30 Sep, 2001
Bleak Days Ahead as Post-9/11 Crisis Roils Travel Sector
THE global travel & tourism is confronting a bleak scenario for at least several months to come but all indications are that Thailand is still managing to hold its own – so far.
While there is general relief that the US has backed off from making a large-scale strike, there is concern about the general economic downturn and uncertainty over currency fluctuations, shifts in investments, rising oil prices, rise and falling stock markets, and other such factors, the stability of which is critical to the regular flow of travel & tourism.
Add to that the general depressed mood and the desire of both leisure and business travellers not to be away from home for long periods of time, and the situation gets even worse. The recent cancellation of the Commonwealth Heads of Government meeting, which would have been a bonanza for host-city Brisbane, is an indication of how big-ticket events are being scaled back for political, economic and security reasons
How to restore confidence in travel is set to be a major challenge. While corporate leaders and mayors of some cities are taking to the skies themselves to wave the all-clear flag, it is against a background of massive industry job losses and across-the-board cost-cutting.
There is some cheer about the global economic and financial powers trying to get economic growth moving again. One good sign is the decision to go ahead with the World Trade Organisation meeting in Qatar this November. Nevertheless, many in the travel & tourism industry say that the mere fear that the US may still strike is just aggravating the uncertainty.
Continuing the trend of the past few years, Thailand is still managing to keep its head above the water, primarily because of its political, economic and social stability. Most of the media attention has focussed on Indonesia, Malaysia and the Philippines. As a result, Thailand has not been hit by any travel advisories, allowing its global salesmen to continue to pitch the product with a relatively higher degree of confidence.
While the upcoming review of visa privileges is a matter of concern, it is unlikely to hit more than a small handful of countries. In the longer term, it might work for the best by making it less easy for potential trouble-makers to come here and indulge in acts that may prove far more costly and affect arrivals from many other markets, especially those with visa-free privileges.
So far, the aviation industry has been worst affected. Boeing, Delta, United, Northwest, Lufthansa, SAS, British Airways are among the aviation companies which have announced widespread layoffs, cut routes and sought subsidies and insurance cover protection.
The laying off of United Airlines’ Thai cabin crew is only part of how far-reaching this is going to be. Royal Air Cambodge has also shut its office here. Many more such moves are expected.
The stepped up security is adding to the hassles of travelling system-wide, even though the queues at immigration and security points are down due to the general drop in travellers. Meanwhile, costs are up: Lufthansa is announcing a 25% increase just in security costs.
Related to the aviation downturn is the impact on travel agencies. In Australia, the airline Ansett Australia collapsed on Sept 13 but returned partially to the skies last week. However, it has sold its Traveland travel agency to a consortium of investors headed by technology group Internova MCI Ltd.
This will include all the 104 company-owned stores and 275 franchised stores of Traveland, one of Australia’s biggest travel agents with 750 staff and annual revenue of A$1 billion (US$490 million). Traveland’s liabilities, estimated at A$25 million, would continue to be managed by an administrator.
However, in a typical display of the secrecy surrounding such deals, Internova declined to disclose the purchase price or name the six investors in its consortium. It did say that it would integrate the Traveland operations into its existing businesses, which revolve around information technology, financial services and travel.
The hotel industry is also likely to be affected by similar ownership changes. In Thailand and other Southeast Asian countries, there has been much resistance to selling-off properties in the non-performing-loan category to investors. The pressure to do so is now likely to rise; the longer the wait, the more the assets deteriorate, devalue and depreciate, further depressing their prices.
Many hotels are also likely to be affected by the moves against money laundering. The cash-rich travel & tourism industry has been well known as a front for money laundering operations, and hotels can expect to come under increasing scrutiny.
The cruising business, widely forecast to be one of the major growth businesses in the ‘good old days’, has been hard hit with the closure of Renaissance Cruises. Other smaller cruise operations are also expected to keel over, leading to thousands more job-losses in both the operating and ship-building sectors.
The confusion in the industry is widespread. Travel agents are never sure about which products to book, as there is no certainty about who will still be in business over the next few months. Then there are the huge administrative costs related to managing cancellations, refunds, redemption of frequent traveller points.
Still, cities and national tourism organisations world-wide are trying to get business moving again through funds and subsidies. In the US, some travel agency consortiums have proposed giving the entire industry a tax-cut for an undetermined period of time to help them bring customers back.
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