
impacting other economic sectors.
Tourism is not only a very important economic phenomena but it
also increases the flow and exchange of cultural ideas and
commodities. It links distant and disparate individuals, businesses
and governments, to a global economic and political network with
the power to shape the policies and economies of countries.
World Tourism in 2006
842 Million
International
Tourist Arrivals
US $ 735 billion
International Tourism
Receipts
+ 4.9% over 2005
International transportation)
Average receipts per arrival:
US$ 870
+ 4.5% over 2005
(US$ 883 billion,including
Domestic Tourism:
Estimated 5 times more than International
(no reliable data available)
Source: World Tourism Organization (UNWTO)
In 2006 there were nearly 850 million international arrivals to the
world’s destinations, with 735 billion US $ in receipts for those
countries, that is an average of 780 US $ per arrival. This excludes
international transportation, as that expense is incurred in the
origin and not in destination. If we were, however, to consider the
whole of expenditure we would be looking at close to 900 billion
US $.
This only refers to international travel and tourism, as domestic
tourism, that is residents of a given country travelling within their
own country, is estimated to be 5 times more than international,
although there is no reliable data on this. I have been trying to find
some statistics on Greece’s Domestic Tourism, but I have been
unable to get them and of course not being international tourism it
falls outside the scope of the UNWTO. Do you have any research
or statistics on domestic tourism? If you don’t, as it seems to be
the case, I will recommend you to carry out some studies in this
area, as it can become quite important.
Sustainable growth
Evolution of International Tourism arrivals and receipts (1995 – 2006)
900
800
700
600
500
400
300
200
100
0
1995
2000
2004
2005
2006
International tourism receipts (US$ millions)
International tourist arrivals (thousands)
Source: United Nations World Tourism Organization
In any case, this data confirms the recovery of international travel
and tourism and its sustainable growth year on year as we can see
in this graph reflecting the evolution in terms of arrivals and
receipts over the last ten years.
World’s market share (%)
International Tourist Arrivals (ITA),
2006
842 million
International Tourism Receipts (ITR),
2006
US$ 735 billion
Europe
ITA: 458 million (54%)
ITR: US$ 348 billion (51%)
Americas
ITA: 136 million (16%)
ITR: US$ 145 billion (21%)
Middle East
ITA: 41 million (5%)
ITR: US$ 28 bn (4%)
Africa
ITA: 40 million (5%)
ITR: US$ 22 billion (3%)
Asia and the Pacific
ITA: 167 million (20%)
ITR: US$ 139 billion (21%)
The European region accounts for more than 50% of the world’s
market share both in terms of receipts as well as arrivals, followed
by Asia Pacific and the Americas, although the latter performs
much better in receipts than arrivals in terms of market share.
International Tourism Receipts (US$ Billion)
International Tourist Arrivals (Mill.)
79,1
France
58,5
Spain
51,1
49,6
Italy
41,1
Italy
30,1
UK
23,6
Germany
85,7
Spain
France
USA
China
USA
51,1
46,3
38,1
China
33,9
UK
33,5
Germany
32,8
Mexico
21,4
Australia
Austria
20,3
Turkey
16,9
Russia
20,2
Austria
16,7
Turkey
18,9
Canada
14,5
18,2
Greece
14,3
Canada
0
20
40
60
# 17 Greece: 14,4 million
80
17,8
0
20
40
60
80
100
Source: World Tourism Organization
Looking at the most visited destinations in the world, we see the
world’s country ranking with France as nº 1 in arrivals followed by
Spain, the USA and China.
Greece is nº 17 in this ranking with 14,4 million international
arrivals (excluding Albanians), but we all know that we should not
focus too much in the arrivals data, as it is not necessarily that
meaningfull in terms of the wealth brought to the destinations. The
truly important figure is the revenue that those arrivals bring to the
destinations.
