Travel & Tourism
Trends and Economic Impact
June 2014 Monthly Update
Summary
•
According to latest data and forecasts, the outlook for the world economy in 2014
(2.6%) is now weaker than at the time of WTTC’s annual economic impact update
(3.3%), and weaker than forecast last month (2.7%).
•
One of the key reasons is US Q1 GDP was much weaker than expected, contracting
by 2.9% (annualised) and 0.7% (quarterly). US GDP growth in 2014 is now forecast to
be 1.5% compared to 3.1% at the time of the annual update, and 2.4% last month.
•
Travel & Tourism indicators for the year-to-date (YTD), albeit only covering the first
few months of 2014, indicate that the sector is performing strongly and will continue to
outpace growth of the wider economy. YTD international arrivals grew by 5.3% in
February, marginally faster than 5.0% for all of 2013. International air passenger traffic
for April also continued to grow for all regions, with early signs suggesting growth in air
traffic for 2014 is on track to be faster than 2013. Current YTD air traffic growth is
6.1% versus 5.4% for 2013. Hotel performance has varied across regions, with Africa
exhibiting particularly weak performance, both in terms of YTD occupancy rates and
average day rates. But initial indications for 2014 remain encouraging for the hotel
sector in US, Europe and parts of the Middle East.
•
Taking all of these developments together, direct Travel & Tourism GDP growth in
2014 is likely to be weaker than anticipated at the time of the annual update. Although
the downward revision for Travel & Tourism should be less pronounced than for the
economy as a whole given the relatively strong YTD industry performance so far.
Wider economy update (1)
•
Eurozone: Eurozone GDP forecast for 2014 remains unchanged at 1.1% but its recovery
continues along a divergent track. While latest PMI readings for competitive core economies such
as Germany, and reforming peripherals such as Spain, have largely sustained positive momentum
into the second quarter (and in some cases surprised on the upside), the pace of improvement
has ebbed in France and among the less ambitious reformers such as Italy. Deflation remains a
key concern after the latest fall in CPI inflation to 0.5% in May. To address this deflation risk, the
ECB announced a series of measures potentially designed to depreciate the Euro, reduce interest
rates and increase bank lending. Oxford Economics attaches a 10% probability to the eurozone
slumping into deflation over the period 2015-18. Under this scenario, the eurozone is forecast to
enter recession in 2015, with an annual GDP contraction of 0.1%, followed by modest growth of
0.5% in 2016. This is in contrast to the baseline scenario, which forecasts annual GDP growth of
1.5% in both 2015 and 2016.
•
United States: The first estimate of US GDP growth in Q1 was already weak (-1.0% annualised),
but has been revised down even further to -2.9% (annualised). This was the fastest rate of decline
since the recession, and was the largest drop recorded since the end of World War II in a quarter
not part of a recession. Weak Q1 GDP was originally blamed on an unusually cold winter.
However, the magnitude of the revisions suggest other factors are at play. The latest revisions
reflect a weaker pace of healthcare spending than previously assumed. Trade was also a greater
drag on the economy than previously thought. Despite the very weak start to 2014, data for
employment and manufacturing point to a strong Q2 rebound with forecast Q2 GDP growth of
3.0% annualised. But overall US GDP growth for 2014 has again be revised downward. Oxford
Economics now forecast growth of 1.5% in 2014, compared to 3.1% at the start of the year and
2.4% last month.
Wider economy update (2)
•
United Kingdom: The UK economy is forecast to expand by 3.2% in 2014, the fastest pace since
2007, and faster than the 2.8% forecast at the time of the annual update of WTTC’s economic
impact research. Falling unemployment, rising real wages (which have been a long time coming)
and optimism surrounding the economic climate should continue to support consumer spending
and Travel & Tourism domestic and outbound demand. Investment will also help to sustain
momentum in UK GDP growth, as businesses respond to increasing demand both at home and
abroad, and start to utilise some of their surplus cash stock piles. It is still not clear when UK
interest rates will begin to rise. Bank of England governor Mark Carney recently cited 2.5% as the
market's definition of a "new normal" bank rate and said it could arrive in the first quarter of 2017.
•
Asia-Pacific: The 2014 GDP forecast for the Asia-Pacific region has been marginally upgraded
this month to 4.3% compared to 4.1% last month. This is due to upgrades to the outlooks in
Australia and Taiwan.
•
Japan: For the first time in 17 years, Japan has increased its sales tax. From 1st April, the sales
tax rate was increased from 5% to 8% to improve public finances. 2014 Q1 saw strong quarterly
GDP growth of 1.6% as consumers brought planned purchases forward in order to avoid the tax
increase. Investment also contributed to growth, with firms expanding capacity in order to meet
Q1’s spike in consumer demand. However, activity brought forward to Q1 by the tax rise means
weaker activity from Q2. April and May’s PMIs dropped below the 50 mark. Consumer confidence
and corporate expectations of business conditions have also deteriorated. GDP is forecast to fall
by 1.5% in Q2, giving back most of Q1 gains.
