North American tourism facing weakened future?

How is tourism doing these days? Perhaps slipping and sliding. And it’s expected to get worse this fall when airlines cut flight schedules.

That is evident in the hotel industry where occupancy dropped to under 67% for the first five months of the year, down a percentage point from the year before, according to Smith Travel Research.

Hotels nationwide may find rates dropping by two percentage points this year, but prices should remain solid, hotel industry expert Ted Mandigo told The Chicago Tribune.

But that could be optimistic.

“This is the bow wave, and the rest of the wave will wash over,” said airline industry analyst Robert Mann, president of R.W. Mann & Co. in Port Washington, N.Y. “Most of the effects won’t be felt until after the big schedule cuts this fall.”
Leisure destinations such as Las Vegas and Orlando are expected to be most impacted, as airlines cut service more deeply to destinations that draw tourists seeking cheap flights.

Convention-related hotel bookings, which dipped in 2007, are expected to edge upward this year and next, though not quite as high as the banner year 2006, the Chicago Convention and Tourism Bureau reported.

But even in the convention segment, there is evidence of belt-tightening.

Not everyone agrees. Deloitte says in its 2008 Industry Outlook:

“Tourism, hospitality and leisure (THL) businesses should experience generally smooth sailing in 2008, as the strong growth driven by both business and leisure travelers in 2006 and 2007 is expected to continue generating healthy consumer spending on hotels and motels, transportation, meals and beverages, gaming and other travel-related purchases during the coming year,”

Overall, the World Tourism Organization predicts a moderate impact on the travel and tourism industry as a result of the global economic downturn, with its annual growth rate experiencing a slowdown in 2008, to 3%, in comparison to 3.9% in 2007.

Said World Travel & Tourism President Jean-Claude Baumgarten:

“Challenges come from the US slowdown and the weak dollar, higher fuel costs and concerns about climate change. However, the continued strong expansion in emerging countries – both as tourism destinations and as an increasing source of international visitors – means that the industry’s prospects remain bright into the medium term.”

The overall impact of this slowdown for mature markets is expected to be offset by the strength of the emerging markets, according to John Walker, chairman of Oxford Economics. He said:

“In particular, China, India and other emerging markets are still growing rapidly, which will increase both business and leisure travel, while many countries in the Middle East are undertaking massive tourism-related investment programs.”

Even in countries where economic growth slows, there is likely to be a switch from international to domestic travel rather than a contraction in demand.

Among the 176 countries covered in research by Tourism Satellite Accounting, the US continues to maintain pole position as the largest travel and tourism economy, with its total demand accounting for more than US$1,747 billion this year.

Report by David Wilkening