Analysing that category, the ranking puts the USA in the first
position and France falls to third. Spain keeps nº 2 and Greece
climbs to # 12 with 14,3 billion US $ in receipts due to international
tourism. This is implies a positive of more than 11 billion US $, in
the balance of payments for tourism in Greece, since the
expenditure generated by Greek residents travelling abroad is of 3
billion US $.
It is true that governments produce statistics, as it is their
obligation, but we should be very careful when it comes to their
interpretation and their application to a more efficient planning
process of the tourism policy and strategy. Many governments
around the world tend to refer too often to their international
arrivals and look at increasing numbers in this field years on year.
That’s fine, but probably not that important. The true importance
lies in the receipts generated by those arrivals and the
employment and wealth brought to their local communities.
Top Outbound Countries 2006
World Total Expenditure: US$ 735
billion
International Tourism Receipts (US$ billion)
Germany
74,8
United States
72,0
United Kingdom
62,6
France
31,2
Japan
26,9
China
24,3
Italy
23,1
Canada
20,8
Russian Federation
18,8
Korea, Republic of
18,2
0
10
20
30
40
50
60
70
80
Source: World Tourism Organization
Now, if we look at where this wealth is coming from, that is the
outbound countries, Germany is the world’s leader contributing to
around 10% of the total world’s expenditure, followed by the USA,
United Kingdom, France and Japan. But we can also see China’s
position now as nº 6 outbound country and climbing.
World regions depend mostly
of intra-regional tourism
Inbound tourism by origin, 2004
Europe
89
Asia and the Pacific
10
79
Americas
20
74
Middle East
24
46
Africa
51
40
0%
10%
Same region
20%
46
30%
40%
50%
60%
From other regions
70%
80%
90%
100%
not specified
An interesting observation, when looking at these international
tourism flows, is that in the three most important inbound regions:
Europe, Asia/Pacific and the Americas, that capture over 90% of
the world’s tourism, the arrivals come from the same region, that is
Europeans travelling within Europe, Asians within Asia, etc.
However when in the Middle East and the Africa regions the
international flows are more balanced between intra and
interregional. This is precisely the reason why when we talk about
the potential of the emerging markets, such as China, India, Brasil
or Mexico, we should consider that this is not going to happen
tomorrow and moreover the European destinations might not truly
benefit significantly from this potential, but rather the destinations
located within their own region.
Volatility and Resilience
Growth of International Tourist Arrivals & Tourism Receipts
12
% change over previous year
10
International Tourist Arrivals
International Tourism Receipts (local currencies, constant prices)
8
6
4
2
0
-2
-4
Recovery
81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06
echo of the second oil crisis /
martial law in Poland /
Falklands conflict / conflict IsraelLebanon
Gulf War /
disintegration of
Yugoslavia
11S
Iraq,
SARS
Source: World Tourism Organization
Another important factor to highlight is the volatility and yet
resilience of the tourism industry, as observed in this graph that
shows the evolution of international arrivals and receipts (orange
and red bars respectively) over the last 25 years and the impact of
world events, followed by an almost immediate recovery.
As such, we can see the oil crisis in the early 80’s, the Gulf war
and disintegration of Yugoslavia in the early 90’s and September
11, the Iraq war and SARS in the beginning of the new millennium,
all followed by a period of recovery.
The Travel & Tourism
Competitiveness Report 2007
Furthering the Process of
Economic Development
www.weforum.org
I would also like to make a short reference to the report produced
by the World Economic Forum on “The Competitiveness of Travel
and Tourism”, which is available through the World Economic
Forum website, and considers three basic pillars for the analysis:
regulatory framework; business environment and infrastructure
and human, natural and cultural resources. It is actually the first
time that the WEF carries out such a comprehensive report on
travel & tourism and, although many things need to be improved in
the methodology of this research, it is a first step forward in a
rigorous investigation about the reality of the industry and a
benchmark for the destinations.
• IMF economic growth
projection of 4.9% for 2007
and 2008
• 5th consecutive year of
growth above the long-term
average.
