World Overview by Joseph Scott, Editor

By 2003, what global economic - and tourism - recovery had been underway seemed to stall beneath the specter of war in Iraq. The mild recovery that had begun toward the end of 2002 flattened out, particularly with disappointing economic indicators in the United States, such as higher unemployment levels and trade deficits. By the fourth quarter 2002, the US GDP growth rate had ground down to 0.7 percent.
      By early 2003, United Airlines had filed for Chapter 11 bankruptcy protection from its creditors and was working with its unions for ongoing concessions in an effort to reorganize. Word on the Street had it that all the major US carriers had hired bankruptcy attorneys and advisors.
      The global economy and worldwide tourism had begun to recover in the fourth (and in many cases, in the third) quarter of 2002, and yet the economy and the industry both seemed to be poised for another contraction in early 2003. It seemed like 2001 all over again. Was tourism most adversely affected by terrorism or a slowing economy in 2001? Was tourism most adversely affected by a sluggish economy or by the threat of war in Iraq in 2003?
      The concept of cause and effect suggests that the war, or even threat of war, will have a deleterious impact on world economies, which will in turn hamper the recovery of tourism to 2000 levels (exceptions such as Caribbean and Alaska cruising notwithstanding). War and the threat of war, terrorism and the threat of terrorism, however, have a two-fisted impact on tourism in that they not only slow down economic growth, but they also frighten potential travelers into staying at - or close to - home.
      Beyond the economic impact of this fear factor is the social effect of people all over the world hunkering down rather than traveling and interacting, getting to know one another, sharing viewpoints, developing mutual respect, building friendships. The social impact of not traveling is isolation. Isolation on a personal scale is debilitating. Isolation on a social scale is dangerous. Isolation is a goal of terrorism: Keep those infidels off my sacred land.
      Hence, a downturn in tourism in the near term is troubling, but a downturn in tourism in the long term is frightening. According to august international bodies such as the International Monetary Fund and the World Tourism Organization, it is not likely that worldwide tourism is in any long-term danger. But then there are voices - such as an airline executive saying that commercial aviation's principal competitor has become the automobile and RV purchasers saying they'll never fly again - that need to be listened to.
      In 1970, I met with a group of astute young Palestinian refugees in southern Lebanon who told me that one day America would be fighting a war in the Middle East over oil. "Never!" I said. In 1972, I met a young African student in Johannesburg who told me that there would soon be free elections for all in South Africa. "I doubt that," I said. In 1969, as I was dodging automatic weapons fire on the veranda of a hotel in downtown Saigon, if somebody had told me that I'd be back someday paying hard cash for the privilege of staying in that same hotel, I can't write what I would have said.
      All to say that we need to listen to the guy buying the RV, as well as the guy controlling billions of dollars worth of economic integration. We need to listen to the guy with the $50-million airplanes who feels threatened by an automobile, as well as the folks who crunch all the numbers that are beamed in by satellite.
      That said - and despite war and the threat of war, terrorism and the threat of terrorism - the International Monetary Fund in early 2003 reported that the global economy is poised for growth, to be led vigorously by Asian economies. Worldwide GDP growth for 2003 was pegged at 3.7 percent, with individual country growth in Asia to range as high as 6 percent.
      While IMF directors were concerned about the possibility of turmoil leading to exorbitantly high oil prices, Saudi Arabian oil officials pledged to increase production as necessary, compensating for any interruption in Iraqi output, as they had during the strikes in Venezuela in January 2003.
      If the prognostications of WTO, the Travel Industry Association of America (TIA), the Office of Travel and Tourism Industries (OTTI) and others pan out, low-priced oil will be needed to help fuel what they anticipate to be a tourism recovery in 2003 and 2004.
      WTO points to a resurgence in 2002, when for the first time, the number of international tourist arrivals broke the 700 million mark, registering close to 715 million, 22 million more than 2001 and 19 million more than 2000. (One-way al Qaeda travel from Afghanistan to Cuba is not included in these figures.)