Wider economy update (3)
• China: Latest data indicate that economic activity in China is improving after a slow start to the year.
Industrial production and retail sales indicators are showing positive signs, with the HSBC PMI for
June reaching its highest reading for seven months. This suggests that growth will continue to firm,
with further gains in new orders supporting the improved outlook. The increasingly expansionary
stance of the People’s Bank of China should also provide a further impetus to growth. The reserve
requirement ratio for some banks has been cut, with the aim of increasing lending to agriculture,
small enterprises and consumers. But overall China’s growth outlook for 2014 has still been
downgraded from 8.8% at the time of the annual update to 7.1% in June.
• Africa: The latest GDP forecast for Africa predicts growth of 3.7% for 2014, with North Africa
forecast to grow at 1.9% and Sub-Saharan Africa at 4.8%. Nigeria is forecast to grow by 6.5%.
South Africa and Egypt are forecast to grow more moderately in 2014, with GDP growth of 1.2% and
1.9% respectively. Instability in Libya and Egypt, and the continued threat of terrorism in Kenya, will
likely have a detrimental impact on Travel & Tourism in the coming months.
Wider economy update (4)
• Middle East: The latest GDP growth forecast for the Middle East for 2014 is 3.5% versus 3.8% last
month and 4.4% at the time of the annual update.
• Iraq: Contributing to the Middle East’s downgrade are the deep political issues within Iraq. The
country’s economic prospects have deteriorated dramatically following the capture of large swathes
of the north and west of the country, including the second largest city Mosul, by insurgents and
militant extremists. Previously buoyant GDP growth forecasts had been based on steadily rising oil
output, but the latest political developments mean that this assumption is no longer valid. The 2014
GDP growth forecast has been cut to 5.8%, which is similar to the estimated outturn in 2013, but
down from the 7.5% growth forecast last month. Longer-term prospects have also been downgraded
as oil expansion plans are put on hold by the major producers and infrastructure investment and
other spending by the government has been postponed.
• Iran: By contrast, Iran, the region’s largest economy, has seen more stability over the past few
months after increased compliance over nuclear enrichment programs. Inflation fell to 17% in April,
its lowest since June 2012 and well below the peak of 45% in June 2013. This decline reflects a
combination of only gradual nominal depreciation of the IRR since last July, as well as monetary
tightening and slowing world food inflation. The GDP forecast for 2014 stands at 2.0% after a 0.9%
contraction in 2013. Growth prospects in other more politically stable Middle-Eastern countries
remain strong, with Qatar and the UAE expected to post GDP growth of 6.2% and 4.6%
respectively.
Latest Travel & Tourism indicators
•
According to the most recent UNWTO Tourism Barometer data, 2013 YTD global international
tourist arrivals up to February increased by 5.3% on the same period last year, marginally faster
than the 5.0% growth for 2013 as a whole. All regions experienced YTD arrivals growth except for
the Middle East, where arrivals contracted by 3.1%. The latter is explained by contractions of 30%
and 17% for Egypt and Lebanon respectively. However with data only available for two months of
this year, it is still much too early to read too much into the arrivals data as a barometer for
the whole of 2014.
•
YTD international air passenger traffic growth as measured by RPK (revenue per kilometre),
remains strong in 2014, growing by 6.1% YTD to April, compared to the same period last year.
This is 0.7 percentage points higher than the growth rate for 2013 as a whole (5.4%). Early signs
suggest that growth in international air passenger traffic for 2014 is on track to be faster than that
of 2013. All regions are showing growth in international air traffic. In particular, the Middle East has
sustained strong, double digit growth, which is slightly at odds with arrivals data. Although the air
passenger traffic data has two extra months of data and also includes transit and outbound traffic.
•
The latest regional hotel data for May 2014 shows a diversity in performance across world
regions, but overall a positive picture of rising demand. In line with Africa’s weak international air
passenger traffic growth, both North Africa and Sub-Saharan Africa have experienced significant
declines across all hotel indicators. Major tour operators have, for example, cancelled all flights to
Mombasa until September due to the “high threat” of terrorism in Kenya. Europe, the Americas
and the Middle East have posted solid growth across all performance indicators. We will monitor
closely indicators for the Middle East and individual countries to better understand developments
and the impact of growing regional instability.
