The Global Tourism Industry

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What to Expect From The Global Tourism Industry in 2010

by Martin Denholm, Senior Editor

“A challenging year.”

That’s a contender for one of the understatements of the year when talking about the woes for the global tourism industry.

It comes courtesy of Caroline Bremner, global travel and tourism manager at market research firm, Euromonitor International.

Her firm just compiled the Global Trends Report 2009, which makes for grim reading for the industry…

Global travel bookings down by 8% this year.
A 14% drop in airline passenger numbers.
A 16% slump in global hotel reservations.

Hardly surprising, given the scale of the global recession and high levels of unemployment in many developed nations.

But amid the recession-induced rubble, Bremner maintains an optimistic attitude for 2010, citing the emergence from recession of powerhouse countries like the United States, Japan, Germany and France.

That’s not to say that 2010 will see a dramatic recovery… far from it. More like a steady one. But with the industry still forced to offer major discounts to cash-strapped consumers, don’t expect any recovery to trigger an upturn in corporate profits.

While that’s great news for consumers who have money to travel, it means travel firms, hotel chains and airlines are still good candidates for profitable downside investment strategies like short-selling and buying puts.

One such airline is British Airways (LSE: BAY.L)…

A £240 Million Reversal

What a difference a year makes.

At the end of the first half of the U.K. fiscal year in September 2008, BA reported a profit of £52 million ($87 million) – not bad for an airline in the midst of one of the worst periods in its industry’s history.

Flash forward to 2009: BA just announced a pre-tax first-half loss of £292 million ($488 million) for the April-September period. It came as revenues slumped by almost 14% to £4.1 billion ($6.8 billion) – a desperately disappointing performance, given that it included the busy summer season.

Unfortunately, BA employees will pay the price for this latest setback, with the firm set to lay off another 1,200 workers on top of the 1,900 already released. The BBC reports that by March 2010, the airline will have laid off 4,900 positions.

But while BA chief Willie Walsh says such operational changes are “absolutely necessary to improve the performance of the business” and ensure survival, he’s facing a backlash from the Unite employees’ union.

With BA having proposed a two-year pay freeze in addition to cutting crew numbers on long-haul flights from mid-November, Unite plans to proceed with a mid-December vote on whether BA staff should take strike action. However, a High Court injunction taken by Unite against BA in an attempt to block the employment changes isn’t set until February 2010.

Meantime, BA gets three months of work from disgruntled employees, as it aims to continue its cost-chopping trend. The company said its semi-annual operating costs declined by 8.7%.

Even with the potential for an improving global economy in 2010, it seems improbable that it will trigger much of an uptick for the tourism industry and the companies within it – particularly with unemployment running high in several countries. Traveling and holidays are likely to be far down the list of consumers’ priorities.

Best regards,

Martin Denholm

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