      A regional breakdown of preliminary WTO figures for 2002 reveals some surprises, including the first significant growth in recent years in international tourist arrivals to the UK, up more than 3 percent; average growth in Central and Eastern Europe of 3.9 percent, despite disturbing downturns in the Czech Republic and Poland, both faltering by more than -5 percent. Croatia, Bulgaria and Turkey, meanwhile, enjoyed significant increases. There was a very surprising 8.5-percent increase in arrivals to Sub-Saharan Africa and an 11-percent increase in arrivals to the Middle East. Not surprising was the fact that Europe once again led the world in international tourist arrivals with 411 million in 2002, up 2.4 percent. This represents fully 58 percent of all arrivals worldwide.
      The year 2002 was an odd one. Arrivals to South America declined by -7 percent after a -1.9-percent drop in 2001, while arrivals in Central America increased by 10 percent. Arrivals in Canada dropped from a 7-percent growth rate in 2001 to 0.4 percent in 2002, and this modest growth likely was fueled to a great degree by Americans reluctant to vacation overseas. While Americans made their holidays closer to home, a lot fewer folks from overseas joined them, as North America's market share of global international tourist arrivals declined to 12 percent from 14.6 percent in 1995, according to WTO.
      While IMF looks to Asia as the future hotbed of economic growth, WTO gazes east, as well, in anticipation of significant tourism growth. Asia and the Pacific received 130 million tourist arrivals in 2002. This represented growth rates of 12 percent for Northeast Asia, slightly less than 4 percent for Southeast Asia, 2 percent for South Asia and 1 percent for Oceania.
      Anticipated growth occurred in China, Hong Kong and renaissance Macao, and surprising rates of growth were experienced by Iran and the Maldives. India, with its own threats of war, suffered a -6.6-percent decline in international arrivals in 2002.
      Terrorists also had their effect on tourism in 2002 in Indonesia with the monstrous car bomb attack in October that killed nearly 200 holidaymakers in blissful Bali; in April with the attack on a synagogue on Djerba, Tunisia, killing 21 people, and the December bombing of a resort near Mombasa that caters to vacationing Israelis.
      These events, coupled with the stagnant global economy and a general concern about traveling, led the United Nations International Labor Organization to predict that worldwide tourism recovery would not occur until 2005. The organization reported that 6.6 million tourism employees worldwide had lost their jobs in 2001-02, literally one out of every 12 workers.
      The typically negative UN organization, however, was contradicted by such research organizations as Smith Travel Research and Deloitte & Touche. Both Smith, analyzing the domestic US hotel industry, and Deloitte, the international industry, announced early in 2003 that recovery was on the horizon.
      Both forecasts assumed relative economic and political stability. Smith predicted modest improvement in occupancy rates and room rates for US hotels in 2003, based on increasing demand and low supply. Deloitte & Touche used the noncommittal phrase "cautiously optimistic" to describe the international industry's outlook in 2003.
      Based on 2002 performances, international forecasters had more reasons to be cautiously optimistic than did US domestic analysts. US hotel revPAR (revenue per available room) dropped by -2.5 percent in 2002, while the hotel industry in other destinations enjoyed varying growth rates. In the Asia Pacific region, revPAR grew by 3.8 percent in 2002, while in Europe it increased by 3.4 percent.
      Perhaps the only thing that can accurately be predicted about the state of the tourism industry in 2003 is its absolute unpredictability. The tenuousness of the industry is, perhaps, most poignantly symbolized by the signs that hang on the front doors and windows of motels and hotels all along Interstate 95, the highway that links the Northeast US with Florida. The signs are hand-scrawled, attesting to their spontaneity, and the message they carry is a sign of the times. They read: "Thank you for traveling."

