Marketing Review — Summer 2008 - (Page 26) 26 55 TRENDS FOR TRAVEL & HOSPITALITY • SUMMER 2008 200116938-001/CHABRUKEN/GETTY IMAGES were recognized. This trend has remained a constant, and with each revision its effective period has been extended. To invalidate this trend would take a catastrophe on the order of the loss of Middle Eastern oil from the Western economies. No such dramatic reversal of global fortune can be foreseen. IMPLICATIONS: New growth among all these trading partners should create a “benevolent cycle,” in which the health of each partner helps to ensure the continued health of the rest at least through 2012. Global growth is expected to come in at 4.8 percent in 2008 and 4.4 percent, on average, in the five years ending in 2013. China has developed into an effective counterbalance for the U.S. economy. When America hits hard times, China can help to keep the world from following into recession. We first saw this in the post 9/11 crunch in the United States. This should make the global economy much more stable for so long as China remains a vibrant trading nation. Any interruptions in economic growth should be relatively short-lived. By 2012 or so, India will expand faster than any other market in the world, with China falling into a close second place. In the long run, the newly capitalist lands of the former Soviet Union should be among the fastest growing new markets, particularly if the oil industries of Kazakhstan and its neighbors, Kyrgyzstan and Uzbekistan, can be developed promptly. Labor markets will remain tight, particularly in skilled fields. This calls for new creativity in recruiting, benefits, and perks, especially profit sharing. This hypercompetitive business environment demands new emphasis on rewarding speed, creativity, and innovation within the workforce. IMPLICATIONS FOR HOSPITALITY AND TRAVEL: American business will be cutting back ruthlessly in 2008 and early 2009, allowing only the most necessary trips, while vacationers will stay close to home until they are convinced the recession is over and their jobs are secure. We expect to see air travel drop in 2008 and recover slowly through 2009. At the same time, consumers will be cutting back from high-end hotels to mid-priced chains and from mid-priced to economy; eating at home or at fast-food outlets rather than pricier restaurants; and—for those who still vacation abroad—favoring cheap destinations such as Mexico, Portugal, and Eastern Europe over Paris and London. Only the high end of the cruise market will be relatively unaffected: The wealthy remain able to pay for luxuries even in the worst of economic times, and 2008 will be as mild a downturn as the U.S. could hope for. The flip side is that the euro and other world currencies buy much more in the States than they do at home. Europeans can hop on a plane for New York or Miami, shop ‘til they drop— their packages, at least—enjoy a few nights out, and return home carrying loot they could not have paid for at local prices. Many of them are doing so. These bargain hunters are bringing needed profits to the American hospitality and travel industry. At the same time, they are helping to maintain demand in the cruise market and in traditional European destinations. By late 2009, most of these aberrations will pass, and Americans again will be contributing their accustomed share to the global hospitality and travel markets. As formerly poor residents of China and India grow increasingly prosperous, they too will fan out across the world as inter- 20 national tourists. By 2020, 100 million Chinese and 50 million Indians are expected to vacation in other lands each year. Accommodating them will be a continuing challenge for hospitality and travel businesses. 20) The global economy is growing more integrated. By some counts, only half of the world’s one hundred largest economies are nation-states. The rest are multinational corporations. In the European Union, relaxation of border and capital controls and the adoption of a common currency and uniform product standards continue to make it easier for companies to distribute products and support functions throughout the Continent. The Internet also brings manufacturers effectively closer to remote suppliers and customers. Companies are increasingly farming out high-cost, low-payoff secondary functions to suppliers, service firms, and consultants, many of them located in other countries. Companies in high-wage countries also are outsourcing management and service jobs to low-wage countries. An estimated 3.3 million U.S. jobs are expected to migrate to India and China by 2015. Some 40 million jobs are believed vulnerable to outsourcing. ASSESSMENT: This trend will continue for at least the next two decades. IMPLICATIONS: The growth of e-commerce enables businesses to shop globally for the cheapest raw materials and supplies. In niche markets, the Internet also makes it possible for small companies to compete with giants worldwide with relatively little investment. This has brought new opportunities for quality-control problems and fraudulent cost-cutting by suppliers, as seen in the recent spate of tainted food and other products coming from China. The Net also has created a generation of “e-preneurs” whose businesses exist largely on the Internet, with production, fulfillment, and other functions all outsourced to specialty firms. Demand will continue to grow for employee incentives suited to other cultures, aid to executives going overseas, and the many other aspects of doing business in foreign countries. However, rising demand for foreign-language training is likely to be a temporary phenomenon, as more countries adopt English as part of their basic school curricula. Western companies may have to accept that proprietary information will be shared not just with their immediate partners in Asian joint ventures, but also with other members of the partners’ trading conglomerates. In high technology and aerospace, that may expose companies to extra scrutiny due to national-security concerns. Establishing overseas branches mitigates this concern by keeping trade secrets within the company, even while gaining the benefits of cheaper foreign labor and other resources. Economic ties can give richer, more powerful countries considerable influence over their junior partners. Thus far, China has been the most successful at wielding this “soft” power. This has given it the ability to undermine American foreign policy even as it secures its energy and raw-materials needs. IMPLICATIONS FOR HOSPITALITY AND TRAVEL: Online B2B sales and services will play a growing role in minimizing
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