Research published by the World Travel & Tourism Council (WTTC) shows that countries dependent on oil income can benefit greatly from investing in Travel & Tourism, to further diversify their economies and to develop additional income streams. This has been demonstrated in the past with the considerable investment in the UAE, but it is now becoming an important opportunity elsewhere.
The Economic Impact Reports, WTTC’s flagship annual research, provide economic data on the contribution of the Travel & Tourism sector on a global level as well as for 184 countries and 24 regions.
Low oil prices will have a positive effect on Travel & Tourism as the drop in prices of crude oil gradually filters down to consumers. Disposable incomes rise, as motoring transport costs and airline ticket prices fall. This is especially the case for consumers in the developed world, amongst oil importing countries.
In oil exporting countries, business investment, government spending and employment in the extraction sector has contracted, which has led to volatility in markets and weaker economic performance. This will impact the Travel & Tourism sector in the short term in these countries, until governments embrace the sector as a source of resilience and growth.
There are some great examples of oil dependent countries that have invested in the sector and therefore boosted their GDP through Travel & Tourism income. The UAE has been the leading example over the last three decades. Over the period of 2012-2015, Travel & Tourism investment in Azerbaijan grew from a smaller base by an average of 24.3% per year, which was the highest growth globally. Investment in Travel & Tourism continued to grow at a rapid pace in the United Arab Emirates and Colombia, increasing at an average of 13.5% and 7.4% per year respectively.
Given the levels of investment, Azerbaijan, the UAE and Colombia saw their Travel & Tourism GDP grow in 2015 by 27.3%, 7% and 4.2% respectively. Two other oil dependent countries have markedly outperformed the wider economy in 2015: Qatar where the sector contribution grew by 23.7% and Saudi Arabia, where it grew by 8.6%.
WTTC research forecasts that government expenditure in Travel & Tourism in the majority of the oil dependent countries will slow in 2016. Saudi Arabia, Kuwait and Norway are all countries where government expenditure is actually forecast to drop.
WTTC President & CEO, David Scowsill, said: “Travel & Tourism is hugely important to the global economy, as it contributes US$7.2 trillion, which is 9.8% of GDP. WTTC encourages oil dependent countries to recognise the potential our sector can bring to their economies, especially in the current situation where income from oil export is declining. It should also be recognised that the sector is a tremendous stimulator of employment, supporting over 284 million jobs worldwide.
Whilst we recognise government expenditure is forecast to decrease, oil exporting governments would benefit greatly from investing in Travel & Tourism. It is critical to drive growth through investing in transportation infrastructure, funding new hotels and tourism attractions, increasing destination marketing and continuing to improve visa processes.”
