San Francisco, March  1998

Global tourism grew by 3.8 percent in 1997 in terms of international arrivals worldwide as compared with 5.5 percent in 1996-and by only three percent in terms of tourism receipts (7.8 percent), according to preliminary estimates compiled by the World Tourism Organization (WTO).

The slowdown was almost entirely attributed to the financial crisis in Asia, together with other crises which plagued the region in the second half of 1997. This resulted in a sharp drop in growth rates for East Asia Pacific last year-to one percent for international arrivals and 1.1 percent for receipts, from 9.7 percent and 10.4 percent respectively in 1996.

South Asia performed much better, with arrivals growing by 5.1 percent as against 3.1 percent in 1996, and receipts up 6.5 percent (11.5 percent).
 

Africa, the Middle Fast and the Caribbean were the world's fastest growing tourism regions last year. Among the individual countries showing the biggest gains were South Africa, Morocco, Sri Lanka, Turkey, Jordan, Egypt, Greece, France and Spain.

Three Pacific Asia countries (WTO defined) again featured among the world's top tourism destinations. China was in sixth place, up from twelfth in 1990, Hong Kong (it is still treated as a separate country for WTO statistical purposes) was sixteenth-as against nineteenth-in 1990, but down from fifteenth the previous year-and Thailand held on to its twentieth place in the ranking, despite a modest one percent rise in arrivals. China's arrivals growth was estimated at 4.4 percent, while Hong Kong arrivals fell by just under 10 percent.

As far as international tourism receipts were concerned, the WTO estimates show five destinations from the region among the world's top tourism earners for 1996. These were, in order of importance China, Hong Kong, Australia, Thailand and Singapore. Of the five, receipts for Thailand and Singapore stagnated, while China's and Australia's grew by an estimated 18.4 percent and 2.3 percent respectively Hong Kong's receipts registered an 11 percent decline.

There were no changes in WTO's ranking of the world's top five tourism earners (ranked according to earnings in U.S. dollars) - the U.S., Italy, Spain, France and the U.K.- although the depreciation of the French franc against the dollar caused it to drop from third to fourth place. As far as arrivals were concerned, France was the overall winner once again, ahead of the U.S., Spain, Italy and the U.K.

Markets

Is the honeymoon over? Japanese newlyweds are becoming more cautious in their travel decisions. According to a survey by Japan Travel Bureau, they spent less on overseas honeymoons last year than in 1996-US$ 4,727 (at US$ 1 to Y121), or US$ 591 a day for an eight-day stay, down almost one percent. Of their favourite destinations, Australia seems to have lost favour, with the U.S. mainland the big winner, followed closely by Hawaii.
 

Source: Japan Travel Bureau; Converted at US$ 1 to Y 121

� German tour operators had another year of positive growth in 1996/97 (year ended October 31, 1997). The leading 57 operators, who represent around 70 percent of the total market, achieved a turnover of DM 23.7 billion, up 6.9 percent, and client sales of 22.0 million, up 5.5 percent. These averages mask big fluctuations in performance from one operator to another but in general, the leaders gained share at the expense of smaller players. Long-haul sales were up only 2.4 percent on 1995/96 and, while details are currently unavailable, there appears to have been a decline to Pacific Asia

� French tour operator Asia is cutting prices for this summer.  Excluding air fares, Indonesia will be down eight percent for hotel rates and 20 percent for land packages, Thailand 20-25 percent, Malaysia 20 percent, Singapore and Australia 10 percent. As for Hong Kong, cuts could be as high as 25 percent, although the local currency is still pegged to the U.S. dollar.

� The results of a study conducted by San Francisco based ResearchWorks International suggest that Russian outbound travel will continue to grow rapidly over the next few years, despite the fact that only 10-12 percent of the population is considered "high income." Nearly 90 percent of Russian travellers are in their forties or younger, providing a young and affluent target market. Pacific Asia is the second favourite destination region after Europe, which attracts nearly 75 percent of all foreign trips.

Aviation

Will Boeing need to rethink its product range? If new B737 models were to use the latest technology, then the commonality link with existing B737s - an important incentive in the sales process - would be lost, and airlines would have a more open choice between Airbus and Boeing. Presently, an airline operating B737s for the last, say, 10 years, would have a strong incentive to buy Boeing.

Boeing was able to introduce new technology (such as fly-by-wire, two-man cockpit) with the B747 because it has no direct competitor for the aircraft, as well as less of a need to have commonality with smaller Boeing aircraft. But the B747 could soon face competition from the proposed Airbus A3XX. If that happens, it seems likely that it would reintroduce B747 derivatives. A stretched B747, for instance, could keep some customers from switching to an A3XX.

� Meanwhile, Airbus, the European aircraft consortium, says it is pressing ahead with studies for its planned A3XX 550-seater plane, despite turmoil in Asia where it expects the bulk of orders. It has been talking to some 20 airlines to set the A3XX's technical design by the end of 1998 or early 1999. Airbus estimates the development cost of the A3XX at US$ 8 billion, although industry analysts put the figure higher. Arch rival Boeing does not believe there is a big enough market to justify such a plane.

� There has been a move away from government ownership of airlines in recent years. Both Japan Air Lines and Qantas Airways are now completely privatised and many others - such as Malaysia Airlines, Thai Airways, and even China Eastern and China Southern in China - have sold some of their shares to the public.

� Pacific Asia registered a 7.5 percent increase in IATA passenger sales agency outlets in 1997, to 8,019.
Cargo sales locations were up 7.3 percent to 1,176. Billing & Settlement Plan (BSP) sales in the region for
1996 totalled US$ 32.58 billion.

� SAirGroup Chief Executive Mr. Philippe Bruggisser says that he expects the crisis in Asia to push down passenger traffic. The drop in tourism within Asia is also hurting the group's duty-free business. However, it plans to save money by moving some operations to the region where costs have fallen sharply; Mr. Bruggisser says it could move its entire information technology operation to Asia, for example.

� British Airways is the latest European airline to launch a low-cost carrier, to be named "Go." It has been facing competition on some short-haul routes from two low-cost airlines - Ryan Air, which sells through travel agencies, and Easy Jet, which sells direct to the traveller, without paying agency commissions. Will the slowdown in Asia bring about a rethinking of some airline operations along these lines?

Hotels

One result of the recent hotel group takeovers is that there will have to be some serious reworking of product alignments which is likely to lead to enhanced marketing skills. One example is Marriott's takeover of the New World group. Although this procedure began in late 1996 / early 1997, there is still adjustment to take place one year later

New World includes the New World brand, Ramada (outside the U.S.) and Renaissance. Clearly; there is some similarity with some of the Marriott brands - Courtyard with Ramada, and Marriott itself with Renaissance and even with some New World hotels.

Marriott is still working on a strategy for mid - market hotels - in which it has Courtyard and Ramada brands (there are no longer Ramada Inns, but there is a limited service Ramada Garni brand in Germany). But Renaissance and New World will be maintained - requiring some clever niche or geographic marketing tactics.

� While the industry is agonising over the business implications of the Internet, it may be ahead of some of its clients. Holiday Hospitality, for one, says that travel policies for many of its multinational accounts still do not allow for the refund of expenses incurred through bookings by Internet.

� U.S. hotel industry profits will rise by about 16 percent to US$ 16.6 billion in 1998, up from US$ 14.3 billion in 1997, according to Coopers & Lybrand LLP's Lodging Research Network. The report says that higher profits will be achieved despite its prediction that U.S. hotel occupancy will drop to 63.6 percent this year from 64.5 percent in 1997. The drop will be offset by the relatively steady demand for hotel rooms, combined with growth in average daily room rates.