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Impact Of Iraq War On Tourism Examined

London-Based WTTC Finds Even A Conflict Of Short Duration Will Be Profound


March 27, 2003
Copyright © 2003 CARIBBEAN BUSINESS. All Rights Reserved.

A prolonged war in Iraq would destroy 449,100 jobs and eliminate more than $30.8 billion of economic value in the travel & tourism industry in the U.S. in 2003, according to a just-released report by the London-based World Travel & Tourism Council (see accompanying charts).

The WTTC report estimates the loss of revenue in Puerto Rico’s travel & tourism industry this year at $262.2 million and the loss of jobs at 3,800.

The WTTC analysis of the impact of 9/11 on tourism worldwide in general and in the Caribbean in particular has been widely recognized as the most comprehensive examination of the catastrophic event (CB May 9, 2002).

As the threat of war in Iraq increased recently, the WTTC updated its annual predictions for the 162 countries and territories it monitors. Its conclusions are sobering because it found that $3.5 trillion, or 10.2% of the world’s gross domestic product (GDP), would decline and that 195 million jobs, or 7.6% of total global employment, would be lost.

"In the event this worst-case scenario takes place, we will look for immediate and decisive action from governments to protect and secure this vital world industry," said WTTC President Jean-Claude Baumgarten. "Strong and proactive public-private partnerships in particular are called for t to develop emergency contingency plans that would help mitigate the impact of events. Key interventions might range from tax breaks to increased levels of investment by governments in security, tourism promotion, and infrastructure."

Indicating that developed and developing countries alike "stand to suffer significant loss of economic value and employment on a par with the damage caused by 9/11," Richard Miller, WTTC’s vice president for research & economics, warned that the industry "should brace itself for a possible repeat of post-9/11 losses if the conflict isn’t resolved peacefully or quickly."

A spread outside Middle East would be more severe

The report examines the war scenario and finds that "in the event of a more disruptive war with some terrorist attacks outside the Middle East, it is likely that the effects on travel & tourism will be more severe. Our scenario assumes the loss of confidence in international travel that could be caused would lead to a further 6% to 7% loss of visitors around the world, rather that the modest recovery we expect in the more benign case. As a result of this and of weaker demand more generally from weaker world growth, the scenario shows travel & tourism industry output falling this year before some recovery in 2004."

The report compares the current crisis with the Gulf War in 1991, when the U.S. drove the Iraqis out of Kuwait in "Operation Desert Storm." It recalled that oil prices increased sharply, equity prices fell sharply across most developed economies, and both business confidence and consumer confidence were hit. "Certain sectors suffered particularly badly, including tourism and aviation. Some commentators believe the Gulf War tipped the already weak U.S. economy into recession, while others believe that a recession or something close to it would have occurred in any case."

So far, however, the WTTC report’s predictions appear to be off the mark. At close of business Friday, the equity markets had scored significant increases and the price of oil had declined sharply, apparently signaling the markets’ confidence in a favorable outcome to the war.

Questioning what the economic impact would be this time, the WTTC report reaches different conclusions depending on which scenario plays out. The first case would be if the war is short and is contained, with minimal impact on long-term oil supplies. In the second, more pessimistic case, oil supplies, for whatever reason, would be substantially reduced into the medium or long term. "In either scenario, the macroeconomic impact would almost certainly have a disproportionate effect on the tourism and aviation sectors, as was the case in the Gulf War," the report concludes.

Just before the Iraqi war update, the WTTC released its annual report on Puerto Rico, which indicated that the island’s travel & tourism industry in 2003 was expected to generate 1.1% of GDP and 15,972 jobs, while the broader satellite industry was expected to total 4.7% of the GDP and 64,312 jobs (see accompanying charts).

"This WTTC research quantifies and documents the travel & tourism economics of Puerto Rico as the first step toward addressing mission-critical issues such as tourism management, tourism marketing, tourism infrastructure, taxation, aviation policy, and much more," said the WTTC’s Baumgarten.

"We hope that by raising awareness of previous performance, current conditions, and the as yet unrealized potential of travel & tourism in Puerto Rico, this report will act as a catalyst, encouraging industry and government to continue to work together to create the conditions necessary to realize the industry’s true promise," Baumgarten concluded.

The research of the WTTC, in connection with Oxford Economic Forecasting, is supported by 100 of the foremost companies in travel & tourism, including Accor, American Airlines, American Express, Avis, Boeing, British Airways, Carlson, Continental Airlines, Diners Club, Walt Disney Parks, Hertz, Hilton, Iberia, Loews, Lufthansa, Mandarin, Marriott, MasterCard, Melia, Meridien, Northwest Airlines, Raffles, Six Continents, Starwood, and Thomas Cook, among others.

Economic impact of Iraq War on travel & tourism in Caribbean 2003

Estimated lost revenue

Puerto Rico $262.2 million

Dominican Republic 251.2 million

Cuba 239.6 million

Bahamas 143.9 million

Jamaica 123.7 million

U.S. Virgin Islands 93.6 million

Barbados 61 million

Aruba 53.9 million

Martinique 53.3 million

Trinidad & Tobago 51.9 million

Guadeloupe 42.9 million

Bermuda 41.1 million

Cayman Islands 39.2 million

Curacao 28.8 million

Antigua & Barbuda 28.5 million

British Virgin Islands 24 million

St. Lucia 21.3 million

Suriname 13.7 million

Belize 10.7 million

Haiti 7.6 million

Grenada 6.7 million

Guyana 6.3 million

St. Vincent & the Grenadines 6.3 million

St. Kitts & Nevis 5.2 million

Anguilla 4.4 million

Dominica 4.3 million

Source: World Travel & Tourism Council

Impact of Iraq War on Travel & Tourism in Caribbean 2003

Estimated Job Losses

Dominican Republic 19,000

Venezuela 13,700

Cuba 13,600

Jamaica 10,200

Puerto Rico 3,800

Bahamas 3,700

Guadeloupe 3,400

Barbados 2,700

Antigua & Barbuda 1,200

St. Lucia 1,000

Aruba 1,000

U.S. Virgin Islands 700

Martinique 600

Belize 500

Cayman Islands 400

Bermuda 400

Grenada 300

Dominica 300

St. Vincent & the Grenadines 200

Anguilla 200

Source: World Travel & Tourism Council

This Caribbean Business article appears courtesy of Casiano Communications.
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