The presentation, which was a partial update of a report initially published by WTO in 1996, analyses the promotional and advertising budgets of a number of countries around the world. It should be noted that the WTO ranking produced as a result of its research excludes certain countries for which adequate data was not forthcoming. Nevertheless, the information makes interesting reading.
 
 

In 1997, according to the WTO, the Singapore Tourism Board had the biggest promotional budget of all NTAs and NTOs worldwide - US$99 million, or 84.7 percent higher than in 1995. The U.K. followed in second place in the ranking ahead of Spain, Thailand and Australia. Thailand's US$66.6 million promotional budget was 30.1 percent up on 1995's level, while Australia's reportedly represented a 25.8 percent decrease on the same year.

As far as advertising budgets were concerned, Australia and Thailand enjoyed much greater funding than most other countries surveyed by WTO. Advertising and promotional activities account for the highest shares of NTA/NTO promotional budgets, although advertising is less important in countries where there is a strong tour operator base that dominates demand.

The public sector still accounts for the major share of funding of NTA/NTO promotional budgets. However, given the current economic climate - and notably, the difficulties facing countries in the Pacific Asia region it is not surprising that governments are looking more and more to the private sector to share the burden. Local currency depreciations have made it almost impossible to undertake any meaningful promotional and marketing campaigns in leading source countries, let alone cover administrative costs.

The impact of all this will become much clearer once 1998 budget details are available, and there are clearly mixed views on the relative roles of the public and private sectors - as shown by our "Guest Column" this month.

Fortunately, few governments in the region have taken things to the extreme that the U.S. has. The adjournment for a further 12 months of a decision by the U.S. Congress on funding of the U.S. National Tourism Organization (USNTO) leaves the U.S. the only country in the developed world without a government-funded NTO and bodes badly for the country's future tourism growth.

Markets

The share of long-haul travel by the Dutch has grown from around six to seven percent of total foreign holiday trip volume in 1992 to 42 percent, or an annual total of some 1.3 million trips. North America accounts for more than one-fifth of these. The Pacific Asia region generated some 500,000 Dutch long-haul trips in 1997. After Indonesia - whose share has fluctuated widely over the past few years - the most popular destinations in the region are India, Thailand and Malaysia.

In its latest Pacific Asia edition of Trends and Forecasts for the Business Travel Industry, American Express predicts the following:

• In local currencies, business class fares will increase five percent in the fourth quarter of 1998 (compared with the fourth quarter of 1997), with first class fares up 4.5 percent and economy fares up four percent. In 1999, first and business class fares will increase three to four percent and economy fares will rise three per cent.
• Average daily hotel rates will decline six to 10 percent in 1998 in local currencies, but will rebound with increases of between six to eight percent in 1999.
• Average meal costs in local currencies will increase eight percent in 1998 and six percent in 1999.

The growth of travel and tourism in China is forecast to be explosive, according to a new report from the World Travel & Tourism Council (WTTC). More than 5.5 million jobs will be created directly in China's travel and tourism industry over the next 12 years, as well as a further 16 million jobs in related sectors of the economy. Demand for travel and tourism should grow at an annual rate of nine per-cent in real terms.

• Good news for Asia - relatively speaking, at least, Australia's proposed general sales tax (GST), which is scheduled to be introduced in July 2000, would apply to domestic, but not international airline tickets. (This is due to the convention between members of the International Civil Aviation Organization exempting international air travel from such taxation.) So outbound travel is likely to be boosted at the expense of domestic travel.
• Overseas tourist arrivals were down one percent to the U.S. in the first six months of 1998. As expected, Asia's economic situation was the main contributing factor to the shortfall, with the region registering a decline of nearly 13 percent. Despite a six percent decline, Japan maintained its position as leading overseas market in terms of arrivals, with 2.4 million. In contrast, West European markets grew by four percent.

Horwath Asia Pacific forecasts that Yangon, Penang, Kuala Lumpur, Langkawi and Seoul will suffer thc biggest declines in average room rates over the full 12 months of 1998. In some cases, these will be down 40 percent from 1997 levels. Singapore's rates should suffer the least. However, the best RevPar  (revenue per available room) will be achieved by Tokyo, Hong Kong, Sydney; Manila and Taipei.
 

• Ritz-Carlton employees are empowered to spend up to US$5,000 per client to resolve crises and iron out other problems. Corporate policy maintains that this is negligible compared with the US$1 million potential lifetime value of a customer to the group.

• After adding its Days Inns' name to ten hotels in China, Cendant Hotels - the world's biggest franchiser of hotel brands - is now planning to establish the second of its brands, Howard Johnson, in the country. It has also signed an agreement to open five new Wingate Inns, its most upmarket brand, in the Philippines.