• Developing economies to
continue growth above
average ( 7.5% in 2007 and
7.1% in 2008)
• Slowdown of the US
economy in Q 1 unlikely to
spill over into other regions
• Germany and UK strong
domestic demand
• Activity in emerging Asia
continues to expand, led by
very strong growth in both
China and India
• Increase in interest rates
Growth to be maintained
through 2008
Source: World Tourism Organization
On the economic front, The International Monetary Fund (IMF) is
predicting an economic growth of 4,9% both for 2007 and 2008,
maintaining a steady growth of the last 4 years above 4%. This
means that we will be experiencing the 5th consecutive year of
growth above the long-term average. In emerging markets and
developing economies the growth will be well above average at
7.5% in 2007 and 7.1% in 2008.
The slowdown of the US economy observed in 1st quarter of 2007
is expected to be benign and shortlived and unlikely to spill over
into other regions. The key question is whether continuing
difficulties in the housing market will begin to have a broader
impact on the economy. The general view is that there will be no
major spillovers, as long as employment and income growth
remain strong.
In Western Europe, domestic demand may pick up more strongly
than anticipated, especially in Germany, where the employment
situation has improved and consumption is increasing. In the
United Kingdom, domestic demand may prove stronger than
forecast despite the new recent increase in interest rates as a
result of the continued acceleration in house prices over the past
year.
Activity in emerging Asia continues to expand at a brisk pace, led
by very strong growth in both China and India. In China, real GDP
expanded by 10.7% in 2006 on the strength of solid investment
and export growth, although the pace of fixed asset investment
cooled in the second half of the year in response to monetary
policy tightening.
In India, real GDP growth of 9.2% was supported by the strength
of consumption, investment and exports.
The overall decline in oil prices since August 2006 has provided
welcome relief to the global economy, particularly in terms of
supporting household spending power and alleviating inflationary
concerns. However, a rebound in prices since early 2007, as
geopolitical tensions have risen, has provided a reminder that the
oil market remains an important source of potential volatility.
Another factor that could restrain somewhat households’
discretionary income is the increase in interest rates. The risks of
inflationary pressures during recent years have lead major central
banks to tighten their monetary policy.
2020 International Tourism Projections
International Arrivals: 1,6 billion (X 2)
Receipts: US $ 2 trillion (X 3)
Estimated average growth 1995 - 2020:
4.1% a year
Actual
Forecasts
1.600
1.6 bn
1.400
million
1.200
1.000
800
600
Middle East
1 bn
Africa
Asia/Pacific
842 mn
Americas
Europe
400
200
0
1950
1960
1970
1980
1990
2000
2010
2020
Source: UNWTO
UNWTO is forecasting international travel & tourism arrivals to
almost double in 2020 bringing the current 842 million to 1,6 billion
at a sustainable pace of 4,1% per annum and, what is even more
important, monetary receipts to almost triple from the current 735
billion US $ to 2 trillion us $.
Forecasts by Receiving Region
International Tourist Arrivals, 1995-2020
Base Year
Market share
(%)
Forecasts
1995
2010
565
1006
2020
(Million)
World
1561
Average annual
growth rate (%)
1995
2020
1995-2020
100
100
4.1
20
47
77
3.6
5.0
5.5
Americas
110
190
282
19.3
18.1
3.8
East Asia
and the
Pacific
Europe
81
195
397
14.4
25.4
6.5
Africa
336
527
717
59.8
45.9
3.1
Middle East
14
36
69
2.2
4.4
6.7
South Asia
4
11
19
0.7
1.2
6.2
Source: UNWTO
Not all the world’s region will, obviously grow at the same pace. In
fact Europe and the Americas, which are more mature will grow
below the world’s average, benefiting regions such as Asia, Africa
and the Middle East, that will capture more marketshare.
World’s Top Destinations 2020
Country
1
2
3
4
5
6
7
8
9
10
China
France
United States
Spain
Hong Kong (China)
United Kingdom
Italy
Mexico
Russian Fed.
Czech Rep.
