2 Apr, 2002

Just Months After 9/11, The Industry Changes Hands

Imtiaz Muqbil

In this dispatch:

1. JUST MONTHS AFTER 9/11, THE INDUSTRY CHANGES HANDS: The travel and tourism industry has now slipped well and truly into the hands of security companies, insurance firms, intelligence agencies and diplomats. A serious problem looms.

2. UP IN ARMS AGAINST ADVISORIES: A number of governments resent being held hostage to “unfair, capricious and arbitrary” travel advisories. At least two ministers are speaking out. The UNWTO feels they have a point.

++++++++++++++++

1. JUST MONTHS AFTER 9/11, THE INDUSTRY CHANGES HANDS

Fingers were being kept crossed when the ITB 2002 opened on March 16, 2002, exactly six months and six days after the event that changed the world. The worst is over, said industry pundits at many a forecasting forum. A V-shaped recovery has begun. There is ‘light at the end of the tunnel.’ Let’s get business moving again. But the optimistic mood was always tempered by a feeling of foreboding that ‘it’ is not over, ‘it’ being the era of global political instability that is also the root cause of woes in travel & tourism.

Obvious enough when ITB delegates returned to their hotel rooms and flicked on the TV, this instability took a further plunge in the last week of March as the Middle East crisis worsened. Israel is now at ‘war.’ So is the United States. Both say they are waging a war on terrorism. As President Bush expects the war to last for years, the travel & tourism industry can look forward to an equivalent period of turmoil, in which the primary victims (in terms of visitor arrivals) can expect to be the Middle East, the United States and Islamic countries, indeed all those regions involved in this war. Africa, Latin America and much of the Asia-Pacific are likely to be less affected.

With war, terrorism and security concerns now guiding the fortunes of the industry, it was perhaps no surprise to witness the travel & tourism industry passing, quietly and perhaps irretrievably, into the hands of lawyers, insurance companies, security companies, intelligence agencies and diplomats. The starting point for any trip, be it for holiday, business or MICE, is soon expected to be www.state.gov, the website of the US State Department which monitors safety and security conditions globally and issues the appropriate travel advisories (see story below). The implications of this in terms of costs and the way the industry does business are phenomenal and far-reaching.

Reports are emerging that global insurance companies, very badly affected by the payouts from 9/11 and unsure about the stability of destinations, are banding together to insure only those travel companies whose financial strength they can vouch for. Also refusing to cover any destination covered by a travel advisory, especially one issued by the US State Department, insurance companies are claiming the right to ‘independently verify’ the financial status of travel agents before extending cover.

This effectively gives them life-and-death power over travel agents, and the ability to drive consolidation in the industry on an unprecedented scale. Indeed, it further compounds the power they already have over airlines, many of whom are already seeking government protection to help remain afloat in the face of massive increases in insurance premiums. This takes the travel industry beyond any previous paradigm shift in direction.

Security companies have sniffed a similar spoor. Hospitality industry strategy professor Michael Olsen of Virginia State University told the Hotel Investment Forum that security companies are getting together to set up minimum ‘standards’ that destinations, hotels and other industry suppliers will have to observe in order to be ‘certified.’ It would be safe to assume that these ‘standards’ will often be found wanting, requiring additional training, hardware and other expensive ‘upgrades’. Certification will naturally have to be renewed every year, at a price of course. The prospects of thousands of destinations, hotels, airports, airlines and others all lining up to be ‘certified’ is enough to make the security companies drool.

The travel advisories are perhaps the most serious problem. Issued on the basis of media or other intelligence reports about the perceived threat to safety, many of them are misleading, obsolete and just plain inaccurate, often still left standing long after a threat has passed. Many of them are biased. The ITB daily newspaper FVW noted, for example, that no advisory had been issued by Germany against travel to Israel (at least not until that time) inspite of the explosive situation in that country.

At the heart of this crisis are the policies that breed it. Here, frustration is rising and being voiced, perhaps for the first time, by the travel trade press. At the time of the ITB, Vice President Dick Cheney was touring the Gulf seeking support for an attack on Iraq, prompting Phil Davies, editor of another travel trade newspaper TTG UK and Ireland, to write in a signed editorial, “The last thing the industry needs is a fresh world crisis – but that is precisely what US president George Bush and prime minister Tony Blair seem intent on creating. Their aggressive attitude towards Iraq suggests they are bent on starting a new Gulf war, despite the protestations of other European governments.”

He added, “Aside from the possible slaughter and a widening conflict in the Middle East, we can expect renewed fears about air safety plunging sales to the eastern Mediterranean and US travellers deciding not to fly. The trade may hardly be in a position to influence this situation, but opposing the pressure for war could be in its best interests.”

Even the editors of Travel Business Partnership, who produce the English version of the ITB daily record, made it quite clear that none of the measures being taken to revive tourism to Israel would be “as important as the overall security situation and the fact that many foreigners are totally opposed to Prime Minister Ariel Sharon’s military solution to the crisis with Palestine. As long as violence continues in Israel on a weekly or even monthly basis, most international travellers are likely to postpone their trips to Israel indefinitely.”

Legally, too, there are difficulties on the horizon. An industry that once only needed to worry about consumer protection laws and money-back claims stemming from misleading advertising or ‘loss of enjoyment’ now has to fear droves of ambulance-chasing lawyers looking to sue for every little security lapse. Companies can expect to pay through their nose should they be found wanting, often by judges sitting in court-rooms in distant lands with little or no idea of local conditions.