• Radisson Hotels has bought the controlling interest in DC International, which operates 18 Radisson hotels and resorts in Australia, Indonesia and Malaysia. DCI was an independent licensee, franchising the Radisson brand in the Pacific Asia region. The agreement also adds 10 countries where DCI can exclusively  operate  Radisson  hotels - Brunei, Cambodia, Indonesia, Myanmar, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

• Club Mediterranee has launched a FFr100 million (US$18 million) advertising campaign to freshen up its image and win new customers. Research has shown that the level of brand loyalty among its exist-ing customers is high, but that it needs to appeal to a wider clientele, particularly younger people and families. The budget for the campaign, which compares with a total advertising spend of FFr65 million in 1997, is seen as a key part of the group's strategy to return to solid profitability.

A survey by the U.S. travel trade journal Travel Weekly points to a US$126 billion sales volume for U.S. travel agencies in 1997 - up 25 percent on 1995's level. As many as 75 percent of U.S. travel agencies made a profit in 1997, and close to 90 percent said they expect to do so again this year However, more than 50 percent said they have not made up revenue lost by the airlines' imposition of commission caps.
 

• Kuoni Travel is targeting an annual turnover of Rs500 million (US$11.7 million) in its first year of operation in India and breakeven by the second year. Its newly established, fully-owned subsidiary; Happi Holidays, will offer two very different types of prod-ucts: deluxe package tours worldwide for upmarket Indian tourists and a new "holiday abroad now and pay later" product for the emerging middle-class for-eign travel market.

• The number of  IATA accredited travel agencies in Pacific Asia increased by 6.7 percent in 1997 to 8,240. Cargo sales locations were up 7.7 percent to 1,222. There was a 22 percent increase in agency locations reporting through IATA's Billing & Settlement Plan (BSP) and a 2.3 percent rise in participating airlines. However, largely as a result of the economic down-turn in Asia, net BSP sales volume fell to US$29.3 billion from US$32.6 billion in 1996 - a decline of 10.2 percent.

The markets most negatively affected were Thailand, where BSP sales dropped 46 percent over the year, and Malaysia (down 32.5 percent). There were also declines of more than 13 percent for Australia, New Zealand, Japan and South Korea. By contrast - and perhaps surprisingly, in the case of Hong Kong - both Hong Kong and Chinese Taipei registered BSP net sales increases, of 6.2 percent and 8.4 percent respectively.

Commentary
Governments Should Re-Examine Their Roles in Tourism Promotion 
 
By Stephen & Halsey Chairman of the PATA Foundation

Over the past couple of decades, it has been fashionable to urge national tourism organisations (NTOs) to get out of the business of promotion and turn it over - if only partially - to the tourism industry's private sector There are many examples of successful partnerships. However, they have almost always operated until now in a climate of tourism growth.

The current decline in tourist arrivals and revenues will put heavy pressure on the private members of these partnerships. Just at the time when spending needs to be increased, money will be less available. Airlines, retailers, hotels-all are suffering a dra-matic drop in income. Will they be willing to donate an ever-increasing percentage of their income to promotional activities?

Many governments have failed to under-stand the huge investment they have in their tourism sectors. This is reflected by the lack of weight vested by governments in the tourism portfolio. Finance and development ministers rarely appreciate the significance of tourism - whether to employment, to tax revenues, to development, or even to the conservation of cultural identity. This phenomenon is usually attributed to the fragmented nature of the industry and to the fact that it is a relatively young one. I would prefer to think that it is because the disparate elements of the industry have preferred to act alone, rather than admit the symbiotic relationships that exist. Perhaps the current difficulties will bring these elements together, if only to share the misery.

If the assumption that the private sector will draw back from funding responsibilities is correct, then how will destinations assemble the war chests for promotional spending to fight for their share of world travellers? Who will pay for the advertising campaigns which will get the masses moving again?

It is my long - held opinion that the best engine to deal with this kind of emergency is a well -funded NTO. By all means, the private sector should fight for a voice in the spending decisions. But the required funds, however large, should not become an added burden to tax-paying companies struggling to stay alive. Governments should be willing to appropriate what is necessary for the health of their tourism industry.

Several NTOs are funded, wholly or partially, from hotel room and departure taxes, and by visa fees. Experience has sadly shown that, once the size of these taxes are recognised by the local authority, appetites are whetted, the taxes are raised (after all, tourists are not voters), and the money collected transferred to the government treasury!

All of this is wrong thinking and it is up to the industry to set the record straight. In the absence of government understanding of the importance of the industry, the private sector needs to put as much pressure as possible to see that beefed-up spending on promotion is budgeted. It will be interesting to see how the U.S. fares under the present pressures. Having relinquished its responsibilities - for the worst possible reasons - and with no assurances that others are ready to pick up the slack, it may well see tourism revenues dwindle.

Other countries which have recently transferred responsibility for tourism promotions to a public - private partnership may wish to reconsider that decision before it is too late - before there is a shortfall in promotional funds as the country loses out in the race to sustain or rebuild its tourist volumes and earnings.