TOURISM WATCH Quarterly Report: Q2 2023 October 2023 SUMMARY Cautiously optimistic tourism growth in an uncertain macroeconomic context • GLOBAL OVERVIEW (P.1): The sector continues its steady recovery in tourism arrivals (33 percent year-on-year increase), receipts, aviation, and lodging indicators as tourism inflation eases and airline operations adjust to new demand. • REGIONAL OVERVIEW (P.3): China’s January 2023 reopening continues to drive global and regional (East Asia and the Pacific) tourism growth. All other regions showed steady year-on-year improvements, with the Middle East and North Africa, South Asia, and Latin America and the Caribbean showing the greatest recovery of estimated aviation passenger arrivals. • TOURISM OUTLOOK (P.6): Tourism prospects are cautiously optimistic due to a continuing recovery, slowing inflation, and continued economic resilience in key global source markets, such as the United States. However, an expected slowdown in global growth, persistent core inflation, geopolitical tensions, and climate change-induced extreme weather events are affecting traveler confidence. • SPECIAL POLICY INSERT (P.7): Comprehensive and up-to-date tourism data is crucial for effective policymaking, yet tourism statistics are often lacking, particularly in developing economies. To bridge this gap, the World Bank is exploring non-traditional data sources, and recently partnered with Visa to incorporate aggregated and anonymous spending insights for evidence-based tourism policymaking. GLOBAL OVERVIEW Between April and June 2023, more than 316 million international tourists traveled globally, a 33 percent increase from the same period in 2022, reaching 85 percent of Q2 2019 levels (Figure 1). The sector continues to move closer to pre-pan- demic numbers, which in Q2 were boosted by an improved industry staffing and operating environment as well as continuing resilience in the global economy. Buoyant global hotel occupancy rates reflect this progress, reaching an average of 71 percent occupancy on July 1, 2023, in comparison to 68 percent in 2022 and 74 percent in 2019 (STR). However, a challenging global macroeconomic and geopolitical context, coupled with frequent extreme climate events, contributes to future uncertainty. Figure 1. International Tourist Arrivals, 2019 vs. 2022 and 2023 180 160 INTERNATIONAL TOURIST ARRIVALS (MILLIONS) 140 120 100 80 60 40 20 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2019 2022 2023 Source: UNWTO Tourism Data Dashboard. Tourism Watch - Quarterly Report: Q2 2023 1 Year-on-year (y/y) growth in travel services substantially Figure 2. Tourism vs. the Broader Economy contributed to the growth of the broader services sector 140 in early 2023 (Figure 2). Trade in travel services recov- ered to 91 percent of 2019 levels in Q1 2023, the most 120 INDEX (2019=100) recent quarter with substantially available data. Mean- 100 while, the recovery of the services sector is catching up 80 with merchandise evolution due to the improved perfor- 60 mance of services, strongly supported by travel growth and 40 improved staffing, and a slowdown in trade in goods because 20 of weakening global industrial production (World Bank). In 0 Q1 2023, the global services trade grew 9 percent y/y (improving Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 on 2019 figures by 22 percent), and overall trade in goods plunged 2 percent y/y (improving on 2019 figures by 28 percent). TRAVEL SERVICES TOTAL SERVICES TOTAL MERCHANDISE Travel receipts, an important indicator of tourism’s contribu- Source: World Trade Organization. tion to foreign exchange earnings and GDP, continued to rise. Note: Figure includes 82 territories that account for 90 percent, 89 percent, and 87 percent of overall trade in goods, services, and travel services in 2019, Though still limited, inbound receipts data for available countries respectively. in January–July 2023 showed a substantial recovery compared to pre-pandemic receipts (2019), particularly for Pakistan (115 percent growth), Albania (82 percent growth), Monte- negro (77 percent growth), Türkiye (75 percent growth), Figure 3. Evolution in Aviation Supply vs. Demand North Macedonia (56 percent growth), and Colombia (31 percent growth) (UNWTO). Major source markets leading 250% growth in outbound tourism spending for the same period 200% Y/Y CHANGE included the United States (11 percent growth), Germany 150% (11 percent growth), and the United Kingdom (16 percent 100% growth through March). 