Latest Travel & Tourism indicators
YTD performance of airline traffic, international tourist arrivals and hotels
(annual % growth)
International air passenger traffic (RPK)
Europe
Americas
North America
April 2014
2014 YTD
(up to April)
7.9
5.6
International tourist
arrivals
Regional hotel performance
Occupancy rate
ADR
RevPAR
2014 YTD
(up to May)
2014 YTD
(up to May)
2014 YTD
(up to May)
5.4
2.6
7.5
10.3
2013
2014 YTD
(up to
February)
2013
3.8
5.2
-
-
-
6.2
3.6
3.3
3.4
6.9
4.9
3.0
3.0
6.9
4.3
3.4
3.6
7.1
Asia-Pacific
6.7
4.9
5.3
7.2
6.0
1.5
-3.6
-2.1
Middle East
18.6
14.8
12.1
-3.1
0.3
3.6
2.6
6.3
Africa
3.9
1.0
5.5
4.3
5.7
-
-
-
North Africa
-
-
-
15.1
6.2
-8.5
-0.3
-8.7
Sub-Saharan Africa
-
-
-
0.6
5.4
-0.3
-2.2
-2.5
8.5
6.1
5.4
5.3
5.0
-
-
-
World
Sources: IATA, PATA, Haver Analytics, Eurostat, UNWTO, STR, STR Global, Oxford Economics
Notes: International air passenger traffic and regional hotel performance - Africa includes North Africa; international tourist arrivals - Africa only includes a limited number of
countries
Latest Travel & Tourism indicators
Overnight visitor arrival growth in 2012/2013
(% year-on-year, January 2012/2013 to the indicated month)
Year to:
%
EUROPE
Year
%
AMERICAS
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Italy
Netherlands
Portugal
Spain
Sweden
UK
Bulgaria
Cyprus
Mar
Jan
Nov
Feb
Jan
Feb
Feb
Jan
Jan
Feb
Mar
Feb
Feb
Mar
Mar
2014
2014
2013
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
-4.9
7.0
3.6
1.9
7.6
4.0
10.4
2.9
9.8
10.9
7.2
6.7
8.9
2.4
-7.8
Canada
US
Mexico
Chile
Anguilla
Antigua & Barbuda
Aruba
Bahamas
Barbados
Bermuda
Cayman Islands
Cuba
Dom Republic
Dominica
Grenada
Feb
Q4
Mar
Mar
Mar
Mar
Mar
Feb
Mar
Feb
Mar
Mar
Mar
Feb
Mar
2014
2013
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
0.6
4.7
15.4
-1.0
0.2
4.3
2.2
-1.8
-1.2
-0.2
5.2
5.0
3.7
1.3
-5.5
Czech Republic
Mar
2014
1.6
Jamaica
Apr
2014
1.4
Estonia
Feb
2014
11,3
Martinique
Mar
2014
Hungary
Q3
2013
1.8
Puerto Rico
Jan
2014
Latvia
Oct
2013
14.6
St Lucia
Mar
Lithuania
Jan
2014
13.4
St Vincent
Jan
Malta
Mar
2014
7.9
British Virgin
Russia
Q4
2013
10.2
US Virgin Islands
Slovakia
Q4
2013
8.2
MIDDLE EAST
Slovenia
Mar
2014
3.2
Israel
Montenegro
Mar
2014
2.7
Croatia
Iceland
Mar
Feb
2014
2014
-0.1
35.2
Norway
Switzerland
Turkey
Mar
Mar
Mar
2014
2014
2014
15.0
2.6
4.1
Year to:
ASIA-PACIFIC
Japan
China
Hong Kong
South Korea
Macau
Taiwan
India
Maldives
Nepal
Sri Lanka
Cambodia
Indonesia
Laos
Malaysia
Myanmar
Mar
Mar
Mar
Mar
Mar
Mar
Mar
Mar
Aug
Apr
Feb
Mar
Sep
Jan
Sep
2014
2014
2014
2014
2014
2014
2014
2014
2013
2014
2014
2014
2013
2014
2013
27.5
-5.7
13.5
10.9
4.9
23.8
4.9
9.6
-2.3
27.6
9.9
10.1
14.8
18.2
44.9
13.0
Q2
2013
5.1
Papua New
Guinea
Philippines
Feb
2014
3.5
1.6
Singapore
Mar
2014
-0.6
2014
5.4
Thailand
Apr
2014
-4.9
2014
2.4
Vietnam
Apr
2014
27.3
Feb
2014
10.7
Australia
Mar
2014
7.3
Feb
2014
-2.7
New Zealand
Mar
2014
4.3
Fiji
Jan
2014
3.0
16.0
Kiribati
Q1
2013
38.5
Oct
2013
3.1
Apr
2014
Jordan
Q4
2013
-5.2
Vanuatu
Lebanon
Mar
Q4
2014
2013
-16.5
11.3
REGIONAL ESTIMATES (1)
Europe
Feb
Mar
2014
-29.7
Americas
Africa
Mar
Q4
Apr
2014
2013
2014
-0.8
3.5
5.3
Middle East
Asia-Pacific
UAE
Egypt
AFRICA
Mauritius
South Africa
Tunisia
%
WORLD
(1) based on these 90 countries only; coverage good for Europe, North America, the Caribbean and Asia-Pacific but very limited elsewhere
Source: Oxford Economics, UNWTO
2014
5.2
Feb
Feb
Feb
Feb
2014
2014
2014
2014
6.2
4.3
-3.1
7.2
Q4
2013
5.0