Introduction to the Travel Industry
The global travel industry is comprised of a wide variety of businesses, from hotels and inns to casino resorts, trains, buses, airplanes, cruise ships, tour operators and travel bookers, both online and physical. According to the World Travel & Tourism Council (WTTC), the global travel and tourism industry supported 98 million jobs on a direct basis in 2011, which they forecast to grow to 120.4 million in 2022. The industry generated $1.97 trillion in direct global contribution to GDP (gross domestic product) during 2011, which is forecast to grow to $3.0 trillion in 2022. The industry’s impact on GDP grew by 3% in 2011 and was forecast to grow 2.8% in 2012. Over the longer term, WTTC expects this growth to average 4.1% yearly from 2012 to 2022.
According to the WTTC’s figures, in the U.S. travel and tourism accounted for $434.4 billion in direct impact on GDP during 2011, which is expected to grow to $601.1 billion in 2022. Asian nations produced strong results from travel in 2011, including China at $181.6 billion direct GDP impact and Japan at $123.5 billion. China is definitely the market to watch for exceptional growth, where 22 million people were directly employed in travel in 2011.
The International Air Transport Association (IATA), the international association that represents most of the world’s major airlines, estimated a global airline industry net profit of $7.9 billion for 2011, dropping to $3.0 billion in 2012 due to high fuel prices and the economic slowdown in Europe. Global airline revenues for 2012 were estimated at $631 billion.
The U.S. Travel Association (USTA) estimated total U.S. travel expenditures at $813.0 billion for 2011. This was up significantly from $758.7 billion in 2010.
International passenger travel is a bright spot. For example, the U.S. International Trade Administration expects international arrivals in the U.S. to grow from 65.4 million visitors in 2012 to 76.6 million in 2016. Hotel occupancy and airline traffic have been strong in emerging nations including India, China and the surrounding Asian region, as well as in Brazil. However, an economic slowdown in these nations during mid 2012 will have a negative effect on travel, at least for the near term.
Airlines are suffering from high fuel costs, resulting in lower profits. On the other hand, hotels and resorts have been enjoying good occupancy rates, which enabled them to raise prices. Business travel has rebounded considerably over the dismal recession years of 2008-09, while leisure travel has been generally strong worldwide. Nonetheless, when members of the European or American middle class do take a vacation, it is generally on a reduced budget. Businesses are sending more employees on trips, but are keeping a tight reign on costs at the same time.
In the U.S., major airlines have cut routes and reduced the total number of seats available, partly by removing older, fuel-guzzling aircraft from service. This put the airline industry in a much more efficient operating condition. U.S. airlines are operating with much smaller staff counts. The number of employees in the U.S. scheduled airline industry plummeted from 485,000 in 2003 to 414,700 in 2011.
The 2008-09 recession was an ugly time for airlines. Many took bankruptcy protection in 2008, including Frontier, and some, such as Aloha Airlines and ATA, once major airlines in Hawaii and elsewhere, were forced to discontinue operations altogether. Several specialty and business-class-only airlines ceased operations also, including MAXjet, Eos and Skybus. Government-controlled Alitalia, in Italy, took bankruptcy in August 2008.
For the near future, advanced new aircraft will bring significant changes in the global airline industry. Boeing’s 787, with the first delivery made to Japan’s ANA airline in September 2011, will enable international airlines to offer great enhancements to passenger comfort with extremely long intercontinental range, while the airlines will benefit from a fuel efficiency boost of about 20%. Although this mid-size aircraft carries fewer passengers than the massive Boeing 747 and Airbus’ giant A380, it will enable airlines to open up many new, direct routes. For example, new flights from Europe directly to growing markets in Africa and Southeast Asia will be introduced. Likewise, new routes from markets in the U.S. such as Denver or Minneapolis, that historically have not been major jumping off points for direct flights to Europe or Asia, will likely be tried.
A small number of the giant Airbus A380 had been delivered by mid-2012, typically set up to carry about 550 passengers in great comfort from one global capital to another. Airbus enjoys a good backlog of orders for this aircraft.
Perhaps more important is the spectacular demand from global airlines for smaller, single aisle planes to replace older models that are not particularly fuel-efficient. Boeing has announced that it will build a new high-efficiency version of its exceptionally popular 737, to be called the 737 MAX, which will compete with a similar offering from Airbus, an A320 NEO model with a new engine option.
Among international carriers, the upstart Emirates has carved out a place for itself as a major long-haul airline. It offers routes spanning the entire world and a major hub in the Middle East.
Discount airlines remain very important players in the U.S. as well as in Europe and the rest of the world. Southwest Airlines is one of America’s top carriers by number of passengers, and JetBlue has enjoyed very rapid growth. Outside the U.S., many carriers have carefully studied Southwest’s methods and strategies, and have enjoyed strong growth. Good examples include Kingfisher in India, Dragonair in China and Ryanair in Europe.
E-commerce continues to play an extremely important role in the travel sector, making booking convenient for consumers and more cost-effective for travel providers. However, online travel booking sites like Orbitz and Expedia face tough competition. Airlines and hotel chains operate their own powerful online reservation systems, with rich features, multiple levels of photos and descriptions, and features for managing frequent traveler awards. Consumers often find the lowest prices on sites operated directly by airlines and hotels.
The cruise line business has held up very well despite the recent financial crisis, particularly at the largest cruse lines. Consumers see cruises as high-value package deals, and cruise ships are nearly full. Cruise companies are hopeful that their “all-inclusive” fare model will continue to attract cost-conscious travelers in addition to luxury cruisers. In 2011, 13 ships were introduced (12 new and one refurbished). Some of the newest ships, such as Royal Caribbean’s “Allure of the Seas” are among the largest passenger ships ever built. The Cruise Lines International Association estimates that North American passenger numbers have been growing at a 7.5% average yearly rate since 1980. Nearly 11 million passengers were carried on 4,222 departures by the top 19 North American cruise lines during 2011.View More
Video Introduction to Travel, Airline, Hotel & Tourism Industry