50% In Q2 2023, the gap between global aviation passenger 0% Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 demand and supply narrowed (Figure 3), resulting in airfare reductions. Aviation supply and demand were dramatically disrupted during COVID-19 and subsequent staffing and logis- DEMAND: PASSENGER TRAFFIC (Y/Y RPKs) tical issues, with evolution in demand outpacing evolution in SUPPLY: PASSENGER CAPACITY (Y/Y ASKs) supply for much of the past two years, driving airfare growth Source: OAG Traffic Analyzer. and improving yields. Airlines have largely solved fleet and Note: RPK = Revenue per Kilometer, a proxy for aviation demand. APK = Available staffing issues in 2023, illustrated by a reconvergence of Seat Kilometer, a proxy for aviation supply. passenger traffic (measured in Revenue per Kilometer) and passenger capacity (measured by Available Seat Kilometer) from May 2022 to June 2023. For example, in China, passenger demand began growing exponentially in January 2023 after Figure 4. U.S. Consumer Price Index and U.S. its reopening announcement, with capacity expected to take Travel Price Index six months to close the gap. 25% June 2023 marked the first y/y decline in U.S. travel-related 20% inflation since February 2021, after three consecutive months Y/Y CHANGE 15% of softening (Figure 4). U.S. travel-related inflation—reflected 10% by the U.S. Travel Price Index (TPI)—has decreased faster than 5% overall consumer price levels, measured by the U.S. Consumer Price Index (CPI). In June 2023, The TPI declined 1.7 percent 0% y/y, influenced by the decreasing prices of motor fuels (-27 -5% Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 percent y/y) and airfares (-19 percent y/y). Airfares fell even below 2019 prices likely due to a leveling out of supply and demand (Figure 3), and this probably contributed to travel CONSUMER PRICE INDEX (U.S.) TRAVEL PRICE INDEX (U.S.) growth. Overall, the CPI eased as well but was still up 0.2 percent versus May 2023 and up 3 percent y/y. (USTA and BLS) Source: U.S. Travel Association. Tourism Watch - Quarterly Report: Q2 2023 2 Tourism-related investors remain cautious amidst macroeco- Figure 5. Tourism Sector Foreign Direct Investment nomic uncertainty and high interest rates (Figure 5). Tourism 140 indicators for foreign direct investment (FDI) project announce- ANNOUNCEMENTS (2019=100) ments continue to plateau after a brief resurgence until Q2 120 NUMBER OF PROJECT 2021. According to the latest UNWTO and fDi Tourism Green- 100 field Investment Report, tourism cluster FDI showed signs of 80 recovery in 2022 in project announcements and job creation. 60 However, global capital expenditure, which kept falling from 40 US$60.9 billion in 2019 to US$10.2 billion in 2022, is yet to 20 see significant improvement (fDi). By regions, in 2022, Latin 0 America and the Caribbean and the Middle East led recovery, Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 whereas Asia Pacific remained subdued, likely due to China’s sputtering economy, rocked by a struggling real estate sector FOREIGN DIRECT INVESTMENT and low consumption. Source: Global Data. Note: Data is from Factiva news scraping as of September 14, 2023. REGIONAL OVERVIEW In Q2 2023, all regions continued growth in estimated avia- In Q2 2023, y/y changes in estimated aviation passenger tion passenger arrivals, but