The Tourism Industry: Betting the House?
If one more person informs me that the present crisis in residential mortgages stems from people using their homes as ATMs, I'm going to go postal. (For a group that supposedly got duped on a mass scale, they certainly did some fancy wheeling and dealing.) Anyway, it's been reported ad nauseum that homeowners typically spent these "withdrawals" on fancy cars, big screen televisions and, yes, exotic vacations.
And so you would expect destinations that depend on tourism for their livelihood, especially the exotic kind, to be getting a bit nervous as the subprime mortgage crisis deepens. These days, however, the World Tourism Organization -- an agency affiliated with the United Nations -- appears to be taking a page from the Bush administration and the Federal Reserve.
Consider the parallels:
From a September press release by the WTO titled "Tourism Growth Ignores Stock Market Crisis":
Broadly speaking, in spite of the trend towards more moderate growth, the U.S. economy remains strong.
President Bush, 10/5/07:
This economy is a vibrant and strong economy.
The recent stock market crisis, caused by the difficulties of the most risky segment of the U.S. housing market, has not at this stage had an appreciable effect on world tourism demand.
Federal Reserve, 9/5/07:
Outside of real estate, reports that the turmoil in financial markets had affected economic activity during the survey period were limited.
Of course it can be argued that something calling itself the World Tourism Organization has, by definition, a vested interest in painting a rosy picture, as does the White House. And one doesn't go to the National Association of Realtors for an objective housing report.
By the middle of September, however, even the Federal Reserve had acknowledged that the mortgage mess was threatening to spill over into the larger economy. Hence the Fed's Sept. 18 and Oct. 31 reductions in interest rates. But the WTO has had nothing further to say on the matter, preferring to stand by its claim that "those experiencing difficulties in repaying their large mortgages [are] not, in any case, the most likely to travel, especially abroad, given their demographic and social profiles." It's interesting that these folks' demographic and social profiles didn't preclude them from buying lavish houses, but let's leave that aside.
More to the point, is the travel industry sticking its head in the sand? Is it just a coincidence that Washington residents are suddenly more interested in regional travel destinations these days (i.e., places they can drive to in four hours or less) than havens more exotic? Couldn't it mean that consumers are pulling back on discretionary spending, fearing that the economy will spiral downward along with home prices in Manassas? Or maybe folks are staying close to home because of the weak U.S. dollar (the value of which fell further after the September and October interest rate cuts). As Washingtonians are discovering, vacations to Paris and London have never been so expensive.
How is the "turmoil in financial markets" affecting your travel plans, if at all? And should the industry itself be worried?
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