Key trends and developments in Travel & Tourism
World Travel and Tourism Council’s (WTTC) annual economic impact research update, released in March 2013, predicted a relatively positive outlook for Travel & Tourism GDP growth in 2013, despite a continuing challenging economic backdrop. Since the annual update release, new data has been published.
Most relevant has been Q1 GDP data, revised GDP forecasts for the whole year, and UNWTO arrivals and receipts data for the first 2-3 months of the year. In addition monthly air passenger and hotel data is available, but again just for the initial months of the year.Economic growth in Q1 has varied from on-going recession in the eurozone and slowing growth in China, to continued robust growth in the US and stronger than expected growth in Japan as a result of monetary stimulus. Overall world
GDP is now forecast to grow slightly weaker in 2013 at 2.2%, with growth downgrades largest for China, India, Latin America and Italy, and only Japan’s outlook revised up. YTD world visitor arrival growth is in line with expectations at the start of the year, albeit based on only two months of data. Other Travel & Tourism indicators show steady growth,again broadly in line with expectation from the annual update research.
Next month, as we reach the mid-point of the year, we will consider in more detail what impact this and a further month’s data are likely to have on the world and regional Travel & Tourism outlook for 2013.
We will also explore receipts performance and analyse whether arrivals performance conceals any downward pressure on average visitor spending, which would be consistent with the hotel ADR trends.Eurozone: GDP forecast for 2013 remains the same as last month, with the economy expected to flat line with 0% growth. Industrial output has been a key drag on growth and is expected to fall by 1.5% over the entire year.This is partly a symptom of underlying weak consumer demand within the region, and weaknesses in some key export markets. Retail sales experienced a year-on-year decline of 2.2% in March, reaching their lowest levels since the onset of the recession.The eurozone unemployment rate hit an all-time high in 2013 Q1 of 12%. Continuing high unemployment threatens to squeeze the level of disposable income further.USA: The 2013 GDP forecast for the US economy remains largely unchanged at 2.1% this month. Stronger increases in retail sales have been balanced out by weaker industrial output. Excluding sales at gasoline stations, retail sales grew by 0.7% in April, indicating that some strength in first quarter consumer spending has carried over into the start of Q2. Retail sales experienced a boost due in part to lower consumer prices, which fell for the second straight month in April, declining by 0.4%.There was more good news for the labour market as unemployment once again dropped in April to 7.5% - the lowest rate since December 2008.UK: GDP forecast for 2013 has been revised up modestly to 0.9% from 0.7% last month. A stronger than expected Q1 2013 GDP growth outturn means the UK narrowly avoided a triple-dip recession, and has set the economy on a better path for the coming year. This slow but sustained recovery has benefited from a strong services sector, which contributed the majority of growth in Q1. Overall, the outlook remains upbeat with the latest Purchasing Managers’ Index (PMI) for services rising to its highest level in 8 months.For Travel & Tourism, the expected weakening of Sterling from $1.46 at the beginning of the year to around $1.60 by the year end, should help boost competitiveness.Middle East: GDP growth forecast for 2013 in the Middle East remains unchanged at 3.5%. However, risks remain to future growth in the form of further civil unrest and the expectation that oil prices will decline in the next few months.Africa: Africa’s 2013 GDP forecast remains unchanged. However, tensions in Algeria, Mali and Kenya remain a threat and may impact on longer-term tourism ArrivalsAsia Pacific: Despite weaker than expected GDP growth in China, Japan’s economy continues to perform well as its expansionary monetary policy takes effect. China’s growth forecast for 2013 has been revised down to 7.5% from 8.2% last month, as rebalancing the economy to encourage consumption has made it more sensitive to movements in consumer expenditure. Nominal retail sales cooled to 12.4% in 2013 Q1 compared to 14.5% the previous quarter.Despite this, house prices have experienced a significant pick up and should this continue, it will play a role in boosting consumer spending.
Japan has continued its expansionary monetary policy and aim of getting rid of deflation and weakening the value of its currency to boost export competitiveness.
The yen has weakened to 100 ¥ per US dollar from 78 ¥ since the expansionary monetary policy first started being discussed last October. The Japanese stock market too has seen significant gains with the Nikkei 225 increasing by over 65% compared to May last year. However, the strategy still entails some amount of risk should the government not persist with the policy if early results fail to continue, or inflation could rise too sharply.However, given the early successes of the policy, we expect Japanese GDP for 2013 to grow by 1.2%, compared to only 1.0% last month, and 0.5% at the time of the annual update research.