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Tourism to boost emerging property markets

The global tourist industry is predicted to average an annual growth rate of 4.2 per cent over the next decade, according to a report released this month by the World Travel & Tourism Council (WTTC) and Accenture.  The fastest rates of growth are in emerging economies boding well for long-term property investors.

The Tourism Satellite Accounting (TSA) report, sponsored by Accenture and prepared by Oxford Economic Forecasting (OEF), includes reports of Travel & Tourism spending for 2005 as well as industry forecasts for 174 countries and the world.  The data, announced at a meeting of WTTC members earlier this month, reveal industry growth of 5.7 per cent in 2004 bringing global travel and tourism spending to over US$6 Trillion (£3.4 trillion) in 2005.  The WTTC reported that whilst events such as the December 2004 tsunami and the 2005 bombings in London and Egypt had local impact they did not materially affect global tourism overall.

Richard Miller, Executive Vice President of WTTC said, “The years 2004 to 2006 will be seen as a period of significant growth for the industry. Although events like the tsunami, bombings and hurricanes, as well as a major increase in the price of oil, could have dampened demand, it appears that consumers are becoming more resilient, and Travel & Tourism continue to be a significant part of everyday life.”

A key engine for economic growth

In 2006, the WTTC is forecasting that overall growth in the global tourist industry will slow slightly to 4.6 per cent (real terms) bringing global tourist spending to US$6.5 trillion (£3.7 trillion).  But international travel in particular is expected to rise more quickly at a real growth rate of 6.5% bringing visitor exports to around US$900 billion.

The growing international travel & tourism industry is a key driver of economic growth internationally.  In 2006, the sector is expected to rise to 3.6 per cent of total Gross Domestic Product (GDP) and create 2.5 million new jobs bringing the overall number of people working in the industry to 76.7 million (2.8 per cent of total world employment).

When the industry's indirect contributions to other sectors of the world economy are also taken into account (for example, tourism-related businesses, such as cleaning companies and caterers) the impact is even higher.  Global travel and tourism is expected to make up 10.3 per cent of GDP in 2006, creating nearly 10 million new jobs and representing 8.7 per cent of total employment.

“We are witnessing the power, speed and vitality of Travel & Tourism and how they can bring economic opportunity and jobs to people and economies seeking sustainable development,” said WTTC President, Jean-Claude Baumgarten.

WTTC is forecasting an annualized growth rate of 4.2 per cent per annum from 2007 to 2016, demonstrating strong growth in the long term.

A boost for emerging property markets

As part of the research, WTTC released its 2006 list of top ten Travel & Tourism economies. For the third year in a row, Montenegro had the highest growth rate, as it continues to use tourism to drive economic development and create jobs. India and China came in at second and third, respectively, illustrating the impact of the emerging middle-class on travel & tourism.  Four central and eastern European countries - Romania, Croatia, Latvia and Albania - also joined the list.

Travel and Tourism Demand, 2007-2016 (Annualized Real Growth)
 
1. Montenegro 10.2%
2. China 8.7%
3. India 8.0%
4. Romania 7.9%
5. Croatia 7.6%
6. Vietnam 7.5%
7. Latvia 7.3%
8. Maldives 7.2%
9. Albania 7.0%
10. Cambodia 7.0%

“Global tourism activity is setting new records globally but what is really amazing is how smaller, developing countries like Montenegro, Romania, Namibia and Brunei are using Travel & Tourism as catalysts for broader economic development,” said Jean-Claude Baumgarten. “They've come to appreciate the impact of international visitors and resident tourism and have made strategic decisions from the highest office to focus attention, resources and effort on the economic potential.”

These rising levels of tourism will in turn lead to increased demand in these countries for tourist accommodation, meaning rising rents for holiday lets and rising market values overall.  All good news for the canny, long-term property investor.