Key Findings
Four key findings emerge from the results of the 2015 TTCI and additional quantitative and qualitative analysis. First, the T&T industry continues to grow quickly, and has proven resilient to shocks. Second, new trends are emerging, and the countries performing better in the TTCI are those that are better equipped to capture the opportunities they bring. Third, developing the T&T sector provides growth opportunities for all countries, regardless of their wealth, and offers job opportunities at all skill levels. And finally, the development of the T&T industry is complex, requiring inter-ministerial coordination, and often international and public-private partnerships. These findings are also partially echoed by the recent work by the Global Agenda Council on the Future of Travel & Tourism, which is outlined in Box 2, and by T&T business leaders, whose perspective is presented in Box 3.
T&T resilience and development impact
According to the UNWTO, the tourism industry employs 1 in 11 of the world’s workers and accounts for a similar percentage of GDP.8It continues to grow more quickly than the economy as a whole (see Figure 3), driven by technological, socio-economic and cultural forces which are driving more people to move internationally more frequently. Travellers from new countries increasingly contribute to the global growth of international arrivals. The sector also benefits from growth in domestic travel and tourism, which the WTTC forecasts will rise globally from 3.1% in 2014 to 3.7% in 2015.9
The T&T sector has shown surprising resilience to geopolitical tensions, threats of terrorism, global pandemics and sluggish economic growth in advanced economies. While international tourist arrivals are correlated with economic fluctuations and sensitive to security issues, these tend to impact specific countries or regions; if one country is hit by instability, others will receive more tourists. Globally, the trend for growth seems unstoppable.
As shown by contributions to this report, the sector’s growth tends to return to trend quickly after a shock—this is true of global air passenger traffic (see Chapter 1.4: “Global Air Passenger Markets: Riding Out Periods of Turbulence”, provided by the IATA), occupancy rates (see Chapter 1.2: “Adapting to Uncertainty—The Global Hotel Industry, provided by Deloitte), international arrivals and capital investments (see Chapter 1.3: “How to Re-Emerge as a Tourism Destination after a Period of Political Instability”, provided by Strategy&). Persistent slowdowns happen only in countries where the shock itself also persists. This is an important lesson for countries afflicted by all types of shock: the ground lost during a negative event can be quickly regained as soon as the situation comes back to normal.
New trends and what it takes to capture them
Increasing purchasing power in emerging and developing countries is one of the major new trends driving demand for travel experiences: according to research, a family trip is the second-highest priority for the booming middle classes, after buying a car. UNWTO’s Barometer shows that China is the largest market in terms of international tourism expenditure, a measure of the aggregate amount spent by a country’s citizens on international travel, and is still growing at a double-digit rate.10 Brazil has become the 10th largest market, while in India, the Philippines, Saudi Arabia and Qatar, expenditures grew by approximately 30% from 2013 to 2014.
Given the importance of regional markets, comparing a region’s growth in international tourism expenditure with its performance on the TTCI illustrates where opportunities to capture these new travellers may be largest. Figure 4 plots regions onto four quadrants. Those achieving a good TTCI performance and where expenditure is growing strongly, in the upper-right quadrant, are best placed to benefit. Regions where demand is growing but which are not yet performing well on the TTCI, in the lower-right quadrant, are where investments in T&T development could bring the greatest returns.
Regions where TTCI performance is good but expenditure growth is low, in the upper-left quadrant, are more mature markets that tend already to attract tourists from within the region but still need to be alert to the interests and preferences of new consumers. Finally, those with low expenditure growth and less good performance on TTCI—in the lower-left quadrant—face the most challenges, and need to develop their T&T sector to attract tourists from other regions. The Caribbean is a special case in this analysis, given its strong T&T sector, diversity and existing reliance on tourists from other regions, but many countries in the region still need to address T&T competitiveness gaps.
Another major trend in travel and tourism is shifting demographics. The number of over-60s in the world is projected to rise from 900 million in 2010 to almost 1.4 billion by 2030.11 Elder travellers tend to require higher standards of quality and sophistication, to have somewhat larger budgets (this demographic accounts for 40% of travel but 60% of wealth) and to be immune to seasonality. Some search for “second youth” experiences, while others have physical limitations that need to be catered to.
