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Shocks and Hurricanes: From Credit Crunch to the Olympics What are the economic prospects for tourism 2008 onwards? Professor J John Lennon E Moffat Centre Initial Endowment by the Moffat Charitable Trust (UK Travel Industry) in 1998

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shocks and hurricanes from credit crunch to the olympics

Shocks and Hurricanes: From Credit Crunch to the Olympics

What are the economic prospects for tourism 2008 onwards?

Professor J John Lennon


moffat centre
Moffat Centre
  • Initial Endowment by the Moffat Charitable Trust (UK Travel Industry) in 1998
  • Largest UK and EU University Centre of Travel and Tourism Business Development
  • Commercial Research and Business Development
moffat centre mission
Moffat Centre Mission
  • Developing company competitiveness
  • Providing targeted research and data supply
  • Promoting destination competitiveness
  • Funding scholarships for travel & tourism students
moffat scholarships
Moffat Scholarships
  • Profit distributed to students in the form of scholarships
  • Almost £700,000 worth of funding for students wishing to study travel and tourism awarded to date
  • More detail see
where are we
Where are we…

8th February 2007

2nd January 2008

19th January 2008

exchange rate favours euro inbound
Exchange Rate favours Euro inbound
  • Euro value has strengthened since Summer 2007 due to inflationary pressure holding interest rates..
  • Impact greatest in London
  • US Dollar begins to rally.
  • Sterling position dependent on MPC tackling Inflation or growing economy.
energy price pressures continue
Energy Price pressures continue
  • Remote rural and highland areas have seen significant reduction in visitation recent months.
  • The price in UK of unleaded fuel and diesel has reduced propensity to travel
  • Urban tourism will be impacted on by reduction in economy air connections
  • Some evidence of coastal revival (South West and South East England)
food price affecting input costs
Food Price affecting input costs
  • Food Price Inflation is impacting on discretionary spending
  • Impact is greater on lower income families, less so higher income families
  • Discretionary spending sectors, such as hotels, pubs, catering and retail are also exposed:
    • At the top end of the quality scale, demand impact should be minimal, and increased costs can be, at least partially, passed on to consumers.
    • In the lower end of the market, however, input price pressures will be met with resistance from a clientele who will suffer more than most from more generally increased food price inflation. Pressure expected in fast food, casual dining and restaurant sector.
uk outbound trends
UK Outbound Trends
  • UK outbound visits stayed static over 2007 with spend increasing.
  • Rest of world saw visits increase 8%. Europe saw 1% increase. North America (particularly cities) saw increased demand from UK and EU
  • Sterling weakened against Euro and most other world currencies
  • Mirrors domestic tourism trends
uk inbound trends
UK Inbound Trends
  • Overseas visits to UK stayed static over 2007 with spend increasing.
  • European Visitors increased 2%, North America declined 6% and Rest of World stayed the same.
  • The cost of a tourist visa to Britain has risen from $72 to $126, which, will understandably lead to a drop in the number of applications compared to the value of a Schengen Treaty visa
european prospects
European Prospects
  • Inflationary pressures present in EU as elsewhere.
  • Strong Euro impacting on Exports but good for outbound travel.
  • EU Growth forecast for 2008 reduced from 2% to 1.8%
  • Consumer confidence declining however
  • Scandinavian countries seem less pessimistic
us prospects
US Prospects
  • Rising unemployment and declining property values are eroding consumer confidence
  • Perception is the economic downturn is expected to be medium term and recovery is anticipated to be weak and slow
  • Slower job growth, increased savings, constraints on credit availability, and widespread declines in home values will restrain spending growth well into 2009-2010
uk prospects
UK Prospects
  • Consumer Confidence is falling.
  • However consumers remain positive about employment conditions
  • A reluctance to invest in major purchases exists (houses/cars) but only a minor decline in white goods household purchases is present.
  • Consumer Confidence drop related to rising food and fuel prices
  • Slowing housing market also impacting on consumer outlook
  • 2008 a tough year for Tourism
  • Collapse of housing market
  • Tighter consumer spending in UK
  • Regional markets unlikely to change
  • Summer holiday remains an essential purchase
  • Employment situation evidencing impacts
  • Slowdown currently affecting financial sector, construction, housing
  • 10 Airlines collapse in 9 months
  • Ryanair profits -47%
  • Plan to open Trans Atlantic Carrier in 12-18 months
  • On line marketing expenditure increasing in Travel
  • For many TA TO online marketing is marketing
  • Cruise Line Contraction
  • Ocean Village Scrapped
  • Cancellation of Carnival Sailings from Dover for Summer 2009
  • Business Travel Costs will soar – reduction in conference, meeting, corporate travel
  • 2008 Data –London showing positive growth in EU inbound
  • Short Haul Outbound - Guaranteed Sun locations : Canaries, Spain, Italy, France
  • England (South/ South West) –reasonable summer bookings
  • Scottish English Travel Industry recording good outbound traffic June, July, August
  • Some thoughts about the futures
    • Shell Global Scenarios
    • 2008-2010
  • Forecasts for world tourism in 2030
    • Winners and losers
  • The tourist of the future
    • Experiences and trends
    • Supply side issues
changing worlds
Changing Worlds