with a reduced y/y growth rate arrivals were positive for 209 out of 223 reporting territo- compared to the previous quarter, as they get closer to a full ries, with the few destinations showing decreases making recovery compared to 2019 arrivals (Figure 6). East Asia and up a minority of global traffic (1.14 percent of global aviation the Pacific grew 341 percent y/y with the release of China’s passenger arrivals in 2019). Figures 7 and 8–14 represent these pent-up demand after the late easing of its COVID-19 rules in changes in green (for growth) and red (for reductions). Figures January 2023, but the region still remains 41 percent below 2019 8–14 feature y/y changes in estimated aviation passenger levels. Meanwhile, the Middle East and North Africa continues to arrivals by region (X-axis), only for low- and middle-income be the only region to exceed 2019 aviation passenger arrivals, countries, which are the focus of the World Bank Group. Coun- likely after Q4 FIFA World Cup promotions. Both South Asia and tries are ordered by the importance of tourism to their economy Latin America and the Caribbean are nearing a full recovery (tourism’s contribution to GDP; Y-axis). (3 and 1 percent below 2019 levels, respectively), which aligns with trends in tourism arrivals for the same period (UNWTO). Figure 6. Change in Estimated Aviation Passenger Arrivals Across Regions Q2 2023 vs. Q2 2019 and vs. Q2 2022 year-to-date growth 400% 341% 300% 200% 100% Y/Y CHANGE 80% 60% 52% 43% 39% 40% 33% 31% 27% 34% 20% 20% 6% 0% -1% -3% -20% -13% -5% -9% -8% -15% -40% -41% -60% Eastern and Western and East Asia Europe and Latin America Middle East North America South Asia World Southern Africa Central Africa and the Pacific Central Asia and the Caribbean and North Africa 2023 VS 2019 2023 VS 2022 Source: OAG Traffic Analyzer. Tourism Watch - Quarterly Report: Q2 2023 3 Figure 7. Change in Estimated Aviation Passenger Arrivals, Q2 2023 vs. Q2 2022 -50% 1,922% No Data Source: OAG Traffic Analyzer. Note: Incomplete data for Falkland Islands, Kiribati, Ukraine, and Tuvalu. This map was produced by the Cartography Unit of the World Bank Group. The boundaries, colors, denominations, and any other information shown on this map do not imply, on the part of the World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. Globally, the destinations with the greatest y/y growth Figure 8. Eastern and Southern Africa in estimated aviation passenger arrivals were Vanuatu Y/Y Change in Estimated Aviation Passenger Arrivals (Q2 2022–2023) (1,922 percent growth), China (1,047 percent), Samoa 20 Mauritius (1,004 percent), and Tonga (941 percent), all in East Asia and the Pacific. Countries that experienced arrivals reduc- tions are mainly surrounding conflict zones, such as Ukraine Namibia 15 TOURISM % GDP (2019) and Sudan, or those that already experienced exponential Lesotho Botswana Madagascar growth due to successful recoveries in previous quarters and Rwanda Tanzania are now leveling out, such as The Gambia (11 percent reduc- 10 Comoros tion), Sierra Leone (3 percent reduction, due to the election 1 2 Kenya Sudan 35 travel shutdown), and Belize (3 percent reduction). Armenia 74 6 Eswatini (85 percent growth) is leading y/y growth for the Europe 5 Burundi Angola and Central Asia region, while Eswatini (137 percent growth), Congo, Dem. Rep. Saint Vincent and the Grenadines (76 percent growth), Chad 0 (47 percent growth), Algeria (104 percent growth), and Sri −50 0 50 100 150 Lanka (44 percent growth) are leading y/y growth in their PERCENT GROWTH IN ESTIMATED AVIATION PASSENGER ARRIVALS respective regions. 