Tourist
arrivals
(Million)
130
106
102
74
57
54
53
49
48
44
Market Average annual
share (%) growth rate (%)
1995-2020
8.3
6.8
6.6
4.7
3.6
3.4
3.4
3.1
3.1
2.7
7.8
2.3
3.5
2.6
7.1
3.4
2.1
3.6
8.5
4.0
Source: UNWTO
China will be the nº 1 world’s destination with more than 130
million international arrivals, followed by France, United States and
Spain.
World’s Top Outbound
Countries 2020
Country
1
2
3
4
5
6
7
8
9
10
Germany
Japan
United States
China
United Kingdom
France
Netherlands
Italy
Canada
Russian Fed.
Total arrivals
generated
worldwide
(Million)
Market
share
(%)
153
142
123
100
95
55
46
35
31
31
9.8
9.1
7.9
6.4
6.1
3.5
2.9
2.3
2.0
2.0
40%
Source: UNWTO
Germany will be first outbound market followed by Japan, the USA
and China, that will climb to nº 4 of the outbound markets, and
together with the UK, will account for 40% of the world’s outbound.
This obviously makes these markets as clear targets for the
destinations to capture more market share.
New trends in Travel & Tourism
Emerging markets
• Still huge potential for growth to exploit
– from current travellers and also from new emerging
middle classes
– sizable populations currently still only take part in
international tourism very limitedly
• Many emerging economies show rapid
economic growth with increasing disposable
incomes, that will be spent on tourism
• In addition to traditional source markets
(Western Europe, USA, Canada, Japan,),
alternative ones (Central and Eastern
Europe, China, India, Korea, Singapore,
Middle East, Mexico, Brazil, etc.)
However there is still a huge potential to exploit, both from current
travellers as well as from new emerging middle classes, as many
emerging economies are showing rapid growth with an increasing
disposable income and a relatively good share of this increase will
be spent in travel and tourism.
As such, growth will also come from other emerging outbound
markets, such as Central and Eastern Europe, India, Korea,
Singapore, Middle East, Mexico and Brazil, but this is not
necessarily going to happen tomorrow and it is not for everybody.
As I mentioned before it will mainly benefit the destinations in
those regions.
Consumer profile and
behaviour
• More mature and experienced travellers
– Increased concern for safety and security
• Access to much more information
– Consumers know what they want and what they can get
• Aging population
– Better health and economic conditions
– Seek new experiences and innovative more sophisticated
products
– Added value and services. Value for money
– Shift in power from producers to consumers
• Increased competition
• More direct distribution
– Need to develop and apply new technologies
In terms of consumer profile and behaviour, we are also seeing
some interesting changes, as we find a more mature experienced
consumer, concerned by safety and security, with access to much
more information and that knows what they want and what they
can get.
An aging population with better health and economic conditions
seeking for new experiences and innovative and more
sophisticated products with more added value, services and new
experiences, that will respond to their needs.
Search for value for money and less loyalty with a shift in power
from producers to consumers (from a “sellers” to a “buyers”
market).
This will imply an increased competition between destinations and
operators in a globalised market and more direct distribution with
application of new technologies. In this respect investment in new
technologies by the tourism sector will be key.
Public-private partnerships
• Close synergy of interests
– Among business; civil society; government
– Private sector, the engine in wealth creation, involved
in telecommunications, education, health, safety, etc.
• Corporate responsibility
– Companies support community development:
environmental protection and enhancement; cultural
and heritage preservation
• Changing Public sector
– Need to reinvent itself
– More strategic approach to its role in society
– Foster trust that creates social capital
In this evolving context, the roles and responsibilities of business,
society and governments have changed dramatically over the last
ten years, as it reads in the report produced by the World Tourism
Organisation in 2002 on “PUBLIC-PRIVATE SECTOR
COOPERATION: Enhancing Tourism Competitiveness”.
There are basically three key areas in this cooperation that I would
like to highlight.
1. Close Synergy of Interests
“We have moved from a world where the state had sole
responsibility for the public good and business maximised profits,
independent of the interests of society at large, to a world where
success depends on the close synergy of interests among
business, (civil) society and government.”