The cost implications of all this are incalculable, all at a time when the industry is already suffering from low cash flow, profitability and yield. For developing-country destinations, it means more leakage of critical revenue, a huge additional outflow of funds beyond the amounts paid out for marketing, reservations and booking fees, intellectual property payments, credit-card charges, interest rates, imports of capital equipment, F&B and manpower.

The bottom line is that travel and tourism is no longer in control of its own destiny. It may have been at one stage when pressing the right marketing buttons could produce the desired results. No longer. Indeed, extraordinary power now lies in the hands of any local rebellion leader of any cast, colour or creed who can hold an entire destination to ransom by triggering a couple of acts of violence, just enough to attract media attention. Along comes an advisory, out goes insurance coverage and the entire travel industry in that destination is as good as dead.

How the industry is going to deal with this in an era of unprecedented global chaos is going to be a major issue, if not The Major Issue, going forward.

-0-

2. UP IN ARMS AGAINST TRAVEL ADVISORIES

Two tourism ministers are banging away at what they call “unfair, capricious and arbitrary” travel advisories that land up making an entire country’s tourism industry suffer for problems in remote corners of their countries. The tourism secretary of the Philippines, Richard Gordon, and his Cambodian counterpart Veng Sereyvuth took up the matter at high-level travel forums at the ITB, indicating a growing level of frustration about the travel advisories and the influence they have in the travel decision-making process.

They are being backed the World Tourism Organisation which has called for tourists to be provided with fair, accurate and reliable information in a way which ensures that citizens of tourist generating countries stay out of harm’s way but does not affect overall visitor flows. Secretary-General of the WTO Francesco Frangialli says that under the new Code of Ethics related to tourism passed by the UN General Assembly in September 2001, countries that want to issue such advisories are obliged to discuss it first with the governments and travel industries of the countries concerned as well as their own travel industry back home.

He said that while it is necessary for those governments to ensure that they protect the interests of their own countries, they also need to ensure that the advisories are not biased or inaccurate. “Very often, something happens far away from main tourism centres and the advisories cover the entire country. Even after the event has long passed, the advisories remain in place.”

Because this code has been passed by the UN General Assembly, he said he would be informing the ministers that they now have a legal base on which to take up the advisories at higher diplomatic levels. He urged tourism ministers to pursue the issue with their own foreign ministers and ensure that they in turn pursue it with the foreign ministers of the advisory-issuing countries.

Mr. Gordon said that by hampering tourism, misleading advisories are “unfair to the Filipino common man who is losing out on opportunities that would be otherwise be given to him.” He says it also advances the agenda of trouble-makers by creating poor economic conditions for them to exploit.

The advisories are complicating the tourism scenario from two main perspectives: Firstly, they land up getting coverage in travel trade papers and the travel sections of consumer media, both print and electronic, effectively scaring away people who are generally ignorant about the vast distances and geography of the countries they wish to visit. Said one senior tourism industry executive, “It’s like CNN or BBC running old clips of fighting or conflict when reporting on issues that may be related to the previous developments but are not prevalent now. It still gives people the misleading impression that the violence is still going on.”

The second most important and relatively new area is that of insurance companies in source-market countries which are declining to cover travel to places where such advisories stand. Because most travel insurance is also sold through travel agents, insurance companies are encouraging travel agents to first check the advisories BEFORE selling holidays and travel insurance to destinations. This effectively means that the impact and influence of the advisories could become perhaps the single most important factor in determining choice of a holiday destination, regardless of the marketing money spent on promoting it.

WTO Deputy Secretary General Dawid de Villiers advised tourism ministers to raise the issue with the ambassadors of the advisory-issuing countries. Mr. Gordon said he had done exactly that with the US ambassador to Manila who informed him that the advisories are reviewed every three months. Mr. Gordon said he was hopeful that the advisories against the Philippines would be “better” after the next review, but did not cite any commitment from the US ambassador to this effect.

Other travel industry sources with more experience at the diplomatic levels said it was just another instance of ambassadors trying to “cover their backsides.” Said one well-informed executive, “They just don’t want to be caught in a position under which, should something happen, they could be asked why they didn’t put out some kind of an advance warning. So, they just let the advisory stand.” He noted that because different diplomatic missions may have different political or risk-assessment perspectives about a given situation, the content, wording an tone of each advisory may differ, further complicating and confusing the scenario.

Mr. Gordon is frustrated enough to want to find some way to hit back. “We don’t have explosions in our streets like in Spain, nor do we have nerve gas in our transportation systems and we certainly don’t have planes flying into our twin towers.” In the Palawan islands, he said, the crime rate is 4.5 per 100,000 people. In the capital of at least one industrialised country, the crime rate is 45 per 100,000 people. “Who should be issuing advisories about whom?” he asked.

The Egyptian tourism minister Mr. Mamdouh Al-Beltagui supports Mr. Gordon’s stand on the need to amend advisories but claims that his country has no problem. Egypt has suffered 11 incidents since 1991, or almost one a year. A number of the attacks have been directed at visitors. Cambodia’s Mr. Veng, who will be chairing the upcoming ASEAN tourism ministers conference when it is next held in Phnom Penh in January 2003, says he plans to take a stand on these advisories and ensure that they are a better reflection of the reality.