Focus on US Default Crisis
Maldives Promotion House – Tourism Professionals all over the world have begun to discuss the depth of the impact from the fallout of the US “Default” crisis and the potential credit rating decline. Experts in Maldives have also expressed concerns about the ongoing and worldwide crisis that will touch people throughout the tourism and travel industry.
While it is critical that experts do not get tangled up in rumours or widely spreading headlines, the crisis has less to do with raising an artificial debt ceiling and more to do with simple debt. According to Dr. Peter E. Tarlow, the President of Tourism and More, Special to ETN, many Western nations, including the US, simply spend more money than they take in.
“Though most Western nations have practiced some form of this economic policy for decades. The unfortunate results of overspending have created highly unstable societies in countries such as Greece, Italy, Spain, Portugal, and Ireland. In all of these nations, deficit spending has been instituted as a means of paying for what is often called “The Social Net,” and there is the assumption that it is the government’s job to “Smooth” out a society’s business and economic bumps,” Dr. Tarlow said.
Dr. Tarlow further explains his view. While in the US, this social net has always existed, the government participation has been much less, while traditionally, Americans have tended to rely on volunteerism and community-service providers, such as religious institutions, rather than government bureaucracies. Thus the social net has existed but at far less governmental cost. Some economists believe that due to the less reliance on government to provide the social net, the US, at least until now, has been able to avoid the economic tragedies that are now occurring across much of Southern Europe.
Despite whatever happens in Washington, there are a number of other factors that will impact tourism. Among these are:
1. Even if the most extreme budget bill is passed, the US is still spending more than USD1,000,000,000,000 (one trillion) dollars more than it receives.
2. US economic national product is down to less than 1.4 percent. That means that economic growth is at about zero.
3. In the US, unemployment is now increasing and housing prices are continuing to be down.
4. China is now facing a major economic slowdown.
5. Germany is now feeling the first signs of a looming recession and may no longer be able to bail out Europe’s so-called PIIGS countries (Portugal, Italy, Ireland, Greece and Spain). While the euro will not disappear tomorrow, its longevity may now be in doubt.
Here are some of the ways that tourism and travel professionals can expect the current economic crisis to impact their industry and some ideas for economic survival in highly turbulent times.
In this global economy, be prepared for continual currency readjustments. For years, the US dollar acted as the one stable currency. This fact is no longer true and unstable currencies in an interconnected world means that tourism officials must be prepared for price fluctuations. The impact of such unstable pricing means not only will many tourism providers be unable to set market prices but also that business plans will need to be updated on a continual basis.
Tourism, especially leisure tourism, is a discretionary expense and, therefore, vulnerable to mood swings. If the public is fearful of not having enough money to pay for basic necessities, then for many people, there is a tendency to pull back. This pulling back does not mean that people will cease to travel. It does mean that they may seek less expensive options, and for shorter time periods. Those tourism businesses that are in or close to major population centres have a great many new opportunities, while those destinations that are dependent on long-haul travel and more lengthy stays may have some challenges to overcome.
Expect this period of economic turbulence to be here for quite some time. Despite what politicians may say, the bottom line is that no one has a plan that is politically acceptable. In today’s world, there are more voters than workers and that means that politicians are afraid to make decisions that may cost them an election.
Foreign, non-business travel should decline as the cost of travel combined with lower salaries will impact the way citizens from major industrialized nations spend their money. This decline in foreign travel will be especially hurtful to those parts of the world, such as the Caribbean that have long depended on foreign visitors and have a reputation for being expensive, offering poor customer service and tending toward being unsafe.
Here are some ideas to prepare for what may be a difficult economic year.
Develop creative bundling packages. For example, create packages that allow business travel to be combined with family vacations. Encourage hotels to include breakfasts, Internet services, and other amenities within the cost of a room.
Keep prices as low as possible. No one likes to cut their profit margin, but some profit is better than no profit at all. Let people know that you care and that your prices reflect your concern for the public’s well-being.
Provide the best customer service possible. When money is tight, our tolerance for bad experiences is even less. These are the times not to make customer service mistakes, and if a mistake is made, make sure to apologize and correct the mistake. In economically-challenging times, no one wants to hear excuses for customer service errors.
In the US, the weak dollar means that many foreigners will find the US a highly-affordable vacation option. US tourism professionals need to internationalize their product and their outlook so as to attract both European and Asian visitors.
Many Latin American nations, due to the low cost of labour and short food supply distances, can also become new tourism destinations. However, issues of poor customer service, violence, and crime waves against tourists often plague this part of the world.
Seek markets that are closer to home. Smaller communities and communities that offer short-term tourism (2 or 3 days) can see increases in their potential market if they can solve problems such as: what to do on rainy days, lack of night time activities, and how to entertain children during inclement weather such as snow storms.
Unfortunately, the travel and tourism industry cannot change the world’s economic policies, but travel and tourism can teach political leaders around the world several important lessons. Among these are: during economically-challenging times, talk less and do more.
Dr. Tarlow has explained that this is not the time simply to market what you have, but rather it is the time to launch new products and become innovative. Creativity and out-of-the box thinking are essential skills for such a challenging economy and the travel and tourism industry are not going to go away.
According to Maleeh Jamal, the Secretary General of Maldives Association for Travel Agents and Tour Operators (MATATO), the Default Crisis will have a worldwide impact. However he also suggests that the direct impact to Maldives would be minor.
“The US market of tourists that visit Maldives is relatively small. Because of that, Maldives will experience only a minor direct effect from the crisis. But Europe will be highly affected by this and thus will create a major effect on tourism in Maldives, because the majority of the tourists to Maldives come from Europe,” Maleeh said.
“China also dominates the tourism market in Maldives and is a major credit partner to the US. So to some extend China’s economy will suffer, leading to a negative effect on the Maldivian Tourism. Moreover, the current statistics show that the world economy may not improve within the next two years. So if Maldives is to sustain its tourism, we have to device a strategic plan to focus on the upper class or the rich and wealthy market as well,” he added.
No matter what the credit rating may be, no matter what the cost of money, people are still going to travel. However, for tourism and travel to prosper rather than merely survive, the industry is going to have to be much more creative, innovative, and service oriented. Tourism centres that can choose to not to provide good service, offer poor security, and lack of new product innovation will not survive. Those, however who choose to offer excellent service and continually reinvent their product in a safe and secure environment are bound to not only survive, but in the end, will prosper.