Although private sector remains the engine in wealth creation, it is
increasingly becoming involved in areas once considered public
services – from telecommunications to education, health and
safety.
2. Corporate Responsibility
Today, most companies accept that their long-term investment
goals can only be achieved within stable social and financial
environments. They are therefore supporting a range of activities
in the area of community development, environmental protection
and enhancement, and culture and heritage preservation. While
not their core businesses, the success of these activities is
essential to the success of their overall business.
Society’s role and influence is also expanding. Local communities
have a growing influence on the behaviour of governments,
businesses and individuals. As pointed out by the World Bank,
society is playing an increasingly key role in assessing the
business community’s contribution to community development and
well-being, rewarding community-friendly behaviour and criticising
the opposite.
3. The Changing Public Sector
The public sector, meanwhile, is having to reinvent itself. It is
withdrawing from the production of goods and the provision of
services, and is taking a more strategic approach to its role in
society. Government’s role is increasingly to foster the trust that
creates social capital and mobilises social forces and energy from
all its stakeholders.
Public-private partnerships
• Governments have played a key role in the
developing of tourism
• They need to give more space to the private sector
• Many areas in which P-P sectors can work
– Marketing
– Control and monitoring of regulation
– Quality factors
– Education
– Investment
– Infrastructure
– Research, development and innovation
– Climate change
– Sustainability
– Tourism policy, etc.
Travel and tourism has not been immune to this change in
stakeholders’ roles and responsibilities, which is affecting all
sectors of the economy. Governments have traditionally played a
key role in the development of tourism and in the promotion of their
countries as tourism destinations. Their role is clearly more
important in developing countries, or in countries in which tourism
is in a transition stage – such as Eastern Europe, Central Asia, or
parts of Latin America, Africa and Asia – where its support can be
crucial to kick-starting growth.
In countries at high levels of economic development, the role of the
public sector needs to be different and support tourism industry by
relying more and giving more space to the private sector. It is
generally recognised that, for tourism to develop in a sustainable
manner, an appropriate physical, regulatory, fiscal and social
framework is required – something that can, of course, only be
provided by governments, or public sector local authorities. They
also usually provide the basic physical infrastructure necessary for
tourism – such as roads, airports and communications – and
create the legal framework within which the industry operates.
This helps to explain why few national governments, or central
administrations, have any serious doubts as to the rationale for
their continued involvement in tourism generally. However, there
have been increasing signs of states’ disengagement from tourism
over the last decade – and not just in the most developed
countries. This has resulted in the relinquishing of a number of
their traditional responsibilities and activities in the field of tourism
in favour of both provincial/state and local authorities and, more
especially, the private sector.
There are many areas in which the public and private sectors can
work together and support each other in an efficient way to
achieve a common goal:










Marketing
Control and monitoring of regulation
Quality factors
Education
Investment
Infrastructure
Research, development and innovation
Climate change
Sustainability
Tourism policy
Just to name a few.
Public-private partnerships
• Tourism dpts in government depend on many
other areas, not under their control
– Interior; culture & education, economy, foreign affairs,
health, infrastructure, environment, transportation, etc.
• Too many changes in Ministerial departments do
not allow for continuity and stability
• The private sector brings a closer look to the
reality of the marketplace
It is also important to take into consideration the fact that the
department responsible for tourism in the various governments
does not have full control of every single aspect that affects travel
and tourism and needs the support of many other departments in
the cabinet: interior, education, foreign affairs, health,
infrastructure, environment, economy, etc.
Moreover the ongoing changes in the ministerial departments,
subject to political circumstances do not ensure the necessary
stability, that could be compensated with a closer connection with
the private sector, that generally speaking is more stable and
experiences less changes in the individuals involved.
It is quite obvious that we have a great horizon ahead of us but we
should not only rely on good luck, and hoping that things will turn
out to be the right way, but rather in a proper planning and strategy
to transform the ongoing challenges that we are facing in true
opportunities.