ArnieCommenting on the economy last week, President Bush said the nation was in "very difficult times, very difficult." He avoided the word "recession," but the term was conspicuous in its absence.

Yet just a week earlier at the World Travel and Tourism Council summit in Dubai, I interviewed the CEOs of some of the largest travel companies in the world, and the tone was not nearly so grave. Challenges were identified, concern was expressed about the state of the airlines, but there was remarkably little discussion about the fallout from plunging levels of consumer confidence in the U.S. or our country's credit crisis.

What's going on here? Was Prozac mixed into Dubai's drinking water? Are these people in denial?

Or is there an alternative economic reality for the travel industry? 

As a group and as individuals, WTTC members are not shy about tackling the pressing issues of the moment: terrorism, the Iraq war, SARS, bird flu and carbon emissions have all been topics of discussion and debate in the past few years. But barely a word was said about the economy during the two-day program, with the exception of concern about the rising price of oil. And even this took a back seat -- way back -- to sustainability and "green" issues during both formal and informal discussions.

In conversations with Bill Marriott, CEO of Marriott International, and Marriott's CFO, Arne Sorensen, I asked specifically what worried them about the current economic downturn. Marriott replied: "The price of oil is a huge challenge. The airlines are cutting back on service and the number of flights and will have to raise their prices. We continue to be very concerned about the health of the airline industry."

But Sorensen also noted that Marriott expected "to see 3% to 5% growth in the U.S." in 2008. "That's down," he said, but added, "We don't see any reason for it to get worse. Every market outside the U.S. is meaningfully better than in the U.S., but foreign arrivals [to the U.S.] were up double digits in first quarter."

Expedia CEO Dara Khosrowshahi also focused on the "extraordinarily difficult time for airlines." From his industry perch, which enables him to see global travel patterns, he said he was observing what has become a two-year downturn of U.S. travelers booking trips on Expedia to Europe. But he said that Mexico and the Caribbean were picking up strength and that European volume into the U.S. was strong.

Companies based outside the U.S. were upbeat, some to the point of exuberance. Gerald Lawless, CEO of Jumeirah Group, the hotel company owned by the government of Dubai (it owns Essex House in New York), said he expected to see bookings rise from 2007 levels, a year he described as an "unbelievable performance." He also said that he had seen no slowdown in interest in investing in Jumeirah's expansion plans; he has been "inundated" with people wanting to invest, and investors who began discussions last year have not backed down on commitments.

Gilles Pelisson, CEO of the French lodging giant Accor, said, "So far, we haven't seen slowing in the business, except just a stagnation of Motel 6 in the U.S. We were expecting a stronger recession, to be frank."

Perhaps most revealing was a conversation I had with Daniela Wagner, who told me that she would be taking over World Waterways from Group IST and transforming it into a booking site for non-mainstream boat and ship products (some 25,000 riverboats, yachts, barges and expedition ships worldwide).

"We were very fortunate to complete our [$9 million] funding when we did," she acknowledged. "We went to market in October [2006] and completed in February." Going forward, Wagner said her U.S. partners had expressed some concern about the economy, but that her European and Asian partners were "quite buoyant." She firmly disagreed with my speculation that her launch timing was inauspicious.

Is travel recession-resistant? I would suggest that it may have become so. For the 18 years from 1988 to 2006, domestic travel and tourism expenditures grew from $465 billion to just over $1 trillion, for a compound annual growth rate of 4.4%. That rate is expected to rise to 5.1% for the years 2007 to 2010, by which time expenditures are expected to exceed $1.2 trillion.

Looking at those growth numbers more carefully, one sees that there were only two instances of decline, one in 1991 and another that bridged 2001-2002.

In those two instances, it took the combination of recession and war to bring the numbers down. The maximum annual decline was 2.7%, and each pullback was relatively short-lived and followed by periods of rapid growth.

The strengthening of the trend toward corporate globalization that has occurred over the last two decades has certainly contributed to travel's strength. Though Marriott is a U.S.-based company, it is also a global company that has hedged its risks by operating properties around the world and in multiple currencies.

On the other hand the airline industry, which is saddled with regulations prohibiting carriers from becoming global companies, is suffering not only from rising fuel costs but from regulatory constraints that have prevented them from avoiding the risk of primary dependency on one currency and one economic system.

I think there's yet another factor that keeps U.S. economic woes from dominating the mind-share of executives of both established and nascent travel companies: memories of the immediate post-9/11 environment.

After that catastrophic attack, there was a general sense that "everything changed that day" and that, for the travel industry, fundamentals that had guided the industry from its creation had shifted.

There was a belief that the booking window had been forever shortened, that travelers would become accustomed to booking very late, looking for the best deals. There was a belief that the corporate five-year plan had become a thing of the past and that it would be hard to forecast beyond a coming quarter.

There was worry that a significant percentage of travelers would not get on airplanes again. There was fear that concerns about being stuck far from home would have a permanent impact on business travel.

As it turns out, the industry, even then, was still operating under the same underlying rules as always: the laws of supply and demand. It was just experiencing a severe, but temporary, drop in demand.

Looking at security in airports today, it's easy to see where the travel industry has been affected, perhaps permanently, by the events of 9/11. But one can also see the direct effects of the post-9/11 era in the rise of family and intergenerational travel and the surge of pent-up demand that has yet to abate after the slowdown that occurred immediately following 2001.

Perhaps the most germane of the 9/11 effects is that it has given all of us in the industry a new perspective. Having been tested by fire, a cyclical economic downturn is taken with equanimity. The weak will certainly feel its effects deeply, but the strong and experienced will gird themselves for a softening period, with confidence that no matter how rough things get, growth awaits at the other end.

E-mail Arnie Weissmann at [email protected].

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