The Global Financial Crisis and Tourism

The financial crisis which hit the global economy in the autumn of 2008 represents the first and most difficult challenge to the globalization process. The crisis, which began as a liquidity crunch, went on to severely affect global financial markets moved quickly to the real economy, hence transferring the global economic expansion into the deepest global economic recession since the 1930s. Moreover, the crisis has shaken confidence in the international financial system, which has, in turn, exacerbated its impact on the global economy.

Over the past six decades, tourism has experienced continued growth and diversification to become one of the largest and fastest growing economic sectors in the world. Over time, more and more destinations have opened up and invested in tourism development, turning modern tourism into a key driver for socioeconomic progress. Tourism has become one of the major international trade categories. Today, the export income generated by international tourism ranks fourth after fuels, chemicals and automotive products. For many developing countries, it is one of the main income sources and the number one export category, creating much needed employment and opportunities for development.

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Tourism is one of the remarkable stories in the modern societies. The industry which began in large scale in 1960s has grown rapidly in term of the number of people travel abroad and income generated. From 1950 to 2007, international tourist arrivals grew from 25 million to 903 million. The overall export income generated by these arrivals (international tourism receipts and passengers transport) grew at a similar pace, outgrowing the world economy, exceeding US$ 1 trillion in 2007, or almost US$ 3 billion a day. While, in 1950, the top 15 destinations absorbed 98% of all international tourist arrivals, in 1970 the proportion was 75%, and this fell to 57% in 2007, reflecting the emergence of new destinations, many of them in developing countries (UNWTO, 2008)

The prospects for travel and tourism in the short term, at least to the end of 2009, are not very positive (ITB World Travel Trends Report 2008/2009). Over the last 25 years international tourist arrivals have tended to grow about one percentage point faster than world real GDP. However, they have also tended to fluctuate more than GDP, with higher peaks in the ‘good’ years and deeper troughs in the ‘bad’ years. Arrivals may well stagnate or even decrease by as much as 2% in 2009.

This forecast takes into consideration the fact that economic growth is expected to slow everywhere and will be concentrated in emerging and developing countries, where outbound travel is still a young and very fragile product. There are no quick or easy fixes to the current crisis, which was many years in the making, and the situation is almost certain to get worse before it gets better. It has no experience of financial systems on the brink of collapse, or of currencies (and assets and inputs necessary to the industry) fluctuating in value by 25% over the course of a few days. On the other hand, the boom in tourism, based on low-cost travel, globalisation, higher disposable incomes in emerging markets, and higher propensities to travel in developed markets, has been very resilient.