Bouncing back

The international travel industry has been badly hit by the global downturn, but now seems to be coming out of the crisis. In 2010, key performance indicators such as international tourist arrivals and RevPAR continued to show steady improvement. Institutions like the World Tourism Organisation (UNWTO) see the travel industry as one of the most dynamic economic sectors worldwide - able to create much-needed growth and employment.

Tourism sector gains momentum

During the most challenging year of the economic crisis, 2009, international tourist arrivals fell by 4%. For 2010, UNWTO reported an increase of almost 7%. Between January and August 2010 the number of international tourist arrivals reached 642 million and even surpassed the record set during the same period of the pre-crisis year 2008. Emerging markets were the main drivers of recovery, and the upward trend in international tourist arrivals was also strong in the Middle East (+14%) and Asia-Pacific (+13%), followed by Africa (+6%) and the Americas (8%); Europe was recovering at a slower pace with +3%. Our own financial results support these findings: in 2010, Rezidor noted a significant EBITDA contribution from emerging regions – our focus areas with a huge demand for and an often drastic undersupply of internationally branded hotels, such as Russia/CIS and Africa.

RevPAR increases steadily

Since the beginning of 2010, the hotel industry has benefited from the ongoing improvement in the economic environment. The overall pattern in most countries in Europe points to a steady increase in RevPAR over the past 12 months. During the first half of the year, growth was primarily driven by occupancy. The second half, however, witnessed a modest increase in room rates which contributed to the RevPAR growth. The strong RevPAR development in the mature and often crowded European markets is also expected to benefit from the low growth in room supply: estimates show an increase of only 1% for 2010, which is far from the high levels observed during the last global crisis in 2003. Despite the positive news, absolute RevPAR is still at a very low base and well below the old levels the hotel industry enjoyed in 2008.

Conversions have positive effects

As in 2009, the global downturn continued to create a trend towards branded hotels in 2010. Hard-hit independent hotel owners were looking for international operators to support their properties with global marketing, sales and distribution tools (including attractive loyalty programmes), as well as with experienced and efficient purchasing and operational processes. From individualconversions to portfolio deals: such agreements are increasingly important for industry leaders, for both their business development and their operational results. In times when funding for newly built hotels remains difficult in many areas, conversions have the positive effect of generating immediate cash flow. Rezidor’s mid-market brand Park Inn by Radisson has proven to be one of the most efficient conversion packages in the industry, and we clearly benefit from this market development.

A dynamic sector

There are more and more glimpses of sunshine – but it is still not yet a bright new day for the international travel industry. Researches continue to highlight budget constraints and unemployment as major risk factors for our industry’s growth – accompanied by further hurdles such as the growing number of taxes on travel and tourism, the dawn of a new decade in which demographics will be changing and will affect travellers’ demands and behaviour, and – last but not least – the increasing need to conduct business in an environmentally responsible way. However, the fact that the travel industry is bouncing back from the downturn faster and stronger than many other industries means that UNWTO is not alone in regarding this as one of the most dynamic sectors of the worldwide economy. With the right attention from governments and organisations around the globe, the travel and tourism business can become a key driver of recovery, growth and sustainability.