There have been numerous incidents in one or more countries in the past that led to sudden and unexpected reductions in demand for tourism services and confronted travel businesses with an economic environment of high uncertainty. However, the current financial and economic crisis appears to be of a larger dimension than most other crises before, and numerous experts around the globe agree that the present economic slowdown has the potential to become one of the most challenging and transformational disturbances on a supranational level since the Great Depression. Predictions of future developments are vague and can only be educated speculation at best, yet for the tourism industry the initial effects of this first major crisis of the globalization era are already clearly perceptible. Drawing on an extensive review of already existing literature, this paper explains the various milestones during the period that led to the 2007-2009 global financial and economic disorder, and subsequently considers a choice of selected key implications for the tourism industry and associated businesses. The aim of this paper is therefore to provide an academically substantiated reference guide for market participants and policy-makers alike, with the ultimate purpose of making a contribution to reduce the number of cases where wrong decisions lead to major difficulties or even the failure of a destination or an individual business. Results of the research indicate that the identified impacts are likely to intensify throughout 2009 and 2010, and that the crisis will most likely also entail fundamental changes for the industry on a long-term basis. In particular, it was found that in the medium term decreased public funding for tourism projects and restricted access to capital are likely to force many travel businesses into serious liquidity problems. This may cause a series of reactions, including widespread workforce reductions and severe cuts in the quality of the provided services. Besides, the crisis is likely to have considerable effects on the way leisure and corporate travel is conducted, as for instance shorter and less frequent trips or a stronger tendency towards cost containment. However, the paper also points out that every crisis embodies a great number of opportunities and provides an analysis of a range of selected chances for destinations and tourism businesses. [...]
Table of Contents
1 INTRODUCTION
2 HOW THE 2007-2009 GLOBAL ECONOMIC CRISIS EVOLVED
2.1 Recent historical background
2.2 The problem of sub-prime lending
2.3 The end of an era
2.4 Effects of the financial crisis on the real economy
3 RESEARCH METHODOLOGY
4 IMPACTS OF THE CRISIS ON THE TOURISM INDUSTRY
4.1 General aspects
4.2 Key negative impacts
4.2.1 Decreased public funding for tourism projects and infrastructure
4.2.2 Restricted access to capital
4.2.3 Excursus: Unemployment in the tourism industry
4.2.4 Changing patterns in leisure travel
4.2.5 Changing patterns in corporate travel
4.3 Selected possible opportunities
4.3.1 Shift in source markets
4.3.2 Intensification of the trend towards ‘Smart tourism’
4.3.3 New spirit of companionship
4.3.4 Other opportunities
5 DISCUSSION AND CONCLUSIONS
Objectives and Topics
The primary objective of this paper is to conduct a critical analysis of the 2007-2009 global financial and economic crisis to determine its implications for the tourism industry and associated businesses, serving as an academically substantiated guide for managers and policy-makers to navigate these turbulent times.
- Evolution and causes of the global financial crisis originating from the U.S. sub-prime mortgage market.
- Direct and indirect impacts of economic turmoil on leisure and corporate travel sectors.
- Strategies for crisis management, focusing on liquidity, staffing, and cost-containment measures.
- Identification of potential opportunities arising from the crisis, such as new source markets and sustainable 'Smart tourism'.
- The importance of public-private partnerships and innovative marketing strategies in volatile economic conditions.
Excerpt from the Book
2.2 The problem of sub-prime lending
In the course of the 1990s the financial community ‘invented’ a number of new credit derivatives with the goal not only to enable commercial banks to access financing options apart from traditional methods, but also to mitigate the inherent risks of weakly rated loans by simply spreading them over the entire banking system. Soon a broad range of structured finance products like Credit Default Swaps (loan default insurances) appeared, and a certain lack of regulation allowed the emergence of a number of highly complex and nontransparent monetary tools that were difficult to control. Collateralized Debt Obligations (CDOs), which can be described as packages of loans of unequal security levels that bundle high-quality with low-quality (‘sub-prime’) assets in order to spread the risk of defaults, became one of the most prevalent instruments in this segment. It goes without saying that investment banks like Lehman Brothers played a key role in this business.
Summary of Chapters
1 INTRODUCTION: This chapter introduces the context of the 2007-2009 global financial crisis and establishes the need for research into its specific effects on the tourism industry.
2 HOW THE 2007-2009 GLOBAL ECONOMIC CRISIS EVOLVED: This section provides a historical overview of the U.S. financial system, focusing on sub-prime lending, the resulting market bubble, and the eventual transition into a global economic downturn.
3 RESEARCH METHODOLOGY: This chapter outlines the hermeneutical research approach, explaining how the author reviewed existing literature and secondary data to investigate the crisis impacts.
4 IMPACTS OF THE CRISIS ON THE TOURISM INDUSTRY: This core chapter analyzes both the negative challenges faced by the tourism industry, such as restricted funding and changing travel patterns, and the strategic opportunities that have emerged.
5 DISCUSSION AND CONCLUSIONS: This concluding chapter synthesizes the research findings, offering insights for tourism stakeholders on how to mitigate risks and capitalize on future shifts in the global economy.
Keywords
Global financial crisis, tourism industry, sub-prime lending, economic recession, crisis management, consumer behavior, corporate travel, leisure travel, liquidity, sustainable tourism, Smart tourism, public-private partnerships, source markets, destination marketing, credit contraction
Frequently Asked Questions
What is the primary focus of this paper?
The paper examines the 2007-2009 global financial and economic crisis to understand its broader implications and specific threats or opportunities for the tourism industry and related businesses.
What are the central thematic fields covered?
Key themes include the origins of the sub-prime mortgage crisis, the subsequent global economic downturn, impacts on tourism demand, and strategic responses for businesses, such as cost management and brand adaptation.
What is the core research question?
The main research question is: How will the current global economic turmoil affect the tourism industry and associated businesses?
Which scientific methods were employed?
The research utilizes a hermeneutical approach, involving an in-depth study and critical interpretation of existing literature, industry reports, and up-to-date media news.
What content is addressed in the main body?
The main body covers the evolution of the financial crisis, the specific negative impacts on tourism (funding, capital, unemployment), and potential opportunities like new markets and sustainable 'Smart tourism' initiatives.
What are the primary keywords characterizing this work?
The work is characterized by terms such as global financial crisis, tourism industry, sub-prime lending, crisis management, consumer behavior, and economic resilience.
What role does the 'A.I.G. effect' play in the analysis?
The 'A.I.G. effect' refers to the public and regulatory pressure on corporations to avoid luxury travel or meetings at prestigious locations during times of economic distress to prevent scrutiny.
How can sustainable 'Smart tourism' serve as a strategic opportunity?
The author argues that focusing on 'Smart tourism'—which includes clean, ethical, and high-quality services—can help destinations maintain a competitive edge and attract discerning travelers despite the difficult economic environment.
- Citar trabajo
- MSc, MA Manuel Kaar (Autor), 2009, A critical analysis of the 2007-2009 global financial and economic crisis and its implications for the travel industry and associated businesses, Múnich, GRIN Verlag, https://www.grin.com/document/186660
