Vacation Blues as Tourists Stay at Home

On a typical weekend afternoon, Beijing’s Silk Street Market buzzes with the sound of tens of thousands of tourists haggling over antiques, jewelry and knock-off Gucci handbags. Rickshaw drivers normally scoop up these marketgoers, pedal them to their hotels and return with pockets full of foreign currency — a lucrative cycle drivers can repeat dozens of times a day. In recent months, though, the Silk Street Market’s once reliable bustle has thinned dramatically. “I haven’t seen a single tour bus pulling into the market this morning,” says Lao Qian, a 49-year-old rickshaw driver taking a long lunch break. “And I’ve had a total of three customers since yesterday.”

From China to the Caribbean, Thailand to Tanzania, workers in the travel industry can relate to Qian’s frustration. Whether it’s check-in staff at airports, hotel porters, taxi drivers or restaurateurs, millions of people who rely on tourism for their living are feeling the icy chill of the worldwide recession. Between 2004 and 2007, global tourism boomed, with an average growth of 3.6% a year. But as consumers tightened purse strings and canceled vacations in the second half of 2008, tourism’s contribution to the world economy grew by just 1%, the industry’s worst performance since the bursting of the high-tech bubble, the outbreak of SARS in Asia, and the terrorist attacks on 9/11 hit international travel earlier this decade. “The last months have been increasingly challenging,” says Jean-Claude Baumgarten, president of the World Travel and Tourism Council (WTTC), an organization of travel executives, “and we clearly haven’t seen the end of it yet.”

That’s an understatement. During the first three months of this year, China, which in 2004 overtook Italy to become the world’s fourth most visited country, saw the number of international visitors drop by more than 7%, and its foreign-tourism revenue shrink by more than 15%. In Spain, year-on-year arrivals dropped by 16% in February — the country’s sharpest decline in years. And in the tropical islands of the Caribbean and South Pacific, it’s a case of surf, sand and empty beach chairs. In February, French Polynesia reported a 30% drop in year-on-year arrivals — tourist numbers are now at levels last seen in 1996 — while the number of tourists cruising between the islands of Bermuda, Antigua and Barbuda in 2008 sank by almost a fifth. The WTTC estimates the travel industry will contract by 3.5% this year and shed 10 million jobs by the end of 2010.

You might think the last thing we should be worrying about right now is taking a vacation. Who can afford it? Aren’t we all meant to be saving and paying off mortgages? But that’s to underestimate the size of the global tourism industry and its potential to energize the world economy. By most accounts tourism is one of the world’s biggest industries, accounting for 7.6% of the world’s workers (220 million jobs) and generating a staggering 9.4% of global income ($5.5 trillion). “If you look at its linkages with other sectors, you see how deeply it cuts into the economy,” says Geoffrey Lipman, Assistant Secretary General of the United Nations World Tourism Organization (UNWTO). “Construction jobs, manufacturing jobs, restaurant jobs — they can all flow out of tourism.”

Industry officials now want governments to start looking at the sector not just as a symbol of the frothy good times — but as a way to get economies back on track. “What are governments trying to do in a recession? They’re trying to create jobs,” Lipman says. “They say, ‘Let’s bail out the car manufacturers, let’s do something about the banks,’ and they forget about the major opportunity they have with the travel sector.”

A few governments are already moving. In March, Madrid pledged $1.3 billion to modernize Spain’s tourism infrastructure in a bid to fight off competition from sunshine destinations like Turkey and Egypt, which have become more competitive as the euro has appreciated. In Spain’s Canary Islands, where tourism represents upwards of 60% of the local economy, the municipal tourism board recently began a series of seminars to help tourism workers cast off their perceived grumpiness; course materials advise cabbies to “ensure your taxis smell nice and don’t drive too fast” and remind hotel staff that, “a smile costs nothing and is the most effective welcome.”