1. Zambia, 2. Malawi, 3. Zimbabwe, 4. Ethiopia, 5. South Africa, 6. Mozambique, 7. Uganda Source: OAG Traffic Analyzer; WTTC. Tourism Watch - Quarterly Report: Q2 2023 4 Figure 9. Western and Central Africa Figure 10. East Asia and the Pacific Y/Y Change in Estimated Aviation Passenger Arrivals (Q2 2022–2023) Y/Y Change in Estimated Aviation Passenger Arrivals (Q2 2022–2023) 40 40 Cabo Verde Vanuatu Fiji 30 30 TOURISM % GDP (2019) TOURISM % GDP (2019) Cambodia Samoa Philippines Thailand 20 20 Gambia, The São Tomé and Principe Tonga Côte d’Ivoire 1 China Senegal Lao PDR 10 10 Mali Solomon Islands 1 23 2 3 45 Central African Republic 4 Nigeria Sierra Leone 6 Chad Indonesia 7 Papua New Guinea Burkina Faso Gabon 0 0 −20 0 20 40 60 0 500 1000 1500 2000 PERCENT GROWTH IN ESTIMATED AVIATION PASSENGER ARRIVALS PERCENT GROWTH IN ESTIMATED AVIATION PASSENGER ARRIVALS 1. Cameroon, 2. Ghana, 3. Niger, 4. Togo, 5. Benin, 6. Guinea, 1. Malaysia, 2. Mongolia, 3. Myanmar, 4. Vietnam 7. Congo, Rep. Source: OAG Traffic Analyzer; WTTC. Source: OAG Traffic Analyzer; WTTC. Figure 11. Europe and Central Asia Figure 12. Latin America and the Caribbean Y/Y Change in Estimated Aviation Passenger Arrivals (Q2 2022–2023) Y/Y Change in Estimated Aviation Passenger Arrivals (Q2 2022–2023) Montenegro St. Lucia 60 30 Georgia 25 TOURISM % GDP (2019) Grenada TOURISM % GDP (2019) St. Vincent and the Grenadines 40 Albania 20 Belize Jamaica Dominica 15 20 Armenia Turkiye Dominican Republic Bulgaria Mexico 10 1 2 1 2 El Salvador Azerbaijan 3 Cuba 3 North Macedonia Haiti 4 Brazil Nicaragua 4 5 Belarus 78 56 Paraguay 6 Russian Federation Suriname 5 Kazakhstan 0 0 20 40 60 80 0 20 40 60 80 PERCENT GROWTH IN ESTIMATED AVIATION PASSENGER ARRIVALS PERCENT GROWTH IN ESTIMATED AVIATION PASSENGER ARRIVALS 1. Bosnia and Herzegovina, 2. Kyrgyz Republic, 3. Moldova, 1. Honduras, 2. Costa Rica, 3. Argentina, 4. Peru, 5. Bolivia, 4. Tajikistan, 5. Serbia, 6. Uzbekistan 6. Guatemala, 7. Colombia, 8. Ecuador Source: OAG Traffic Analyzer; WTTC. Source: OAG Traffic Analyzer; WTTC. Figure 13. Middle East and North Africa Figure 14. South Asia Y/Y Change in Estimated Aviation Passenger Arrivals (Q2 2022–2023) Y/Y Change in Estimated Aviation Passenger Arrivals (Q2 2022–2023) 20 80 Lebanon Maldives Jordan TOURISM % GDP (2019) 15 60 Tunisia TOURISM % GDP (2019) Morocco 10 40 Egypt, Arab Rep. Iraq Algeria Iran, Islamic Rep. 20 5 Sri Lanka Libya Nepal Pakistan India Bangladesh 0 0 0 20 40 60 80 100 0 10 20 30 40 PERCENT GROWTH IN ESTIMATED AVIATION PASSENGER ARRIVALS PERCENT GROWTH IN ESTIMATED AVIATION PASSENGER ARRIVALS Source: OAG Traffic Analyzer; WTTC. Source: OAG Traffic Analyzer; WTTC. Tourism Watch - Quarterly Report: Q2 2023 5 TOURISM OUTLOOK Tourism prospects are cautiously optimistic given a strong June–November 2023, even though travel expenditures are recovery, moderating inflation, and the continued averting expected to increase, likely due to inflation concerns (ETC). High of recessions in key global source markets. However, slowing travel prices and uncertain personal finances are the primary global growth—headlined by China’s fragile economy, along with travel concerns for Europeans, while concerns over the war persistent core inflation, geopolitical tensions, and frequent in Ukraine still impact 44 percent of Europeans’ travel plans. extreme climatic events—is affecting travel confidence (ETC).1 Global economic growth is projected to fall from an estimated Although still positive, the latest UNWTO Confidence Index 3.5 percent in 2022 to 3.0 percent in 2023, and core inflation shows a decreased evaluation for the second half of 2023, is projected to decline more gradually than initially expected in line with a Q2 plateauing of flight searches and bookings (IMF). Despite debt crises being triggered in various developing and a volatile Travel Sentiment Score (Figure 15). Record- economies, those of many key tourism source markets—such breaking heat in June and July led to earth’s hottest August as the United States—remain strong. Europe, another key on record (NOAA), a trend likely to continue affecting travel source market, showed in the latest European Travel Commis- patterns. The recent violence in Israel and Gaza is likely to sion’s