Coronavirus Complications Compound a Critical Market’s Outlook: People we talked to during the three days of Connect Travel’s recent Marketplace—it ran a schedule of programs paralleling other Connect events at the Gaylord Palms Resort in Kissimmee, Florida—told INBOUND what Carroll Rheem, vice president of research and analytics at Brand USA, confirmed with a rather thorough examination of up-to-date China travel market data and for the inbound travel market as well: It was already going to be a soft year for China’s Visit USA traffic.
Overall, Rheem said, 2020 was going to be a trying year for the international inbound tourism industry because of “the jitteriness of the markets around the world and the potential for economic slowdown, which is very much real, (the U.S.) domestic potential climate and international tensions – not just between the U.S. and other countries, but between themselves … “
“There are lot of things we don’t know and any one of them could have a strong impact on travel plans and the appetite for traveling in (key) markets,” she added.
Regarding China specifically, Rheem told Marketplace delegates that, “obviously, coronavirus has taken over as the topic for this market but, even before all of this—before the trade concerns, before the disease—there has been a persistent slowdown in China, in and of itself, by itself, for lots of different reasons, and that‘s really what impacts most of what we’re seeing.”
An Inequality Gap: By most accounts, measures of growth and progress are in place in China: Its economy has been growing faster than that of most countries – 6 percent a year. However, its Gini index (or inequality index) indicates that the portion of the economy that the wealthy control is high. China’s middle class—which has driven the growth of the travel market—is not growing as it once did, Rheem explained, noting that “travel did not grow at all in 2019 – before coronavirus ever hit. So, I think that when people talk about the impact of corona virus, it starts with this expectation that China was going to be growing like gangbusters. That didn’t happen. And that’s simply not the case. It was flat already.”
Rheem, who is quite popular as a speaker at travel and tourism industry events because of her ability to take some of the dense and abstruse data she deals with in her job and make it palatable and easy-to-grasp for all kinds of audiences, sometimes injecting humor into her presentations, letting delegates know that a recovery or expansion in the global industry is not going to be easy.
A sampler of Rheem’s humor was evident when she began to approach the subject of making a forecast for the near-term travel economy. She paused, so that delegates could see an image of the late John Kenneth Galbraith, a noted economist and one-time U.S. ambassador to India, with one of his quotes: “The only function of economic forecasting is to make astrology look respectable.”
She reviewed the economic condition of key markets, country-by-country, and pointed to challenges—political, economic and others—which mean that “it’s going to be a tough year.” The one economy “that really stands out,” she said, is India, which “has the strongest upward momentum in the next few years.”
What to Do in the Near-Term: No one, it seems, wanted to use the phrase, “wait and see,” but that’s how INBOUND translates what it heard at the Marketplace. Combined with accounts that have been published elsewhere, the conventional wisdom suggests that U.S. travel suppliers who do business in China, hold off on new expenditures or promotions, saving such resources until that vague point in the future when the coronavirus is receding and China—as well as other key markets—resumes air traffic to and from the United States.