Travel & Tourism at a Tipping Point
The travel & tourism (T&T) industry plays a vital role in the global economy and community. In 2018, the industry helped generate 10.4% of world GDP and a similar share of employment, and has shown enormous resilience over the last decade. Fueling this expansion and relative resilience is the ongoing growth of the middle-class in Asia and other parts of the world. In the coming decade, industry contribution to GDP is expected to rise by nearly 50%.1 In light of this expansion, policy-makers, industry leaders and other stakeholders will have to pay closer attention to T&T competitiveness to capture this growing market. While government and business actors alike will need to consider what competitiveness levers they can activate to retain or gain market share, special consideration needs to be given to sustaining tourism infrastructure, services and assets. As numbers of business and leisure travelers increase the world over, improvements in competitiveness will need to be undertaken alongside careful planning for tourism management and carrying capacity of destinations. The results of the TTCI serve as a tool for policy-makers, T&T businesses and other stakeholders to understand and advance the necessary dialogues and actions that will ensure the longevity of this critical sector.
The 2019 Travel & Tourism Competitiveness Index (TTCI) assesses 140 economies for T&T competitiveness in four subindexes: Enabling Environment, T&T Policy and Enabling Conditions, Infrastructure, and Natural and Cultural Resources (see About the Travel & Tourism Competitiveness Index 2019 for more details). The economies covered by the index account for nearly 98% of global direct T&T GDP and a similar proportion of international tourist arrivals.2 In this section we discuss what it takes to be competitive in T&T and the implications for longer-term economic development and longevity of the industry. The second section, 2019 Results and Analysis, presents overall results for the 2019 TTCI, along with analysis of ranking quartile groups. While there is some country/economy and regional analysis in Part 1, more in-depth regional analyses, including data analysis and tables, are presented in Part 2. Further TTCI information can also be accessed by visiting the Travel & Tourism Competitiveness Report 2019 online (http://reports.weforum.org/ttcr).
T&T competitiveness requires a holistic approach
The TTCI is deliberately designed to reflect and measure the diversity of factors that influence a country’s ability to compete globally in travel and tourism. Each of the 14 pillars that make up the index, if addressed with appropriate policy-making and sufficient investment, has the potential to drive competitiveness and returns in tourism arrivals and receipts.
What is explored to a lesser degree is the nuanced interdependence of the pillars and their combined impact on the longer-term sustainability of the industry. The results of this year’s report present an opportunity to explore this in more detail. At the outset, the data suggests that a holistic, systems-led approach to tourism strategy is required to truly perform successfully on the global rankings. In particular, economies need to achieve a strong performance on all of the pillars to rise to the top of the index. Typically, the highest-scoring economies tend to beat global averages on the majority of the pillars, while the opposite is true for the bottom-scoring economies. Only Mexico, Brazil and India have been able to rank among the top 25% of ranked economies on the TTCI by outperforming the global average in as little as seven of the 14 pillars. These economies have exceptional natural and cultural resources, which they combine effectively with relatively strong price competitiveness.
Yet even depending on a smaller number of pillars, such as Natural Resources, still requires a systems-led approach. The assets that this pillar measures cannot be bought or created, but if not managed well can be destroyed rapidly. The ability to generate demand and derive value from them relies heavily on the ability to set and enforce environmental policies (measured in the Environmental Sustainability pillar) , as well as the ability to effectively manage their “consumption”. If adequate focus is not given to preserving these assets, they will, as with any depleted resource, cease to contribute to the overall competitiveness performance of the country.
Other interdependencies are equally clear. Developed infrastructure and international openness are required to boost connectivity of destinations, which allows for a greater number of travellers to visit. A favourable business environment makes it easier for T&T businesses to operate in a country, while a skilled workforce leads to better customer service, productivity and capability to leverage increasingly vital communication and technology tools. Concerns over healthcare, hygiene, safety and security conditions can also prove detrimental to generating T&T demand and investment, especially from abroad. Given the complexity and interconnectedness of these factors, it is impossible for industry corporations or tourism agencies to tackle these issues in isolation. They require cross-industry collaboration, public-private engagement and a better understanding of the global context beyond T&T. See Boxes 1 and 2 for real-world examples of such collaborations.
