Countries dependent on oil income can benefit greatly from investing in travel and tourism to further diversify their economies and to develop additional income streams. This has been demonstrated in the past with the considerable investment in the UAE, but it is now becoming an important opportunity elsewhere.
The Economic Impact Reports, the World Travel and Tourism Council’s (WTTC’s) flagship annual research, provide economic data on the contribution of the travel and tourism sector on a global level as well as for 184 countries and 24 regions.
Low oil prices will have a positive effect on travel and tourism as the drop in prices of crude oil gradually filters down to consumers. Disposable incomes rise, as motoring transport costs and airline ticket prices fall. This is especially the case for consumers in the developed world, amongst oil importing countries.
In oil exporting countries, business investment, government spending and employment in the extraction sector has contracted, which has led to volatility in markets and weaker economic performance. This will impact the travel and tourism sector in the short term in these countries, until governments embrace the sector as a source of resilience and growth.
There are some great examples of oil dependent countries that have invested in the sector and therefore boosted their GDP through travel and tourism income. The UAE has been the leading example over the last three decades. Over the period of 2012-2015, travel and tourism investment in Azerbaijan grew from a smaller base by an average of 24.3% per year, which was the highest growth globally. Investment in travel and tourism continued to grow at a rapid pace in the United Arab Emirates and Colombia, increasing at an average of 13.5% and 7.4% per year respectively.
Given the levels of investment, Azerbaijan, the UAE and Colombia saw their travel and tourism GDP grow in 2015 by 27.3%, 7% and 4.2% respectively. Two other oil dependent countries have markedly outperformed the wider economy in 2015: Qatar where the sector contribution grew by 23.7% and Saudi Arabia, where it grew by 8.6%.
WTTC research forecasts that government expenditure in travel and tourism in the majority of the oil dependent countries will slow in 2016. Saudi Arabia, Kuwait and Norway are all countries where government expenditure is actually forecast to drop.
eTN is a media partner for WTTC.