Industry Sectors

Travel Agents and Tour Operators        The economic situation for traditional full-service travel agencies has been going from bad to worse since 1995, when major airlines started to cut agency commissions. They continued to do so incrementally ever since, until finally, in early 2002 - faced with their own financial crisis as a result of the recession and the September 11, 2001, terror attacks - the major US airlines eliminated standard agency commissions altogether. Meanwhile, the Internet has continued to eat into agents' customer base, as airline Websites and giant online travel sites attract more business every year with low fares and easy-to-use self-booking software. Food Service        Recession, terrorism and/or war - people still have to eat, and the American consumer continues to show a disinclination to cook at home.        The National Restaurant Association estimated that total industry sales for 2002 would reach $407.8 billion, a growth of 3.9 percent over 2001. Adjusted for inflation, the "real" increase in sales for 2002 would be 1.4 percent, the NRA said. That compares with recession-plagued 2001's real increase of 0.8 percent over 2000 - an indication of a significant recovery for the industry in 2002 even if the health of the economy remains questionable in many respects. The industry's total take for 2001 was $392.5 billion, somewhat less than the $399 billion the association had been projecting. Hotels/Motels        Unlike the troubled airline industry, the hotel industry continued to make money in 2001 and 2002 - but not as much as it did in 2000. Except for the third quarter of 2001, analysts mostly attributed the lodging business's declining occupancies and revenues to the ongoing recession and cutbacks in business travel.        According to Smith Travel Research, the US lodging industry took in $16.1 billion in pretax profits during 2001, a precipitous 33-percent decline from the $24 billion it earned in 2000. Overall hotel occupancy for 2001 was 60.2 percent, Smith's researchers said, compared with 63.7 percent in 2000. The firm estimated that revenue per available room (revpar), a key measure of industry performance, fell by seven percent in 2001. Transportation        The psychological impact of the September 2001 terrorist attacks combined with the slumping economy has had a negative effect on all forms of transportation in the US.        The Travel Industry Association of America documented this trend in its late summer 2002 summary of travel industry performance indicators. For the first eight months of 2002, TIA said, domestic air travel (revenue passenger miles) was down -8.5 percent, international air travel fell -11.9 percent, rail travel on Amtrak was off -1.1 percent, and auto travel nationwide had declined -6.7 percent compared with the same period in 2001. Rail        Although it received a boost in ridership and revenues after September 11, 2001, when many travelers started looking for alternatives to air travel, the gains did little to resolve Amtrak's long-standing financial problems. The fortunes of America's national rail company just keep going from bad to worse, as its debts pile up faster than its revenues increase. Cruise Lines        Despite an initial drop-off in business immediately after September 11, 2001, the cruise industry was one of the few fortunate segments of the travel industry to experience a fairly substantial rebound and return to growth in 2002. Car Rentals        The fate of the car rental industry is closely tied to that of the airline industry and to trends in business travel, and like those businesses, it has been hurting. Since 2001, the car rental business has been characterized by shrinking capacity, bankruptcies and consolidation. Airlines        Commentary on the airline industry during 2002 was full of superlatives - but they were all the negative kind. The Economist said the airlines were "flying blind," and facing "their biggest-ever crisis." Boeing CEO Phil Condit said the airlines were in "the worst decline the aviation industry has ever seen." Web Travel        Although most of the travel industry was struggling well into 2002 to get back on a growth track after the shattering events of September 11, 2001, one segment of the business was quick to recover: Online travel.        Various Internet business trackers all report that the surging growth in consumers' use of the Web for researching and buying travel services dipped only slightly in the fourth quarter of 2001 before resuming its rapid rise in 2002. [BACK TO TOP]

Geographic Regions