Box 1: Global Health Security and T&T:
A Case for Cross-Industry Collaboration
The number and kind of infectious disease outbreaks (e.g. influenza, Ebola, Zika, SARS, MERS-CoV, antibiotic resistant bacteria, etc.) have increased significantly over the past 30 years and, as global trade and travel increase, the international spread of disease is expected to grow. In today’s globalized world, a pathogen can travel from a remote village to major cities on all continents in under 36 hours, but unjustified or ineffective restrictions on travel or trade during outbreaks can have a massive economic impact on affected countries.
For example, efforts by countries to ban flights from nations with H1N1 outbreaks in 2009 were ultimately revealed to be ineffective in containing the virus; and the estimated loss associated with the H1N1 outbreak for the Mexican tourism industry was $5 billion. Similarly, between 2002 and 2004, as a result of Severe Acute Respiratory Syndrome (SARS), Hong Kong saw a 41% reduction in tourism GDP, Singapore 43% and China a 25% reduction as well as a loss of 2.8 million jobs.
The World Economic Forum convenes experts from international health organizations and travel and tourism business leaders to mitigate the impact of outbreaks on the industry and subsequently on national GDPs through its Epidemics Readiness Accelerator (ERA). Together, efforts are underway to improve decision-making, coordination and communications within and between both the public and private sectors, relating to risk, travel advisories and border measures.
Box 2: Protecting the Ocean Ecosystem:
A Case for Public-Private Collaboration
Only 7% of the ocean is protected through Marine Protected Areas (MPAs). However, this figure varies based on the criteria used. Further, many MPAs are either only legally designated, poorly managed and enforced, or represent standalone efforts with little integration between them. Yet these ‘national parks in the sea’ should be seen as part of an economy’s infrastructure, helping to ensure a sustainable tourism industry and a supply of food from the sea. Addressing this, and increasing levels of protection, is key to restoring ocean ecosystems while generating and safeguarding the businesses, communities, jobs and livelihoods that rely on healthy seas.
The Friends of Ocean Action brings together leaders from government, business, civil society, international organizations, science and technology to fast-track solutions to the most pressing challenges facing the ocean. One way to advance the health of ocean ecosystems is to promote the achievement of ambitious marine protection targets by driving concerted, public-private cooperation across geographies and sectors on the establishment of MPAs. The Friends of Ocean Action’s efforts include: engaging in key relevant policy fora to support the international community in increasing global MPA coverage; partnering with key stakeholders to set-up and champion a game-changing new MPA platform and building a business case for MPAs that will mobilize a strong coalition of world business champions ready to contribute to reaching a new 30% MPA target by 2030.
Strong T&T translates into overall economic development
Once economies begin performing well along a broad range of pillars—and in so doing begin to surpass the global average in T&T competitiveness—trends show that visitor numbers tend to climb considerably (Figure 1). However, because T&T competitiveness depends on aspects such as business conditions, strong labour markets, technology and infrastructure, less developed economies tend to lag their more advanced peers in overall scores. Because enabling conditions such as these are beneficial to economies on a whole, T&T stakeholders, both public and private, can use this to justify investment in the sector as it has reinforcing effects on the economy overall.
The difference in average TTCI score for high-income economies and the average TTCI score for low to lower-middle income economies is approximately 38%. However, the average score between these economic groups within the Natural Resources pillar narrows to just below 11%. This is due to the obvious reason that natural assets are distributed among countries with varying economic conditions. Therefore, many lower-income economies that have an abundance of natural assets would do well to consider investing in efforts to drive economic development through the vehicle of a thriving travel and tourism sector, especially given that they may lack the foundations necessary to pursue other emerging economic pathways such as advanced manufacturing. An example from Africa is the marked increase in visa openness that is in large part a response to the need to drive T&T on the continent but has the obvious benefit of stimulating trade and development on a larger scale.3
Moreover, assets like natural and cultural resources, have the potential to attract capital investment; suggested by the correlation between T&T capital investment and Natural and Cultural Resources subindex scores, which is approximately 76%.
Figure 1: Travel & Tourism Competitiveness Index 2019 and international tourist arrivals
Note: International tourist arrivals excludes Liberia, (2017 or latest available). Top performers for each region are highlighted.
Sources: World Economic Forum and World Tourism Organization (UNWTO).
Figure 2: Correlation between TTCI pillars and international tourist arrivals, by income level
Notes: Light-coloured bars indicate high-income economies, dark-coloured bars indicate low- and lower-middle-income economies. Log of international tourist arrivals (2017 or latest available). Excludes arrivals for Liberia.
