I had the pleasure of attending the WTTC Global Summit 2014 in Hainan, with this event regarded as the ‘Olympics of the travel industry’. The event brought together governments, destinations, airlines, hotels, online travel agencies and many more to debate pertinent issues of the day.
Golden Age of China Travel
China’s Vice Premier, Mr Wang Yang, emphasised the importance of travel and tourism, with the industry being a key pillar of the Chinese economy. The country’s travel and tourism industry has entered a golden period, supporting 65 million new jobs and accounting for 9% of the country’s GDP.
In 2013, China had three billion domestic tourists and over 100 million outbound tourists (including day trips), with over 150 countries having approved destination status. The country is already a global leader in travel. One of the key challenges mentioned at the summit was to ensure that product quality matches rising demand. With 200,000 households already authorised for rural tourism, the industry will also be used to redress the rural/urban imbalance and help eliminate poverty.
The summit’s host city, Hainan, aims to become a world-class destination by 2020, offering corresponding international standards. The island already welcomes 36 million visitors annually, predominantly domestic, and offers a wide selection of luxury hotels.
Ethics and sustainability were key themes running throughout the summit as the impact of climate change on the global economy is now more widely accepted, with man almost certainly being responsible for this. With the planet expected to warm by a further 4°C by 2100, according to Forum for the Future and the Intergovernmental Panel on Climate Change (IPCC), the need to act is urgent.
The EU Environmental, Social, Governance directive (ESG) was noted as a step in the right direction, with companies with more than 500 employees required to report on their social and environmental performance. Wyndham was highlighted for its industry-leading sustainability benchmarking, and such metrics will soon appear in its 10K listings. There was a suggestion with regard to reporting Tourism Satellite Accounting (TSA) and Environmental Accounting together.
Globalisation and technology were given as key reasons for the growth in inequality in terms of income in recent years, which is also exacerbating historical tensions, with a dozen potential flashpoints in Asia. Despite millions being lifted out of poverty, with China alone responsible for 680 million people being taken out of poverty, the Gini coefficient is moving in the wrong direction and global inequality is widening.
According to the OECD, 10-20% of money spent on holidays remains in the destination, meaning that the majority of expenditure remains within developed markets and does not trickle down to grass-roots level. To ensure local communities benefit, Lord Malloch-Brown suggested that hotels/tour operators could provide a breakdown of emissions and the impact on the local community (tax, job creation, schools) and the environment upon check-out. This suggestion went down very well with delegates.
There was palpable frustration about governments around the world failing to recognise travel as a means of employment, as the travel industry faces the triple challenges of restrictive visa regimes, anti-liberalisation sentiment and high taxation, which all combine to impede growth. Connectivity was deemed to include every part of the supply chain, including destinations and hotels, not just airlines and airports, thus requiring joined up thinking between public and private bodies.
According to Deloitte, the golden opportunity for hotel growth in China lies in the mid-priced segment as the market is currently polarised due to the strong presence of budget and luxury brands.
IHG has 208 outlets open in China, with another 211 in the pipeline as it expands into to second and third-tier cities. Richard Solomons, the company’s CEO, mentioned that it has re-invested all profits in infrastructure, with a focus on the long term.
Beijing Tourism Group (BTG) mentioned that there had been a fall in profitability in 2013 for mid- and high-end hotels, declining by 17% and 28%, respectively. This was attributed to the drag from the slowing global economy, combined with curbs on government spending on expenses. Mr Qiang, Chairman of BTG, called for hotel reforms, encouraging operators to think international, establish new business models and offer new experiences to suit China’s new consumers. New business models under development include aparthotels from companies such as Starwood and the guesthouse format.
Challenging the Status Quo
Following the claim that the planet will be 4°C warmer by the end of the century. Bjorn Lomborg from the thinktank, Copenhagen Consensus Centre, took the discussion further and provoked much debate by challenging the current view on climate change and the necessary responses required by governments.
Professor Lomborg said that he believed that the biggest challenge that mankind faces is not climate change, but instead comes from indoor and outdoor air pollution. He quoted the second instalment of the IPCC which states that the net cost of global warming to GDP would be between 0.2 to 2% of world GDP, whereas the cost of funding global warming policies could amount to 4% of world GDP in 2030, rising even higher as a percentage in the next century.
Youth unemployment was raised several times as a big threat globally, especially in Europe, with a shockingly high rate of 58% in Spain (among those aged 15-24 years). Hence, the importance of travel as an employment generator.
Marriott CEO Arne Sorenson cited the interesting example of Jia, a member of staff and also a customer. Jia is aged 25 years (Generation Y), Chinese, unmarried, in her third job and does not own a house or car. She will go where she is welcome visa-wise and seeks low-pollution destinations. She represents the future generation of travellers.
Areas of Note from WTTC Speakers
- China is set to become a leader rather than a follower in global luxury
- A rise in localised conflicts, such as island disputes in Asia, Kashmir, Ukraine and Syria
- Jeffrey Katzenberg of DreamWorks revealed that there will be a DreamWorks animation park in Shanghai with 32 attractions by 2019, with potential also for a park in Hainan
- Opportunities for new accommodation models in China include guesthouses, hostels and holiday rentals
- Asia’s hub set-up will change with the new free-trade zone
- China Eastern will launch a low-cost carrier, Jet Star Hong Kong with Qantas
- Sydney was hailed as how governments should put growth above local politics as it pushes ahead with a second airport for the city
- Hong Kong is a good example of seamless rail and air connectivity
- Creating a second tourism hub in Thailand – Chiang Mai 20 years ago – to relieve the pressure on Bangkok
- Deregulation in the United Arab Emirates
- Solar panel lampposts in Hainan
Not Such Good Practice
- The UK’s APD tax was described by the Pacific Asia Travel Association’s CEO Martin Craigs as a “self-harming, hypocritical tax” that has led to a partial climb-down from the UK government
- Illegal encampments in the Masai Mara
- Construction of cruise ship infrastructure in Jamaica which has damaged its coral reefs and eco-system
To find out more about Hainan, please click HERE