European travel sentiment monitoring (conducted in impact travel to the Middle East and Africa during the second May–June 2023) a slight y/y decrease of travel intention from half of the year. Figure 15. Forward-Looking Tourism Indicators 200 60 Q2 Q2 Q2 180 50 TRAVEL SENTIMENT SCORE 160 140 40 INDEX (2019=100) 120 100 30 80 20 60 40 10 20 0 0 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 FLIGHT BOOKINGS FLIGHT SEARCHES TRAVEL SENTIMENT SCORE (RIGHT AXIS) Source: UNWTO Tourism Data Dashboard, Google, OAG Traffic Analyzer, and TCI Research. Tourism Watch - Quarterly Report: Q2 2023 6 SPECIAL INSERT The Importance of Tourism Data and Statistics for Policymaking Tourism data and statistics play a pivotal role in informing The urgency to improve tourism data has increased due to and shaping effective policymaking within the tourism sector. recent shocks and global crises. The COVID-19 pandemic was Tourism data can help policymakers better allocate scarce a clear example of tourism industry disruption that benefited resources, understand visitor trends and preferences, prior- from just-in-time data. Now, rapid technological advancements, itize markets and destinations, and monitor environmental sustainability concerns, and changing demographics highlight and social impacts. the vital role data plays in adapting to an evolving industry landscape and enhancing visitor experiences. However, many emerging destinations operate in a severely data-poor environment with a lack of up-to-date tourism The World Bank Group is working to address these data gaps data and statistics and low analytic capacity. Several factors in three key areas (Table 1). contribute to this gap, including limited financial resources, inadequate infrastructure for data collection and analysis, challenges coordinating across government agencies, and a lack of prioritization for data-related initiatives. Table 1. Three Key Areas to Reduce Tourism Data Gaps Investing in Data Standardizing Data Promoting Public-Private Infrastructure and Collection and Reporting Partnerships Market Intelligence Modernizing data collection methods, Adopting standardized data collec- Collaborating with private sector using non-traditional data sources, tion methodologies and reporting stakeholders, such as tourism and such as online big data, imple- frameworks, in alignment with non-tourism businesses, industry menting digital and automated international standards set by associations, and research organi- systems, and upskilling personnel organizations like the UNWTO. zations, to enhance data collection responsible for data management. This ensures consistency and efforts. Public-private partnerships comparability of data, making it can lead to more comprehensive and Examples of World Bank Group easier to benchmark tourism accurate data, as businesses often work: performance against global trends have valuable insights into tourist • Using OAG’s aviation data to mon- and share information with interna- behaviors and trends. itor tourism sector growth trends tional stakeholders. and the impacts of crises, such Examples of World Bank Group as Russia’s war on Ukraine, on the Examples of World Bank Group work: sector. work: • A new World Bank-Visa partner- • Developing a set of sustainable • Financing the improvement of ship, analyzing aggregated and tourism indicators in Indonesia tourism statistics systems in anonymous spending insights and capacity building for the Benin by piloting Tourism Satellite through the Visa Destination development of new tourism data Accounts. Insights platform, to identify collection instruments (Expendi- • Conducting an extensive assess- high-value tourism segments and ture Surveys, Occupancy Surveys, ment of current practices in lodg- spending patterns and monitor and Exit Surveys) in The Gambia ing surveys and providing recom- progress in the diversification of and Peru. mendations to improve response tourism