Vacation Blues as Tourists Stay at Home

LOW SEASON Roman souvenir vendors cope with slower times

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That may sound dramatic but consider this: in 2008, Italy's tourism revenues fell by 5%, the first drop in seven years. The slump has already translated into a loss of $5.2 billion and at least 150,000 jobs.

With so many people cutting back on vacations, airlines are also suffering. The International Air Transport Association estimates passenger traffic will contract by 5.7% this year, leaving airlines with losses of $4.7 billion. Carriers such as Cathay Pacific and Qantas have been cutting services, which in turn hurts hotels and restaurants in places such as Sydney, Mumbai and London, to which Cathay Pacific will cut 17 round-trip flights in May alone.

Bargain Time
The battle for the shrinking pool of tourists, naturally, is good news for anyone still vacationing. To shore up the Southeast Asian market, Cambodia, Malaysia, Thailand and Vietnam have cut visa fees and worked with airlines, hotels and tourist sites to slash prices. Caribbean operators say deep price cuts have been essential to keep the region in people's minds during the turmoil. Some Caribbean resorts have cut prices in half, while Elite Island Resorts — the second-largest independent hospitality group in the region — will even accept guests' depressed stocks as payment; the firm values stocks at their closing price at the end of last October (way above what most stocks are worth now) and says it will sell them when the markets eventually go up again. "We're hoping that these deals will never have to see the light of day again," says Hugh Riley, Secretary-General of the Caribbean Tourism Organization, the body representing the travel interests of 32 nations in the region. "It's unusual for the Caribbean to have to offer these kinds of deals. Nobody makes a profit when that happens."

Once prohibitively expensive, places such as South Korea and Iceland have been transformed into bargain getaways. The weakening of South Korea's won helped the country attract 7% more tourists last year — a faster rise than any other Asian destination — and so far this year 50% more Japanese tourists have arrived. In Iceland, where the krona has fallen by 40% against the euro and 65% against the dollar since its three major banks collapsed last October, the nation is betting on increased arrivals: this summer IcelandAir will open up new routes to nine cities in Europe and North America. And Visit Britain, the official U.K. tourism body, is running a $2.6 million ad campaign urging foreigners to "see more of Britain for less;" in December, the sterling fell to a record-low against the euro. "The pound isn't going to be this weak forever," says spokeswoman Hayley Senior. "It's about taking control of the moment and trying to get as many people in as possible."

Boosting tourism, however, isn't merely about attracting foreign visitors: governments are also courting their own citizens. In China, local authorities have distributed domestic-travel coupons nationwide. In Wuhan, a city along the Yangtze River in central China, $146,000 worth of coupons were snatched up within 10 minutes at a promotional event, and the city has pledged more vouchers totalling $73 million. In Britain, it's estimated that 5 million more citizens will choose a "staycation" in the British Isles this year, rather than venturing to the pricey eurozone.

The sense of urgency is most pronounced in the developing world, where a job in tourism can mean the difference between poverty and prosperity. In Kenya, a single employee at a hotel or restaurant supports four other people with their salary, according to Gerson Misumi, managing director of Tamarind Management, a restaurant and resort firm in Kenya and South Africa. "There's a chain of services that depend on our industry." Lipman of the UNWTO agrees. "Tourism is a good development agent because poor countries don't have to manufacture it," he says. Developing nations already have their product — nature, culture, tradition — and all that's required to profit is a bit of investment in infrastructure and Internet marketing. "The market comes to these countries, then wanders around depositing foreign-exchange income wherever it's directed, including poor rural areas," Lipman says. That's a handsome return on investment for any country, developing or otherwise.

With reporting by Lin Yang / Beijing and Robert Horne / Bangkok

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