Clues to the Health of the World Economy from Tourism Trends

By: Andrew_Butter

U.S. Outbound and Dubai-Inbound Compared - Leaving aside the hangover from the debt bubble, not yet even half cured  by the cocktail of QE flavored with the bitter spice of austerity…life goes on.

One way to get a feeling for the pulse of the economy that exists outside of borders, literally, in the stratosphere, or close-by, is to look at how much of that apparently soon-to-be-worthless fiat-money real-people are spending on travel internationally.

A convenient timeline can be found on the BEA database of International Transactions, they have a line (#24) which records how much money Americans handed over to foreigners (they call them “aliens” in over there), so that they can fly out of America.

Armageddon or not, that chart suggests either the price of oil drives tourism (and business) travel, or the other way around, or they are both driven by the same thing. Or could that just mean that rich people (bankers perhaps) are doing OK, while those left behind suffer?

It’s a similar story in Dubai:

Interesting that in Dubai oil tanked in 2008, just before the “message” got through to the revelers, perhaps over there oil-prices drove the market? A possible reason REVPAR did not bounce as far as in the outbound from USA (different market), might be because the 1,500 room Atlantis Hotel opened in September 2008 (a less auspicious moment to open a huge hotel cannot be conceived), that added about 30% to supply; take that out of the equation and the bounce would have been as high as the bounce-back in U.S. Outbound.

It’s going to be interesting to see whether (a) whatever drives tourism/travel, is driving oil, in which case oil is not a bubble now, or (b) if not, then how a drop in oil prices, which is likely if oil is a bubble, will affect revenues in the international tourism sector.

Stock prices of the big hotel chains are intriguing though:

The start of the crash in international hotel stock prices started along with the start of the decline of the stock markets, the bottom though coincided exactly with the bottom in oil-prices which preceded the bottom in stock prices by about a month.

The pull-back pretty much followed oil prices (and stock prices), Starwood had a more exciting ride, probably because more of their earnings come from outside U.S.A.

Perhaps hotels have the pulse on where the “other” world economy is headed?

By Andrew Butter

Twenty years doing market analysis and valuations for investors in the Middle East, USA, and Europe. Ex-Toxic-Asset assembly-line worker; lives in Dubai.

© 2013 Copyright Andrew Butter- All Rights Reserved

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