markets. • Harnessing big data and machine rates and enhance performance • Launching the Blue Tourism Re- learning by analyzing thousands as part of IFC’s project on Tourism source Portal with support from of online travel reviews, searches, Sector Strengthening in Peru, in the World Bank Group and Tour- and listings informing the Comoros collaboration with UNWTO. ism Action Coalition for a Sustain- Country Economic Memorandum able Ocean (TACSO). and the Uganda Economic Update. Tourism Watch - Quarterly Report: Q2 2023 7 METHODOLOGICAL NOTES INDEX CONSTRUCTION Travel Sentiment Index: Data comes from TCI Research. The index leverages a social media web crawler that monitors global Estimated Aviation Passenger Arrivals Index: Data on esti- web social conversations shared by the media, consumers, mated international passenger arrivals landing in a given companies, citizens, brands, and officials. Data are reported geography, regardless of flight length, for a given month or as Net Sentiment Scores measuring the balance of sentiment quarter. OAG estimations are based on real bookings data polarity in web social conversations concerning the travel and made by travel agencies through global distribution systems tourist destinations (percent of positive comments—percent (GDS). These estimates are reportedly based on a series of of negative comments). proprietary algorithms that use various external datasets and historical ratios between total passengers and realized GDS GLOSSARY bookings. These arrivals data are rebased as a percentage of estimated aviation passenger arrivals in the same month Available Seat Kilometer (ASK): Metric used in the airline or quarter of 2019, then multiplied by 100. Three countries industry to measure the total passenger carrying capacity of were removed from recovery graphs given missing arrivals an airline’s flights. It represents the number of seats available data for some months. for sale multiplied by the number of kilometers those seats are scheduled to travel. Tourism Foreign Direct Investment (FDI) Index: Data comes from GlobalData and provides intelligence on greenfield FDI 1 European Travel Commission (ETC): Consumer market trends. A team of analysts collect FDI-related information from research was undertaken in May–June 2023 on 10 key Euro- thousands of publicly available sources, such as company press pean outbound markets. releases and other media channels. Each project is qualified, quality controlled, and entered into a database. The database Occupancy Rate: Indicator of hotel performance, equal to the is global, real-time, and ever-expanding. number of hotel rooms sold/room supply. Travel Price Index (TPI): TPI measures the cost of travel Revenue Passenger Kilometer (RPK): Metric used in the avia- away from home in the United States and is based on the tion industry to measure the total passenger traffic or demand U.S. Department of Labor price data collected for the monthly for an airline’s services. It represents the sum of the products Consumer Price Index (CPI). The TPI is released monthly and obtained by multiplying the number of revenue passengers is directly comparable to the CPI. carried on each flight stage by the corresponding stage distance. For further information, The Tourism Watch quarterly bulletin series is prepared by the Trade, Investment and Competitiveness (TIC) Markets, Competition and Technology Tourism group please contact the team at of the Finance, Competitiveness and Innovation (FCI) Global Practice. The bulletin tourism@worldbank.org has been prepared by a team led by Alex Pio, Alba Suris, and Anthony Patrick or visit the Tourism and Mavrogiannis, with contributions from Vincent Palmade, Louise Twining-Ward, Competitiveness website. Shaun Mann, Denisse Pierola, Jessie F. McComb, Jose Miguel Villascusa, and Jessica Rose Wilson, under the guidance of Martha Martinez Licetti. Tourism Watch - Quarterly Report: Q2 2023 8