Analyses - March 5, 2005



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March 2005


Print Trends,

Commentary from Michael Nowlis on the tourism trends in 2006

François Chevrier's article concerning tourism trends in 2006 summarizes the broad expectations of many analysts in the North American market. As it is difficult to address the multitudinous industry developments in such a brief piece, I am pleased to suggest a few international trends to complement his list.

Gen Y hybrid consumers will use price transparency provided by the Internet and the euro to combine five-star hotel accommodations with low-cost flights, both reserved at discount travel sites. Although practitioners of conspicuous consumption, the Millennial Group sees no contradiction in following a 5-minute lunch at McDonald's with a 5-hour dinner chez Ducasse. New concepts of value for money will result in consumers mixing and matching products to satisfy their desire of the moment.

Merger and acquisition activity in the hotel sector will continue at a torrid pace. Starwood's recent purchases of Meridien and Société du Louvre, the Fairmont-Raffles merger and the reunification of Hilton are precursors of the rapid consolidation ahead.

Multi-brand lodging companies will further capitalize on the reputations of their flagship properties to create upscale product groups using brands such as St. Regis, Waldorf-Astoria and Crillon. These super-luxury properties will justify stratospheric rates by offering enhanced amenities and employing database technology to introduce new standards of service excellence.

As budget airlines emerge in new geographic regions, they will expose the long-ignored fact that air transport is a commodity where low-cost leaders are most profitable. Investors who shied away from traditional carriers will find confidence in these new airlines as manifested by Ryanair's ranking of maintaining the second highest market capitalization of European airlines (behind Air France-KLM).

While travelers become increasingly accustomed to living in an unsafe world, security will play a significant role in selecting leisure destinations. Disease, crime, air safety and terrorism will become important criteria for holidaymakers planning trips abroad.

While Mr. Chevrier provides a broad optimistic forecast for North America, other destinations will manifest greater variations in demand. In Europe, the United Kingdom, Austria and the Netherlands will see increasing growth in their business and leisure markets while Poland, Germany and Sweden will struggle to fill hotel rooms and tourist facilities. François Chevrier cites the growing attraction of China and India but Asian tourism markets such as Indonesia, Sri Lanka and Nepal will suffer from political instability.

In 2006, analysts, scholars and industry leaders will discover the meaning of Albert Einstein's observation that “The only constant in the universe is change”.

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