As always, the world’s tourism outbound travel market is in a fine balancing act.  In Europe and the US, fragile consumer confidence is marred by economic uncertainty as residents watch frantic efforts by politicians to create stability in the midst of crisis.  But in the Asia Pacific, outbound tourism is flourishing – even Japan is seeing a modest uptick in outbound travel.    In Canada, Canadians are still travelling, but will that hold up with the recent drop in the value of the Loonie?

NORTH AMERICAN MARKET WATCH

US Travel: The US Travel Price Index (cost of travel away from home) increased 7.8%, July 2011 over July 2010.  Motor fuel prices increased another 1.5% from June but jumped 33.6% from last year.  Lodging prices were up 4.8% compared to July last year, and were up 3.7% from last month.  Airfares increased 7.6% against July 2010 but were unchanged from the previous month.  The price of gas is the top factor influencing travel decisions.  Despite all of that, USTA’s Traveler Sentiment Index, although still down 11.5% compared to March 2007, shows some recovery in July, rising 5.5% since April.¹

US Economy: Troubling news on this front – the recession, which was expected to be much improved by now, is showing that a fundamental ‘slowdown’ is underway in the US.  Growth slowed sharply in Q1 and Q2 of the year – Q1 growth estimates are .4%, Q2’s are 1.3%.  Consumer spending was flat in Q2. The Consumer Price Index decreased 2.0 % in June, but was up by 3.6% in June 2011, over June 2010.  The Thompson Reuters/Univ. of Michigan’s Consumer Spending Index is at its lowest level in 2 years.  Upper-income confidence is also shaky – Unity Marketing’s Luxury Consumption Index fell sharply at the end of July.²

Canadian Travel: Canadians continue to travel internationally in increasing numbers; in June, Canadians returning to Canada increased by 5.5% overall; specifically Canadians returning from the US increased by 6.0%; from the rest of the world, 4.3%.³ Tourism spending in Canada edged up 0.1% in real terms in the first quarter of 2011, as increased outlays by Canadians at home offset lower tourism spending by non-residents in Canada.  This was the seventh consecutive increase in tourism spending in Canada, for a cumulative gain of 6.5% since the second quarter of 2009. The largest spending category was air transport, followed by accommodation and F&B. ⁴

Canada’s Economy: Against the backdrop of the stressed US economy, output in the Canadian economy fell slightly in May (0.3%).  Consumer spending continues to be sluggish.  Unemployment stands at 7.2%.  Private sector employment is gaining, led by construction, manufacturing, transportation and finance.⁵ The Canadian Index of Consumer Confidence dropped for a third straight month in July, falling 1.8 points (to 81.3), reflecting on-going uncertainty about future job prospects.⁶ The Canadian dollar is in its longest losing streak since June amidst global concerns around the stalled US economy and Europe’s debt crisis.⁷ As of August 20, it stood at $1.01 US.

EUROPEAN MARKET WATCH

Europe overall: A quote from Jose Manuel Barroso, President of the European Commission, on the issue of euro area sovereign bond markets in an August letter to other euro-zone colleagues: “Developments in the…bond markets of Italy, Spain and other euro area Member States are a cause of great concern.”⁸ European Union officials may push for joint bond sales to help contain the region’s sovereign-debt crisis. Consumer confidence in Europe weakened for the 3rd month in July, and the recent economic woes of the region dampens the outlook for private consumption.  However, some countries are affected more than others⁹ – read on…

Germany: Retail sales volume jumped 6.3% in June to lead the recovery in the EU.  Inflation was steady at an annual rate of 2.4% in June and the unemployment rate eased to 6.1% in June compared with 7.1% a year earlier.

United Kingdom: Despite the fact that visits abroad by UK residents increased by 5% in Q2 over Q1 (seasonally adjusted), and were up by 1.0% in June 2011 over June 2010, the sustained depression in UK outbound travel is taking a toll, exemplified by the recent (August) failure of Turkey-specialist Holidays for U – a firm that has been in operation since 1994 – in the height of the tourism season.¹⁰

France: After a dramatic week that saw French banks pummeled on stock exchanges, the government continues to insist that the country will reach its official target of 2.0% growth.¹¹ French consumers reined in spending in the second quarter as unemployment hovered around 9.7%, while prices inched up in June after being flat for three months.¹²

ASIA PACIFIC MARKET WATCH

The Pacific Asia Travel Association (PATA) reports a 5.0% increase (year over year) in visitor arrivals to Asia Pacific destinations year to date (Jan-May) – 4.0% in May alone.  Leading regions are South Asia (15%) and Southeast Asia (12%).¹³

Japan: Japanese outbound departures, which saw major decreases of between 8.1 to 9.1% in March through to April, have begun to pick up in July for the first time since the tsunami, increasing 4.5%.  They have a long way to go yet to regain the 7.9% increase that was registered in February.¹⁴

