Monday, April 2, 2018

Economics of Tourism: The Future of Direct Contact with Other Countries

Tourism intrigues me in economic terms, because it's a larger industry than many people realize. It's also treated as an export industry, in the sense that if a German tourist comes to the US, the spending is essentially in economic terms an export of "services" produce in the US and consumed by a non-American--even though the actual consumption happened within the geographical US. At a broader human level, tourism interests me because face-to-face direct interactions with people from other places, whether as host or as visitor, can shape how people from around the world view each other.

Thus, I read with interest the OECD Tourism Trends and Policies 2018 report, and in particular the discussion of "Megatrends Shaping the Future of Tourism."  Here are some snippets (citations omitted):
"Global tourism has experienced steady growth for over six decades, culminating in an estimated 1.2 billion arrivals in 2016; a figure which is forecast to rise to 1.8 billion by 2030, with international tourist arrivals in emerging economy destinations projected to grow at double the rate of that in advanced tourism economies. Global expenditures on travel more than doubled between 2000 and 2016, rising from USD 495 billion to USD 1.2 trillion and accounting for 7% of global exports in goods and services. In OECD countries, tourism accounts for, on average, 4.2% of GDP, 6.9% of employment, and 21.7% of service exports." 
What are some of the megatrends that will affect patterns of international tourism moving forward?
There is an expansion of the global middle class: ""At the end of 2016, there were approximately 3.2 billion people considered to be in the global middle classes around the world. Annually, about 150 million people are joining this demographic group, with the majority of these (an estimated 88%), residing in Asia ... " The share of elderly in global population is rising: "The United Nations (UN) has projected that by 2050, nearly all regions of the world will have almost a quarter of their population aged 60 and older ..."

Taken together, these patterns suggest much larger tourist flows from Asia to the rest of the world. They also suggest a possible emphasis on tourism involving the elderly. In some cases, this may take the form of a rise in multigenerational tourism. In others, it may just mean an emphasis on "accessible" tourism, which has an emphasis on having transportation connections and eventual destinations that work well for the elderly.

Another pattern involves medical tourism:
"Another niche segment that is likely to experience significant growth in the coming years is that of medical tourism. As the cost of medical insurance and procedures, whether for health or cosmetic purposes, continue to increase in developed economies, emerging economies will become attractive options. As the quality of medical practitioners and infrastructure improves and the costs remain low, relative to those in source markets, tourists will be more likely to consider travelling abroad for wellness purposes and/or to combine a medical procedure with a short break ..."
And yet another involves the evolving travel patterns of "Millenials":
Millenials currently account for about 20% of international travel, spending an estimated USD 203 billion around the world. By 2040, they will range in age from 45-60 ... Data indicates that Millenials take more trips annually  than other generations--at four or more per year. However, trips tend to be shorter in duration compared to other demographic groups. Furthermore, they are more likely to pick travel experiences that they consider to be "authentic"--preferring to head off the beaten track and "live like a local" ...
A variety of other evolutions are likely to matter, as well. Internet connectedness is changing how people can plan and shop for vacations--but also making it more important to have methods for evaluating whether what you see on the web is trustworthy. There are even some predictions that the rise of virtual reality tourism will at some point tend to reduce the actual need to travel. Maybe that tradeoff will happen someday. But my guess is that for the short- and middle-term, virtual reality may turn out to be one of the most effective tools for making  people want to take a trip.

For some additional commentary on the tourism industry in the US and at the global level, see: