Shocks and Hurricanes: From Credit Crunch to the Olympics

1. Shocks and Hurricanes: From Credit Crunch to the Olympics What are the economic prospects for tourism 2008 onwards? Professor J John Lennon E jjle@gcal.ac.uk

2. Moffat Centre • Initial Endowment by the Moffat Charitable Trust (UK Travel Industry) in 1998 • Largest UK and EU University Centre of Travel and Tourism Business Development • Commercial Research and Business Development

3. Moffat Centre Mission • Developing company competitiveness • Providing targeted research and data supply • Promoting destination competitiveness • Funding scholarships for travel & tourism students

4. Moffat Scholarships • Profit distributed to students in the form of scholarships • Almost £700,000 worth of funding for students wishing to study travel and tourism awarded to date • More detail see www.moffatcentre.com

5. Where are we… 8th February 2007 2nd January 2008 19th January 2008

6. UK economy…

7. Stagflation?

8. Exchange Rate favours Euro inbound • Euro value has strengthened since Summer 2007 due to inflationary pressure holding interest rates.. • Impact greatest in London • US Dollar begins to rally. • Sterling position dependent on MPC tackling Inflation or growing economy.

9. Energy Price pressures continue • Remote rural and highland areas have seen significant reduction in visitation recent months. • The price in UK of unleaded fuel and diesel has reduced propensity to travel • Urban tourism will be impacted on by reduction in economy air connections • Some evidence of coastal revival (South West and South East England)

10. Food Price affecting input costs • Food Price Inflation is impacting on discretionary spending • Impact is greater on lower income families, less so higher income families • Discretionary spending sectors, such as hotels, pubs, catering and retail are also exposed: • At the top end of the quality scale, demand impact should be minimal, and increased costs can be, at least partially, passed on to consumers. • In the lower end of the market, however, input price pressures will be met with resistance from a clientele who will suffer more than most from more generally increased food price inflation. Pressure expected in fast food, casual dining and restaurant sector.

11. UK Outbound Trends • UK outbound visits stayed static over 2007 with spend increasing. • Rest of world saw visits increase 8%. Europe saw 1% increase. North America (particularly cities) saw increased demand from UK and EU • Sterling weakened against Euro and most other world currencies • Mirrors domestic tourism trends

12. UK Inbound Trends • Overseas visits to UK stayed static over 2007 with spend increasing. • European Visitors increased 2%, North America declined 6% and Rest of World stayed the same. • The cost of a tourist visa to Britain has risen from $72 to $126, which, will understandably lead to a drop in the number of applications compared to the value of a Schengen Treaty visa

13. European Prospects • Inflationary pressures present in EU as elsewhere. • Strong Euro impacting on Exports but good for outbound travel. • EU Growth forecast for 2008 reduced from 2% to 1.8% • Consumer confidence declining however • Scandinavian countries seem less pessimistic

14. US Prospects • Rising unemployment and declining property values are eroding consumer confidence • Perception is the economic downturn is expected to be medium term and recovery is anticipated to be weak and slow • Slower job growth, increased savings, constraints on credit availability, and widespread declines in home values will restrain spending growth well into 2009-2010

15. UK Prospects • Consumer Confidence is falling. • However consumers remain positive about employment conditions • A reluctance to invest in major purchases exists (houses/cars) but only a minor decline in white goods household purchases is present. • Consumer Confidence drop related to rising food and fuel prices • Slowing housing market also impacting on consumer outlook

16. Conclusion • 2008 a tough year for Tourism • Collapse of housing market • Tighter consumer spending in UK • Regional markets unlikely to change • Summer holiday remains an essential purchase • Employment situation evidencing impacts • Slowdown currently affecting financial sector, construction, housing

17. Conclusions • 10 Airlines collapse in 9 months • Ryanair profits -47% • Plan to open Trans Atlantic Carrier in 12-18 months • On line marketing expenditure increasing in Travel • For many TA TO online marketing is marketing

18. Conclusions • Cruise Line Contraction • Ocean Village Scrapped • Cancellation of Carnival Sailings from Dover for Summer 2009 • Business Travel Costs will soar – reduction in conference, meeting, corporate travel