Meanwhile, younger travellers (especially “millennials”) are characterized by distinctive travel preferences. They are not very much interest in traditional vacations packages but they are motivated by increasing their knowledge about the world and experiencing everyday life in other countries, according to a recent survey by the World Youth Student and Educational Travel Confederation. They tend to spend more time exploring more remote destinations and have less interest in luxury.
Younger travellers rely especially heavily on new technologies and online services to shape their travel “experience”, often using the sharing economy—but the internet is increasingly important for all kinds of travellers. A recent study by Boston Consulting Group estimates that 95% of people use digital resources to organize a trip, using an average of 19 websites or mobile applications—not only for booking, but also searching for information and inspiration, making plans and sharing experiences during and after the trip.12 Internet access during a trip is increasingly seen as a necessity: a Tripadvisor survey found that 74% of the respondents mentioned “free wi-fi” as the main benefit when deciding about accommodation.13
More specifically, the prominence of mobile internet is increasing. In China, for instance, mobile travel sales accounted for 40% of the business of the most important OTAs, Ctrip and eLong. Deutsche Bank Securities estimates that by the end of this decade mobile hotel bookings worldwide will triple, while non-mobile online reservations will rise by only 4% annually.
The importance of the ICT channel to a country’s T&T competitiveness cannot be overstated. The best performers are luring customers with online marketing strategies and country-level branding, and offering customer care services beyond online booking. This requires management awareness and developing skills from technical and programming knowledge to data interpretation, to understand and meet consumers’ evolving needs. Figure 5 shows how international arrivals (taken in logarithms) are somewhat correlated to the extent of internet usage for business-to consumer transactions.
The importance of online searches also points to the need to value natural and cultural resources, as countries with a higher number of UNESCO heritage sites tend to be searched for more often online (see Figure 6). Giving these resources more visibility can translate into additional internet searches, offering the opportunity to convey information about the country’s other attractions.
Opportunities for all
With low- and middle-income countries now receiving more international visitors than high-income countries (see Figure 7), it is clear the T&T sector can have a significant impact on countries at all stages of development. Increasing the competitiveness of the T&T sector can produce short-term economic effects such as balance of payments gains, while investments in infrastructure to boost tourism can have considerable long-term spillover effects on the wider economy.
In terms of creating employment, not only is the T&T sector relatively labour intensive, it tends to employ more women and young people than most industries, and creates more opportunities for SMEs. While the belief persists that employment in T&T tends to be low-pay/low-skills, the sector increasingly demands high-skilled workers in areas such as ICT, management and marketing. Developing specialized tourism niches also promotes higher-skilled employment. An anecdotal example comes from medical tourism in Portugal where Lisbon’s Hospital Lusíadas activity has grown significantly due to the inflow of international patients.
Coordination and cooperation are key to success
Identifying priorities, upgrading infrastructure, calibrating fiscal incentives and executing international marketing campaigns are among the tasks necessary to succeed in developing the T&T sector—tasks which are often beyond the scope of local administrations and even single national ministries. Therefore, the difference between success and failure in T&T can lie in creating strong collaboration frameworks and overcoming financial, institutional and organizational bottlenecks.
Building transport infrastructure, for example, requires the involvement of at least two ministries—transport and finance—along with local authorities, the contractor, investors and, sometimes, other agencies. Given long investment horizons, investors need to be reassured on feasibility, risk allocation and the public sector’s contractual commitment. A recent World Economic Forum-Boston Consulting Group study identifies best practices to overcome these institutional complexities, ranging from the quality of technical, legal and environmental feasibility studies to the rigour of the project preparation process.14
The province of Salta in Argentina offers a successful case study of an integrated, large-scale approach. Despite the advantages of significant natural and cultural resources, proximity to growing countries such as Chile and a devaluated currency, tourism did not develop before the introduction of a plan which included upgrading tourism and transport infrastructure, restoring cultural heritage and launching a national and international promotional campaign. The plan involved a public-private partnership, with a loan from the Inter-American Development Bank signalling long-term commitment.15