Trust &


mega drivers creation of tourism economies
Mega Drivers – Creation of Tourism Economies


Prosperity and affordability

Globalisation &





Perceptions of luxury

Anxiety society, health and safety

The experience economy

and authenticity

Time pressures


Consumer drivers shaping tourism




Image and brand

the sports tourist
The Sports Tourist

Doing extreme sports, by gender, age and social grade

Proportion who do extreme sports, e.g. rock climbing, white water rafting etc at least once a year

“Which of these best describes how often you do extreme sports (e.g. rock climbing, white water rafting, hand-gliding)?"


The Religious Tourist

Religious Attendance in the UK



Source: Christian Research/The Future Foundation

the authentic tourist
The Authentic Tourist
  • Ethical
  • Natural
  • Honest
  • Simple
  • Beautiful
  • Rooted
  • Human
the food tourist
The Food Tourist

The success of McDonald’s

the affluent traveller and space tourism
The Affluent Traveller and Space Tourism




eco tourist ish
Eco Touristish

Correlation between levels of ‘ethical purchasing’ and wealth in Europe, by country

sub sectors of demand
Sub Sectors of Demand
  • Health Tourist
  • Food Tourist
  • Natural Heritage Tourist
  • Active
  • Aged - Aged / Active
  • Females
  • Child Centred
  • Grand Tours
  • Family
a complex and dynamic marketplace
A complex and Dynamic Marketplace
  • Hard to forecast
  • Clear evidence of growth and contraction
  • Consolidation and reduction in supply
  • Centrality of leisure / holidays but nature of activity changes
luxury trends help us understand this complex marketplace
Luxury trends help us understand this complex marketplace
  • The idea of small, boutique, unique accommodation offers catering to the luxury market is not bourn out by supply changes
  • The idea of searching for the unspoiled, isolated and escape destinations have in the past characterised our stereotype of luxury
  • The rejection of over-development and congestion appeared to epitomise expenditure in luxury markets
contra indications in supply
Contra-indications in Supply
  • There would appear to be growing evidence for the contrary in recent supply shifts
  • This is best characterised by Dubai – the capital of superlatives in tourism
  • One of the world’s most prominent destinations
  • It has been developed and continues to grow on an epic scale
  • Indoor ski runs in the desert
  • Theme Park development 2 x as large as Florida Disneyworld
  • 100s of man made islands
  • 6 Runway airport
does dubai work
Does Dubai work ?
  • 2007 6 m visitors
  • 2010 15 m visitors
  • Luxury v Mass Luxury
  • Everything is a luxury nowadays…
  • Issues of authenticity and sustainability
  • In 10 years has become a watchword for quality and service in the international tourism industry
  • Aims to attract 15 m tourists by 2010
  • Airport deals with 25m visitors
atlantis dubai
Atlantis, Dubai
  • £750 m to develop
  • Located on the entrance to the Palm
  • Bridge Suite £18,000 per night
  • Largest number of inbound visitors are from the UK
  • Many locations aspire to recreate the Dubai phenomena through the creation of mega-resorts catering for high spenders
  • IRAN: Flower of the East, 17 m Euro development Kish Island
category killer
Category Killer
  • CHINA: Hainan Island ‘China’s Hawaii
  • 18 Golf course (10 more planned)
  • 50 Hotels (15 more planned)
  • $200m 7 star hotel (2011)
  • Major market – China domestic
island paradise
Island Paradise
  • 99 year leases for sale on 61 islands
  • 5 islands sold for $627m
wilderness appeal
Wilderness Appeal
  • Coast – 6 resorts being developed
  • 160,000 beds
  • High Atlas Mountains – Ski Resort
  • 3,800 beds, 300 retail units, 25,000 sq mts. of conference facilities
is the demand sustainable
Is the demand sustainable
  • Commercially ?
  • Global Tourism worth $6.5 trillion per annum
  • Annual Growth 4.2% per annum over years 2007-2017
  • Environmentally – certainly not.
contra indications of new luxury
Contra-indications of New Luxury
  • Concern with quality and facilities
  • Spa as an essential
  • Concern with value for money
  • Mix of products and services – fly cheap eat expensive
contra indications of new luxury52
Contra-indications of New Luxury
  • Dubai and Abu Dhabi – development of cultural facilities : Louvre and replication of Lyon heritage
  • Cultural, educational and artistic elements to increase destination offer
what the individual says
What the individual says ?
  • Why visit a destination ?
  • ‘Atmosphere’
  • Experience
  • Distinctiveness
  • Authenticity v Mass Luxury
  • Spa may be the new swimming pool
what the individual wants
What the individual wants ?
  • When does space become a luxury ?
  • Contra-indications for the Dubai offer
luxury and politics
Luxury and Politics
  • In the past people believed that McDonalds and Pizza Hut could break down political barriers and unite the world’s cultures
  • In fact, the great unifier - luxury brands
  • Fake Armani from China to Croatia, Africa to America
the centrality of the visual landscape
The centrality of the visual landscape
  • The centrality of arresting visual images
  • All aspects of our lives are filled with visual culture; leisure, entertainment, shopping, food, tourism and travel
  • “The world becomes a picture that distinguishes the essence of the modern age” Martin Heidigger
the centrality of the visual landscape57
The centrality of the visual landscape
  • The average US citizen watches 4 hours of TV per day
  • US consumer 28 hours per week
  • EU Internet consumption 14.3 hours per week
  • The range of channels of communication has increased at an unprecedented level
visual culture for youth
Visual Culture for Youth
  • The pictures are electronic
  • MySpace Facebook Bebo Twitter
  • The similarity to Scrap Books – self expression that leads suppliers to consumers through tracking and data mining
luxury tourism and visual representation
Luxury, Tourism and Visual Representation
  • How is your product and service perceived
  • Use of iconography, images, dynamic visuals
defining luxury for the future
Defining Luxury for the future
  • Space
  • Authenticity
  • Simplicity
  • Escape and Contact
developing distinct quality experiences
Developing distinct quality experiences
  • In our efforts to create original or distinct experience what often occurs is a process of serial reproduction
  • These ‘unique’ luxury experiences echo the worst elements of globalisation and the ersatz nature of the shopping mall
the guggenheim phenomena
The Guggenheim Phenomena
  • Guggenheim, Bilbao a successful example of creative industries revitalising a former industrial port
  • Result: a proliferation of Guggenheims across the world : Berlin, Salzburg, Rio, Tokyo, Las Vegas (2)
  • By 2005 waiting list 50+
the guggenheim phenomena65
The Guggenheim Phenomena
  • Guggenheim Bilbao
  • 1998 1.3m visitors
  • 2007 less than 650,000 visitors
environmental sustainability
Environmental sustainability
  • The appeal of the simple offer, Reduced facility, Natural appeal
  • Eco-products : 70% of tourists agree that it is more important for hotels to be more environmentally conscious
  • Eco-tourism growth 25%+ per annum
  • Competitive Positioning : Aspen Colorado first US Ski resort to achieve ISO 14001, 1st resort to join Chicago Climate Exchange
luxury trends and the mass market
Luxury Trends and the Mass Market
  • Examining what is happening in the ‘luxury’ sector helps us understand what is occurring in the mass market
  • Mass market phenomena :
  • Dubai
  • Emirates
  • Spa Treatment
  • Cruises
becoming consumer centric
Becoming Consumer Centric
  • Do not take lessons from industries that do not evolve
  • The centrality of customer retention is at the centre of the approach
  • Jeff Bezos “ …the retention of 5% of customers can impact on profit by 125%”
understanding affluence
Understanding affluence
  • “Real affluence today is often measured not by what you own but by what you do and where you go”