19. Conclusion • 2008 Data –London showing positive growth in EU inbound • Short Haul Outbound - Guaranteed Sun locations : Canaries, Spain, Italy, France • England (South/ South West) –reasonable summer bookings • Scottish English Travel Industry recording good outbound traffic June, July, August

20. Given the bleak economic outlook what can we anticipate for Tourism development in the future

21. Context • Some thoughts about the futures • Shell Global Scenarios • 2008-2010 • Forecasts for world tourism in 2030 • Winners and losers • The tourist of the future • Experiences and trends • Supply side issues

22. Changing Worlds Trust & Security

24. Mega Drivers – Creation of Tourism Economies Climate Prosperity and affordability Globalisation & competition Accessibility Events

25. Perceptions of luxury Anxiety society, health and safety The experience economy and authenticity Time pressures Longevity Consumer drivers shaping tourism Technology Environment Individualism Image and brand

26. The Tourist

27. The Sports Tourist Doing extreme sports, by gender, age and social grade Proportion who do extreme sports, e.g. rock climbing, white water rafting etc at least once a year “Which of these best describes how often you do extreme sports (e.g. rock climbing, white water rafting, hand-gliding)?"

28. The Religious Tourist Religious Attendance in the UK Millions Forecast Source: Christian Research/The Future Foundation

29. The Authentic Tourist • Ethical • Natural • Honest • Simple • Beautiful • Rooted • Human

30. The Food Tourist The success of McDonald’s

31. The Affluent Traveller and Space Tourism Millionaire Enthusiasts Passionate

32. The Cultural Capital and attraction of Festivals and Events

33. Retail and Tourism: Shopping in Dubai

34. Eco Touristish Correlation between levels of ‘ethical purchasing’ and wealth in Europe, by country

35. Tribes v Families

36. The Pet Tourist

37. Sub Sectors of Demand • Health Tourist • Food Tourist • Natural Heritage Tourist • Active • Aged - Aged / Active • Females • Child Centred • Grand Tours • Family

38. A complex and Dynamic Marketplace • Hard to forecast • Clear evidence of growth and contraction • Consolidation and reduction in supply • Centrality of leisure / holidays but nature of activity changes

39. Luxury trends help us understand this complex marketplace • The idea of small, boutique, unique accommodation offers catering to the luxury market is not bourn out by supply changes • The idea of searching for the unspoiled, isolated and escape destinations have in the past characterised our stereotype of luxury • The rejection of over-development and congestion appeared to epitomise expenditure in luxury markets

40. Contra-indications in Supply • There would appear to be growing evidence for the contrary in recent supply shifts • This is best characterised by Dubai – the capital of superlatives in tourism • One of the world’s most prominent destinations • It has been developed and continues to grow on an epic scale

41. Dubai • Indoor ski runs in the desert • Theme Park development 2 x as large as Florida Disneyworld • 100s of man made islands • 6 Runway airport

42. Does Dubai work ? • 2007 6 m visitors • 2010 15 m visitors • Luxury v Mass Luxury • Everything is a luxury nowadays… • Issues of authenticity and sustainability

43. Dubai • In 10 years has become a watchword for quality and service in the international tourism industry • Aims to attract 15 m tourists by 2010 • Airport deals with 25m visitors

44. Atlantis, Dubai • £750 m to develop • Located on the entrance to the Palm • Bridge Suite £18,000 per night • Largest number of inbound visitors are from the UK

45. Imitation • Many locations aspire to recreate the Dubai phenomena through the creation of mega-resorts catering for high spenders

46. Imitation • IRAN: Flower of the East, 17 m Euro development Kish Island

47. Category Killer • CHINA: Hainan Island ‘China’s Hawaii • 18 Golf course (10 more planned) • 50 Hotels (15 more planned) • $200m 7 star hotel (2011) • Major market – China domestic

48. Island Paradise • CAMBODIA • 99 year leases for sale on 61 islands • 5 islands sold for $627m

49. Wilderness Appeal • MOROCCO • Coast – 6 resorts being developed • 160,000 beds • High Atlas Mountains – Ski Resort • 3,800 beds, 300 retail units, 25,000 sq mts. of conference facilities

50. Is the demand sustainable • Commercially ? • Global Tourism worth $6.5 trillion per annum • Annual Growth 4.2% per annum over years 2007-2017 • Environmentally – certainly not.