United States         While pockets throughout the domestic and international tourism sectors were reporting positive signs of recovery after the heinous events of September 11, 2001, a reluctance to travel hangover and the soft global economy continued to drag down industry performance throughout 2002. This situation was borne out by research and analysis that continued to be reported nearly to year's end 2002.        The Travel Industry Association of America's performance indicators showed a drop in domestic air revenue passenger miles of -8.5 percent for January through August 2002, compared to the same 2001 period, as commercial aviation employed 10.6 fewer workers than the previous year.        The nationwide hotel occupancy rate declined by -3.0 percent to 66.9 percent, as the demand for lodging dropped by -1.2 percent, and employment in the industry fell by -5.2 percent. Receipts declined by -4.6 percent. Canada         Canada is the second largest country in the world with a population of 30.6 million people. Although the national population density is about 5 per square mile, 90 percent of the population lives within 200 miles of the United States border. With Canada's aging population and plummeting birth rate (1.49 children on average), the government reports that it must rely on increased immigration. Today's per-capita immigration rate is twice that of the US and about 17 percent of the population is foreign born. In fact, immigration is encouraged and frequently eased for those willing to settle in Canada's less populated areas.        The economic recovery in Canada has been reported in The New York Times as forging ahead of the US. "The Economist," 2002 ranks Canada as ninth in the world's economy, 12th in purchasing power, and 7th in tourism arrivals. Canadians are ranked 9th in tourism spending and 9th in tourism receipts. Caribbean        In 2002, the Caribbean launched its first regional television advertising campaign to motivate potential travelers to choose an island vacation. The $16-million blitz, "Life Needs the Caribbean," was funded by Caribbean governments and the Caribbean Hotel Association. Hoping to sustain an ongoing advertising campaign, tourism ministers considered funding it with a tax on tourists who book trips to the Caribbean, hardly an incentive.        The Caribbean realized a healthy increase in international tourist arrivals in 2000, with 17,334,000 visitors, compared to 16,129,000 in 1999, according to the World Tourism Organization (WTO). Capital investment in travel and tourism in the Caribbean in 2000 was approximately $7 billion or 21 percent of total investment in the region. About 35 million people live in the Caribbean. (By comparison, Canada has a population of 28.5 million.) In 1999, tourism accounted for $19 billion in gross revenues in the region. Latin America        With varying degrees of success, the 21 countries of Latin America, a huge and diverse region stretching from the Rio Grande to Tierra del Fuego, tested the tricky waters of political and economic change in the 1990s. Elected presidents replaced military dictators, and economic reform began as governments started unwinding the old interventionist, protectionist policies and introducing new plans for balanced budgets, privatization and trade liberalization.        How are these concepts and practices faring in the new millennium in Latin America? Not particularly well by the end of 2002, for national economies - almost all tied closely to trade with the US - have slowed in tandem with the American economy, and in some countries, the downturn has been dramatic and drastic: financial meltdown in Argentina for one, free fall in the Brazilian currency for another. Many Latin governments have high hopes that sensible economic reform - that comes with high interest rates, high budget surpluses and debt payments made on schedule - if carried through, will be the best hope for eventual sustained prosperity. Yet other Latin voices reject the 1990s policies of free trade and privatization as the correct prescriptions to cure the region's chronic economic woes. Western Europe        Despite double-digit declines in visitor statistics in the Americas, South Asia and the Middle East, travel to Europe declined by only -0.6 in 2001, according to the World Tourism Organization. It was the first annual decline since 1982, when tourism was slowed by the effects of such events as the Falklands war, the Israel-Lebanon conflict and an oil crisis.        So there was significant reason for optimism that Europe would rebound to positive statistics by the end of 2002. Hence, it was disappointing when German Porras, President of the European Travel Commission (ETC) reported at the World Travel Market IPK Forum in November 2002 that preliminary figures for the year indicated a further small decline in inbound European tourism of -0.2 to -0.3 percent. Central and Eastern Europe        The biggest news in Central and Eastern Europe in 2002 was generated by voters in Ireland, when in October, they approved the European enlargement plan, setting the stage for the addition of 10 new member countries.        The Irish constitution required the vote, which reversed a June 2001 referendum rejecting expansion. All but two - Malta and Cyprus - of the potential new members are Central and Eastern nations that were once Soviet states: Estonia, Latvia, Lithuania, Hungary, the Czech Republic, Poland, Slovenia and Slovakia. Bulgaria and Romania are working toward inclusion in 2007. Middle East        As has happened so often in the past couple of thousand years, the Middle East is engulfed in uncertainty. Yet in this part of the world, one thing remains certain: it is a tremendous travel destination, whose myriad cultural monuments left over from its historical role as the cradle of civilization, varied and exotic scenery and intoxicating mix of people are a delight.        