PWC Luxury Survey 2007

  • People living busy urban lives in NY, London, Tokyo are increasingly inclined to remote destinations
  • Faraway places (with butlers)
becoming more consumer centric
Becoming more consumer centric
  • Cementing the connectivity
  • Building the personal relationship in the impersonal world
  • The difference between a hand written letter and an e-blast is a clue
understanding the supply dna
Understanding the supply DNA
  • Ease of access
  • Path to consumer
  • Ease of purchase
  • The ‘distinctive experience’ building of ‘high trust relationships’
  • The importance of repeat and loyalty
  • The centrality of Technology and People
in summary
In Summary
  • 2008 Data –London showing positive growth in EU inbound
  • England (South/ South West) –reasonable summer bookings
  • UK Travel Industry recording good outbound traffic June, July, August
  • Potential for North Wales ?
but i still go on holidays
But I still go on holidays…
  • ABTA Survey 6 Oct 2008
  • More than 80% of consumers who travel abroad are planning to do so again within next 12 months
  • 47% will not change travel plans because of recession
  • Strength of Euro – acting as a deterrent
  • Opportunity for North Wales
and quality continues to appeal
And quality continues to appeal
  • 5 Star Self Catering and Bed and Breakfast accounts for less than 3% of UK supply
  • 5 Star remains popular achieving highest occupancy and rates
  • Quality will prevail in recession
  • However deals are important…
and the olympics
And the Olympics…
  • Significant impact on VisitBritain budget to 2012
  • Plenty of research suggest Olympic displacement
  • Who last made a profit on the Olympics ?
  • And afterwards 2014 Commonwealth Games in Glasgow…
hold fast in difficult times
Hold Fast in difficult times
  • Quality – Personal Service as well as fittings
  • Relationships – drive contact at all levels
  • E-marketing is marketing
  • 1-3 hour drive time targets
you have been very kind
You have been very kind…
  • Your questions and comments are welcome
  • And do not forget the scholarships
  • J John Lennon

Moffat Centre for Travel and Tourism Business Development

Glasgow Caledonian University