China: In the first half of 2011, 32 million Chinese traveled abroad and spent 28 billion USD – a rise of 17% over the previous year.  1.33 billion Chinese traveled within China.¹⁵ The Chinese Consumer Confidence Index rose by 8.2 points and the Consumer Expectation Index by 11.4 points over this time period.  Total retail sales in China grew 16.8% in January-July vs. the same period last year.¹⁶ Leaders from the luxury travel sector, meeting in Asia in June, agreed that China’s economic growth has generated “a burgeoning class of wealthy individuals who are increasingly sophisticated and educated and appear to be following the Western trend of ‘spending for experiences’”.¹⁷

The rapid growth of Chinese travellers is prompting changes in hotel practices: Starwood Hotels and Resorts and Hilton Hotels are among the chains that have introduced special services aimed at the Chinese traveller, like stocking rooms with slippers and tea kettles, providing Chinese meals and literature in Chinese languages – hoping for increased brand awareness.¹⁸

Australia: According to a new report from Contiki Travel, 97% of young Australians feel that food is the most important element of travel.  Art, fashion and music were also important – locally designed t-shirts gives great “street-cred”.¹⁹ Outbound travel from Australia increased by 5.9% in June 2011 over June 2010.  Top destinations for Aussie’s were Thailand, the US, and Singapore.  Increased interest in the US has been fueled by the strong Aussie dollar, but this may change as in recent weeks the dollar has decreased in value due to global economic instability and currently stands at $1.04 US.

New Zealand: In the year ended at July 2011, trips abroad by New Zealand residents increased by 5.6% over the previous year.  The top travel destinations were Australia, Fiji, UK and the USA with the USA seeing the greatest growth (9.1%).²⁰

WORD OF MOUTH

“We support tourism as an area of major importance in our agenda to fight poverty.”

A statement by Mozambique’s President, Armando Guebuza, after joining the UNWTO/WTTC Global Leaders for Tourism Campaign at the end of June.  The country’s Government Plan identifies tourism as a strategic sector in the socio-economic development of the country. ²¹

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FOOTNOTES

1. Dr. Suzanne Cook, U.S. Travel Outlook, U.S. Travel Association, August 2011 [↩]
2. Dr. Suzanne Cook, U.S. Travel Outlook, U.S. Travel Association, August 2011 [↩]
3. Statistics Canada, International Travel: Advance Information, June 2011 [↩]
4. Statistics Canada: National Tourism Indicators, First Quarter 2011 [↩]
5. Statistics Canada, Canadian Economic Observer, Section 1: Current Economic Conditions, August 2011 [↩]
6. Canadian Conference Board, Document Highlights from the Index of Consumer Confidence, July 2011 [↩]
7. John Detrixhe, “Canada Dollar Falls on European Debt Crisis, Slower U.S. Economic Growth”, Bloomberg,  Aug 19, 2011 [↩]
8. Letter from President Barroso to the Heads of State or Government of the Euro area, August, 2011 [↩]
9. David song, “European Consumer Confidence Deteriorates Further”, Daily FX, July 20, 2011 [↩]
10. Ian Taylor Analysis: Outbound is up on 2010, but 2008 is the key comparison, Travel Weekly, August 16, 2011 [↩]
11. Rory Mulholland, “Zero growth, debt crisis pile pressure on France”, AFP, August 11, 2011 [↩]
12. Statistics Canada, Canadian Economic Observer, Section 1: Current Economic Conditions, August 2011 [↩]
13. PATA, “South Asia and Southeast Asia Leading Asia Pacific’s Tourism Boom”, Press Release, August 3, 2011 [↩]
14. Japan National Tourism Organization, “2011 Visitors & Japanese Departures”, accessed from the JNTO website, August 22, 2011 [↩]
15. CIFIT Online (quoting the Chinese Tourism Academy), “Tourism Market Growth Forecasted to Exceed Expectations”, July 7, 2011 [↩]
16. National Bureau of Statistics of China, Indexes accessed August 22, 2011 [↩]
17. “ILTM leaders explore luxury development in Asia and Chinese travellers”, Breaking Travel News, August 10, 2011 [↩]
18. Lauren Covello, “In China, a New Hotel Every Two Weeks”, Fox Business News, August 11, 2011 [↩]
19. “Young Aussie travellers make food first stop: Contiki report”, Travel Blackboard, 11 August 2011 [↩]
20. New Zealand Ministry of Economic Development, Key Tourism Statistics, August 22, 2011 [↩]
21. World Travel & Tourism Council, “Tourism A Poverty Reduction Tool Says President Guebuza of Mozambique – Joins UNWTO/WTTC Global Campaign”, Press Release July 8, 2011 [↩]