Fold in such other ingredients as excellent beaches and a sunny climate, and we should have a recipe for a tourism bonanza. Yet the Middle East's share of world tourist arrivals is small - under 5 percent , with 24 million arrivals in 2001 and international receipts amounting to $12 billion - and most certainly held back by ongoing political instability. The day this is resolved, one can expect major increases in tourism. The Pacific        The Pacific region has some of the most diverse and attractive destinations in the world. Hawaii, Australia, New Zealand, Fiji, French Polynesia and Guam all offer different and unique experiences, though all are primarily tropical destinations.        The area's diversity was dramatically underscored by the widely varying impact the events of 2001 had on the Pacific's tourism industries and in the ways they were affected by the economic downturn - and how they responded to it. According to the World Tourism Organization, Australia's 10.9-pecent tourism growth in 2000 plummeted to a negative -2.6 percent in 2001, while New Zealand's robust 11.3-percent growth rate in 2000 dipped to a still-healthy 6.8 percent in 2001. Fiji, recovering from internal strife that had devastated its tourism business to the point of a -28.3-percent decline in 2000, realized an increase of 18.4 percent in 2001. French Polynesia and Guam registered declines of nearly -10 percent in 2001, while a decline that had begun in Papua New Guinea in 2000 was stemmed somewhat. South Asia        The tourism trade had some serious obstacles to overcome in 2001-2002. Understatement? Of course. War, threats of war, terrorism, brinkmanship, and the existence of a couple of nuclear arsenals - not the things of which happy holidays are made. South Asia is a region in transition, however slow that transition may be moving. In Kashmir, change grinds to a halt with each new act of terrorism. In Afghanistan, change came with the swift authority of a smart bomb. Now is the slow part. In Pakistan, the government roots out terrorists in concert with the international cause led by the United States, while it is blamed by neighboring India for fostering and encouraging the same international criminals.        With all this going on, the visitor cancellations didn't start coming in until it appeared that India and Pakistan might, in fact, be at the very brink of war in summer 2002. Two nations that have historically defied reason facing off with nuclear arsenals. Visitors to India tend to be a bit adventurous, but even this was too much for the least timid among them, and the calls started coming in. The situation cooled. Could tourism have helped to avert a nuclear war? What a terrific possibility to ponder. East Asia        For a region that has been enjoying moderate economic growth for the past few years, since rebounding from the crisis of 1997, 2001 did not play out as anticipated. In the face of an uncertain US economy and a sharp drop-off in technology exports following the deflation of the Internet balloon, experts all over the area scrambled back to their calculators to revise what had proven to be overly positive growth predictions. Their results were staggeringly low, with major players such as Japan, Hong Kong, Thailand and Taiwan all forecasting economic growth between 1 percent and 4 percent for 2002.        Still, while some reports warned of another potential crisis, other experts thought fears were exaggerated. While conceding that industrialized nations such as Singapore, South Korea, Hong Kong and Taiwan would be hard hit by the sudden loss of tech exports, many believe that more established powerhouses like China and Japan would be able to weather the storm with relatively little loss. China, in fact, attracted foreign investors and businesses throughout 2001, leading up to its ascension to the World Trade Organization in November. With a record number of mergers and acquisitions within the country as businesses prepared for the competition of a much more open market, China's financial headlines this year were positive - at least more positive than those of its suffering neighbors. Africa        Perhaps the big news out of Africa this year was the formation of the African Union, "perhaps" being the operative word. Although it replaces the 30-year-old Organization of African Unity - and has exacted pledges from member states to renounce corruption, conflict and oppressively dictatorial regimes in favor of democracy and respect for human rights - the AU is still a group in which democratically elected heads of state sit beside autocrats of long-standing. Nonetheless, the AU has granted itself the power to step in to stop genocidal conflicts and other gross violations of human rights. Its members are pledged to hold open elections. Patterned on the model of the European Union, the AU is expected to be governed by a parliament of member states, create a central bank and field a standing army. However with a significant number of members chronically delinquent when it comes to dues-paying, it appears old ways die hard. Stay tuned. [BACK TO TOP]