Sources: World Economic Forum and World Tourism Organization (UNWTO).
Figure 2 shows the correlation between TTCI pillars and international tourist arrivals for low to lower-middle income and high-income economies. From this data, it is clear that low to lower-middle income countries have a stronger relationship than their high-income counterparts do between arrivals and pillars such as Business Environment, Human Resources, ICT Readiness, International Openness and overall Infrastructure. This indicates that improving in these areas may have a more marked impact on T&T demand for lower-income countries than for high-income ones. On the opposite end, Figure 2 also shows that more advanced countries are more likely to compete on natural and cultural resources, probably due to reduced differentiation for business environment, ICT readiness and other aspects associated with higher levels of economic development.
Figure 3: Correlation between travel & tourism and overall competitiveness
Source: World Economic Forum, 2018 and 2019.
Favourable enabling environments and improved infrastructure that can be achieved through properly managed T&T-led development may translate into increased economic productivity and overall national competitiveness. Figure 3 shows the relationship between T&T competitiveness and the Global Competitiveness Index 4.0 (GCI 4.0), which measures the set of institutions, policies and factors that determine an economy’s level of productivity. Because of shared foundations of competitiveness, there is a clear relationship between T&T and general competitiveness. Consequently, pursuing T&T competitiveness through such foundations can lead to a more productive economy, which in turn, may lead to reduced poverty levels, income and inequality.4
Anticipating the tipping point
The results of the 2019 TTCI that are presented and analyzed in the following section of Part 1 indicate that both developing and developed nations have advanced in competitiveness, with improved scores in areas such as price competitiveness, air transport infrastructure, ICT readiness, T&T prioritization and international openness. And as Figure 1 shows, T&T competitiveness does often lead to substantial increases in travel and tourism demand. Given the forecasted growth in T&T in the coming decade, understanding the consequences and impact of T&T competitiveness is important so that public and private stakeholders can together design pathways for sustainable management of the sector over time.
For example, developing nations may be exposed to surges in visitors that end up overwhelming local infrastructure, cause shortages in housing supply and degrade the very cultural and natural assets that attracted tourists in the first place. Thailand had to recently close down its famous Maya Bay cove after a rise in visitors caused extensive ecological damage.5 More developed economies, even with robust and reliable, air, road and port and T&T infrastructure, may not adequately anticipate the impact that growing demand for travel could have. As a result, certain destinations may be ill prepared to deal with higher tourist numbers that are a result of their competitiveness. In Italy—which ranks 10th for tourist service infrastructure and 4th for natural and cultural resources—Venice has announced that it plans redirecting cruise ships away from the city’s central islands, following public discontent.6 Economies would be wise to begin paying more attention to the role that digital demand for natural and cultural tourism might play in our increasingly digital societies. For instance, the top 10 economies for cultural and entertainment digital demand account for a third of the tourist arrivals among economies in this year’s rankings.7 While this does not prove that increased digital demand necessarily leads to more arrivals, it does show that trends in online searches often mirror trends in numbers of visitors, especially on the upper end of the ranking. Thus, it is vital that policy-makers pay attention to these trends. Failure to adequately address issues related to rising tourism numbers has the potential to negatively impact future competitiveness, making nations victims of their own success. Therefore, more research and data will be required to measure when competitiveness leads to diminishing returns and to understand the feedback loops which may then drive down competitiveness. In the meantime, strategies tied to dealing with rising tourism numbers are already being developed. For instance, the UNWTO provides potential strategies for sustainable tourism in urban environments, which include promoting time-based visitor dispersion, including during off-peak seasons, developing infrastructure with the needs of locals and tourists in mind, improving the monitoring of arrivals and setting up platforms for discussions with local residents.8
It is also imperative that countries balance their focus on T&T as one component of a diversified economic plan. While T&T is certainly a strong driver of economic development for a number of states, policy-makers and T&T businesses need to work hand in hand to make sure investment in T&T is shared with local communities and takes into account future needs of the industry. Creating an economy over-reliant on tourism that purely depends on natural and cultural resources and low-cost labour does not set a path for sustainable growth. The tourism industry of the future will be technology-driven and rely more on skilled workforces.9 Decision-makers should take care to integrate efforts to drive T&T competitiveness within a holistic economic strategy that balances the near-term economic promises of the rapidly growing travel and tourism sector with consideration for the long-term resilience of its resources: human, natural and cultural.