Italy has taken a more traditional route by boosting advertising. In April, the national tourism board launched a $13 million initiative called “Italia Much More” that seeks to lure tourists from the U.S., Canada and Europe with television commercials replete with dramatic opera music and sweeping aerial shots of Italy’s landscapes. “The crisis is tangible for everyone and Italy will suffer,” says Matteo Marzotto, the head of the National Tourism Board. “We’re in the middle of a war.”

That may sound dramatic but consider this: in 2008, Italy’s tourism revenues fell by 5%, the first drop in seven years. The slump has already translated into a loss of $5.2 billion and at least 150,000 jobs.

With so many people cutting back on vacations, airlines are also suffering. The International Air Transport Association estimates passenger traffic will contract by 5.7% this year, leaving airlines with losses of $4.7 billion. Carriers such as Cathay Pacific and Qantas have been cutting services, which in turn hurts hotels and restaurants in places such as Sydney, Mumbai and London, to which Cathay Pacific will cut 17 round-trip flights in May alone.

Bargain Time
The battle for the shrinking pool of tourists, naturally, is good news for anyone still vacationing. To shore up the Southeast Asian market, Cambodia, Malaysia, Thailand and Vietnam have cut visa fees and worked with airlines, hotels and tourist sites to slash prices. Caribbean operators say deep price cuts have been essential to keep the region in people’s minds during the turmoil. Some Caribbean resorts have cut prices in half, while Elite Island Resorts — the second-largest independent hospitality group in the region — will even accept guests’ depressed stocks as payment; the firm values stocks at their closing price at the end of last October (way above what most stocks are worth now) and says it will sell them when the markets eventually go up again. “We’re hoping that these deals will never have to see the light of day again,” says Hugh Riley, Secretary-General of the Caribbean Tourism Organization, the body representing the travel interests of 32 nations in the region. “It’s unusual for the Caribbean to have to offer these kinds of deals. Nobody makes a profit when that happens.”

Once prohibitively expensive, places such as South Korea and Iceland have been transformed into bargain getaways. The weakening of South Korea’s won helped the country attract 7% more tourists last year — a faster rise than any other Asian destination — and so far this year 50% more Japanese tourists have arrived. In Iceland, where the krona has fallen by 40% against the euro and 65% against the dollar since its three major banks collapsed last October, the nation is betting on increased arrivals: this summer IcelandAir will open up new routes to nine cities in Europe and North America. And Visit Britain, the official U.K. tourism body, is running a $2.6 million ad campaign urging foreigners to “see more of Britain for less;” in December, the sterling fell to a record-low against the euro. “The pound isn’t going to be this weak forever,” says spokeswoman Hayley Senior. “It’s about taking control of the moment and trying to get as many people in as possible.”

Boosting tourism, however, isn’t merely about attracting foreign visitors: governments are also courting their own citizens. In China, local authorities have distributed domestic-travel coupons nationwide. In Wuhan, a city along the Yangtze River in central China, $146,000 worth of coupons were snatched up within 10 minutes at a promotional event, and the city has pledged more vouchers totalling $73 million. In Britain, it’s estimated that 5 million more citizens will choose a “staycation” in the British Isles this year, rather than venturing to the pricey eurozone.

The sense of urgency is most pronounced in the developing world, where a job in tourism can mean the difference between poverty and prosperity. In Kenya, a single employee at a hotel or restaurant supports four other people with their salary, according to Gerson Misumi, managing director of Tamarind Management, a restaurant and resort firm in Kenya and South Africa. “There’s a chain of services that depend on our industry.” Lipman of the UNWTO agrees. “Tourism is a good development agent because poor countries don’t have to manufacture it,” he says. Developing nations already have their product — nature, culture, tradition — and all that’s required to profit is a bit of investment in infrastructure and Internet marketing. “The market comes to these countries, then wanders around depositing foreign-exchange income wherever it’s directed, including poor rural areas,” Lipman says. That’s a handsome return on investment for any country, developing or otherwise.