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Travel key to economic recovery, CEOs say
March 6 2013

Leaders of developed nations are beginning to understand the role of travel and tourism in economic recovery, but they still have a long way to go, leading hotel CEOs said.

Highlights
  • The Obama administration took significant strides forward when it enacted visa reforms, Marriott’s Arne Sorenson said.
  • Travel and tourism could generate 73 million jobs in the next decade, Hilton’s Chris Nassetta said.
  • The U.K. has been much slower to enact reforms, said IHG’s Richard Solomons.

BERLIN—The past year was a turning point for the global travel industry as more developed nations recognized the important role tourism plays in economic recovery. All it took was constant cajoling by some of the largest hotel companies in the world, according to some of the chief executives who run them.

Four such leaders described those efforts—and their effects—Tuesday during a general session at the International Hotel Investment Forum in Berlin.

Arne Sorenson, president and CEO of Marriott International, pointed to the Obama administration’s more lenient, thoughtful approach toward visa reform. A year ago the wait time for an in-person visa interview in China was 90 days, he said by way of example. Today, that wait time is only five days.

“I think they’re getting it,” he said.

Chinese inbound travel to Hilton Worldwide’s U.S. portfolio was up 60% during 2012, which is a testament to the success of those measures, said President and CEO Chris Nassetta.

But such progress is not limited to the U.S. “I think that’s happening in other parts of the world,” he added.

“The long-term goal is to have smarter, global visa policies,” Nassetta said, suggesting a single entry system for visas around the globe.

Reform need not be huge, though. If the G-20 nations in the next five years would execute simple tweaks, such as more visa waiver partnerships, global travel could increase by as much as 120 million travelers, which would translate to 5 million jobs, he said.

“My attitude is it’s a game of inches. … Even small changes can have a very important impact,” Nassetta said.

Yet for every mark of progress exists persisting headwinds, said Richard Solomons, CEO of InterContinental Hotels Group.

“The U.K. government … I guess they listen, but I’m not sure if they’re hearing.  … It’s just very slow process,” he said. “I’ve been very disappointed in the progress, certainly in the U.K. and other European countries.”

Movement through motivation
“How do you get governments focused on this? … It is a huge component of all of their economies. It’s driving incremental growth, that low-hanging fruit. … There’s tens of millions of jobs associated with being smarter about these small incremental steps,” Nassetta said.

The travel and tourism industry’s total economic contribution to global gross domestic product during 2012 was $6.6 trillion, representing 9% of total gross domestic product, according to the World Travel & Tourism Council. The industry accounts for 260 million jobs—or one in 11 of all jobs in the world.

“As an industry we do create jobs, and not only do we create jobs but they’re entry level in many cases with the opportunities to move up,” said Frits van Paasschen, president and CEO of Starwood Hotels & Resorts Worldwide.

China, for example, has done an excellent job using the hotel industry as a means to create jobs during its aggressive urbanization, he said.

The travel and tourism industry could create 73 million jobs in the next decade alone, said Nassetta, citing findings from a white paper Hilton produced with the International Youth Foundation.

“It’s an opportunity and a necessity. … A lot of those new jobs are going to be in emerging markets, places where all of us on this stage are growing the fastest,” he said.

Regional hurdles
“This is one of those classic areas where just doing one of the basic things right is an incredibly effective way to get things done. Things that sound simple appear to be more difficult than reality. That’s especially true when looking to do anything with governments,” van Paasschen said.

That’s even truer given such economic uncertainty throughout the globe, the Starwood chief said, highlighting the challenges in Europe.

“From a political standpoint and from a fiscal standpoint, there are important issues that Europe has yet to revolve about in which direction it wants to go. I don’t imagine that in 2013 some of those very substantive questions will be answered,” he said. “This is one of those situations pivotally in history where big decisions have yet to be made.”

The hotel industry still has been able to produce results throughout the region, however, van Paasschen said. Cities such as Paris, London and Rome will always attract demand. “In addition to that, Europe is the home to some very important global companies,” he added.

The world is also watching the U.S., where the political system has “seized up with total paralysis,” Marriott’s Sorenson said.

The current sequester, which will bring massive cuts to government spending, was designed to be so bad that the U.S. Congress could never let them pass. But now politicians are saying, “It won’t be so bad,” he said.

“Either they are wrong today or they were wrong then,” Sorenson said. “My own view is they were probably wrong both times. It will be very interesting to see what happens. … Business seems to continue very well.”

“The U.S. end consumer is pretty resilient. They’re tired of this. They’re not even listening,” Nassetta added.

Corporations have been a different story, he said. Group contracts still are lagging, but even they are beginning to creep back slowly.

Van Paasschen modified a quote from Winston Churchill to sum up the situation in the states: “America always does the right thing after they’ve exhausted every other alternative.”

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