Compensating Economies
The world economy is shifting. The US is entering a recession. Growth in gross domestic product is declining in Germany and France, the UK, and Europe as a whole, including Italy. Inflation in Europe was 3.2% in January, the highest since the euro was created in 1999, and it is rising in China, Australia, Eastern Europe, Russia, and the Middle East. Yet this might not all be as desperate as it seems. China’s GDP expanded by 11.4% in 2007, with a 9.9% growth forecast for 2008. India’s economy grew 8.5% in 2007, with 9% growth projected for 2008.
Foreign tourists with cash will bring cash flow into the US. High-end real estate, vacation homes, beachfront mansions, and commercial properties are going for fire-sale prices. This infusion of capital will help to soften the depth and duration of any recession, as will the continued prosperity of China and Japan, where low-dollar American exports are finding open markets. It can therefore be expected that any recession in the US will be minimal and the economy will rebound quickly. GDP and employment growth should be on the upswing again no later than the first half of 2009.
The travel industry will be hit hard in the beginning but bounce back once recession ''jitters'' subside. American businesses will cut back dramatically in 2008 and early 2009, allowing only the most necessary trips, while vacationers will stick close to home until they are convinced that the recession is over and their jobs are secure. Air travel will most likely drop during the remainder of 2008 and recover slowly in 2009. Americans who do travel will frequent destinations where the weak dollar goes further: Mexico, Brazil, Argentina, Portugal, and Eastern Europe. This will open the door to these ''discovered'' destinations and make them attractive getaways even after the prosperity returns.
Population Shifts
Populations are being changed by large-scale migration. There are 30 million international migrant workers in Europe, 20 million in Africa, and 18 million in North America. In 2005 about 4 million people immigrated permanently to member countries of the Organisation for Economic Co-operation and Development, a group of 30 free-market countries. Likewise, immigration is rapidly changing the ethnic composition of the US population.
According to the Census Bureau, in 2000 Latinos made up 12.6% of the US population; by 2050 they will account for 24.5%. Asian immigrants, currently 3.8% of the population, will reach 8% by 2050. The market for international travel should grow significantly in the US and Europe, mostly due to increasing immigrant populations visiting their former homelands. Routes between the US and Latin America will grow the fastest, followed closely by those between Europe and Africa and the Middle East.
Additionally, the baby-boom generation is living longer and staying active until a much older age. In the developed world people age 60 and older, the fastest-growing age group, made up one-fifth of the population in 2000. They will make up one-third in the next half century. Seniors are generally the wealthiest segment of the population. As their numbers expand, the travel industry will only expand with them, making it more stable.
Expanded Tourism
Tourism, travel, and vacationing will continue to grow. International tourism grew by more than 6% in the first half of 2007, mostly due to global prosperity. By 2020 international tourist travelers are expected to reach 1.6 billion annually, increased from 842 million in 2006. According to the World Trade Organization, by 2020 100 million Chinese and 50 million Indians will spread out across the globe, replacing Americans, Japanese, and Germans as the world’s most numerous travelers.
All aspects of the industry will continue to grow well into the future. Immediate growth will most likely be in the Middle East, where travelers will visit neighboring countries and Europe. After that the fastest and greatest growth will flow to Europe and the US by newly prosperous, middle-class vacationers from China and India.
Abnormal Energy Prices
Notwithstanding unusual political or economic instability, oil prices average around $65 a barrel. Oil prices today have soared beyond anyone’s expectations and dramatically affected the global economy. Prices of more than $140 per barrel today are an aberration that will not last. The major reason is a global shortage of refinery capacity, with another $10 to $15 per barrel of ''risk premium'' due to instability triggered by the Iraq War. New refineries in Saudi Arabia and other countries scheduled to step up by 2010 will help ease the tight supply-and-demand balance for oil, as will new pipelines in Russia. By then, also, the Iraq War should be reaching a resolution, and hopefully, we can expect to see oil prices stabilizing again at $65 a barrel.
So even though some adhere to the adage ''Things always look darkest just before they go completely black,'' many factors indicate that the recession we’re experiencing will be short-lived, and the world economy should be on the upswing as consumerism and marketing trends continue to improve. The travel industry will most likely continue to thrive as global populations shift and an aging, prosperous population takes advantage of tourism as they head into their golden years.
