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Emerging Markets Drive Tourism Investment

Driving forces behind the world's economic recovery and honey pots for foreign investment, emerging markets are also engines pulling the travel and tourism industry. While developed countries can expect to see little change in tourism figures during 2010-2011, prospects for emerging economies are very different.

Tourism is one of the world's most important industries, employing millions of people worldwide and acting as a major source of investment. Tourism prospects are also an important factor to consider when making property investment abroad. A buoyant tourist industry (domestic and international) improves rental and resale potential.

Like the global economy, the travel and tourism sector has also suffered from recession and 2009 was a difficult year for the tourist industry in most countries worldwide. However, according to the World Travel and Tourism Council (WTTC), recovery in on the horizon.

The WTTC predicts a growth of 0.5% in travel and tourism this year with a better outlook of 3.2% growth in 2011. This global figure hides much better ones for some countries, mostly emerging markets led by the BRIC economies.

For Brazil, the WTTC predicts a growth of 5.9% in the contribution of travel and tourism to GDP this year. Annual growth over the next ten years is expected to average 5.6%. Although foreign arrivals to Brazil were down 2% last year, buoyant domestic travel kept the tourist industry afloat. For the WTTC, the 2014 World Cup and 2016 Olympics will drive investment in Brazil into the travel and tourism sector, "implying robust inbound growth over the next decade".

Those planning investment in Brazil within the tourist sector will be looking at South Africa this year. The 2010 World Cup is expected to attract millions of tourists to South Africa where the WTTC says there will be "a sharp spike in visitor arrivals and spending". The effect of the next Olympics (London, 2012) will be similar. The WTTC forecasts "grim prospects" for tourism in the UK in 2011, but expects the Games to drive recovery in the sector from 2011 onwards.

The tourist sector in the other BRICs has a mixed outlook. While Russia will have a very slow recovery after experiencing the worst performing tourist industry among emerging markets in 2009, China can expect a gradual acceleration in the growth of tourism.

Prospects for other emerging markets look generally good. The WTTC is "optimistic" for tourism in Montenegro. Singapore is set for "modest growth" this year and will "accelerate sharply in 2011". And the Thai tourist industry has a "dynamic recovery" ahead.

Things in developed countries do not look quite so good. Tourism in the US and Spain - two of the world's most-visited destinations - will remain sluggish this year and the tourist industry in Spain will only return to real growth in 2012. Japan's tourist industry is in for a very slow recovery with the outlook for travel and tourism in the eurozone classed as "uncertain".

Just as emerging markets - with Brazil and China at the head - currently represent the best opportunities for investment, they also have the best outlook for tourism. Obelisk believes this tandem of growing investment and tourism has huge potential. It also adds further weight to the argument that investment in emerging markets is an essential part of any portfolio.

 

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