A traveller's cheque for the future

It boasts that it is the world's biggest business and it probably is. It is also the biggest employer. And in some parts of the world it is one of the fastest-growing industries, too.

The industry, of course, is travel and tourism. It figures, doesn't it? Think about the money you will be spending this summer on a holiday, add in other breaks through the year plus some business travel, and the amount will be considerable. Here in the UK it represents just under 12 per cent of the economy, both in terms of GDP and employment. It's double the size of the health-care industry and more than half the size of manufacturing.

Despite its size, though, it still seems a Cinderella of the economy. For example, in recent weeks there has been a string of stories about the impact of the strong pound on British exporters, and an almost equal number about the delights of travel abroad now that the pound buys more than at any time for five years. But did you see any stories about the damage sterling is doing to Britain's domestic tourist industry?

Looked at in global economic terms, travel and tourism is particularly interesting because it offers enormous employment opportunities. A world which will have better and cheaper telecommunications will paradoxically also be a world where people will want to travel more.

While the telecommunications revolution will create jobs, the overwhelming probability is that these jobs will be almost entirely for the highly skilled. By contrast, travel and tourism creates the need for a mix of skills. The industry bridles at the charge that many of the jobs are "bad" jobs, pointing out that pay is pretty much in line with the average in the countries concerned. (Here in Britain the average remuneration of employees in tourism is slightly higher than for the economy as a whole - about 104 per cent.) But it is true that, while most of the booming new industries do require high skills, travel and tourism will also create jobs for the less skilled. In that sense it is unusual: a growth industry which does not exclude the less skilled.

The numbers will be big. As the left-hand graph shows, it already employs a quarter of the Caribbean workforce, which you might expect. But it also is a substantial employer in Europe and North America. The greatest potential for growth over the next 10 years is in Asia, as the right-hand graph suggests, with a near-doubling of jobs in South- east Asia and large increases elsewhere in that region.

In one sense you would expect this sort of development. As people get richer, they spend a larger proportion of their income on travel and tourism. East Asia is getting richer faster than anywhere else in the world at the moment, and most tourism, even in the jet age, is fairly local. So it is unsurprising that job opportunities will surge. But there is another less obvious message: that a region which industrialises rapidly is also one which will create job growth in non-industrial activities.

The job growth graph carries a slightly disturbing message for Europe. The EU will be the slowest-growing region in terms of tourism job growth over the next decade, which, given continental levels of unemployment, is a grave concern. Here in the UK, the trade forecasts that 310,000 new jobs will be created over the next decade.

This presents slightly different messages for the UK and for the rest of Europe. For continental Europe the problem is jobs: here it is competitiveness. We will probably find that our travel and tourism industries are forced quite sharply up-market. Assuming that sterling remains reasonably strong there will be rising pressure to give better value for money. Of course there is always that pressure on every business; the point is that it will intensify. If we do not respond by improving the quality of the output, we will find that we lose market share and have an even greater current account gap in tourism than we have at the moment. Though we are successful tourist exporters, Britons spend even more abroad than foreigners spend here.

What does "going up-market" mean in practice? It is easy to see the process in a manufactured product: an ordinary modern car has many features which only a luxury car would have had a decade ago. It is harder to see in a service industry, but the same principle applies. For example, a middle- ranking hotel needs to find ways of offering the level of service of a luxury one. But it needs to do so without involving more labour: the growth in employment will come from a rise in the overall output, not from more people being hired to produce the same.

There is no magic wand, but there are some clues as to how this might be done. In the airline business there has been a revolution in productivity over the last decade: the planes are the same, but in general the service is better and in real terms the fares are lower. In hotels there is a model in Scandinavia, which has been accustomed to using labour much more frugally than has been common in the UK or US. Hotels there have invested to create luxury environments which need relatively little labour to keep clean, while staff are trained to meet guests' needs in the most efficient way possible.

The public sector has a particular role in the UK, for several reasons. Travel infrastructure is an area which has suffered from under-investment, and it will be interesting to see how strongly the new government supports public transport projects like the new terminal at Heathrow. But there is also a more direct impact, in several ways. For a start, as visitors arrive in the UK they go through immigration - not a wholly pleasant experience. There are enormous potential advances to be made here, most obviously in clearing immigration controls before visitors start their journey, rather then when they arrive. The cute acronym is FAST - future automated screening for travellers - which uses biometric identification, computerised processing and automated entry to speed procedures.

The government also needs to tax sensibly - the industry argues that it provides more tax than any other industry yet, although international visitor spending is an export, it does not receive the same support as other export industries.

Another area for progress stems from the fact that many of the big "heritage" tourist draws in Britain are operated by the public sector. Here the government is not just a regulator or a taxer and spender, it actually runs a lot of the projects - museums, public buildings and so on. Some are fine, but the quality of output seems uneven, and there are certainly assets which could be developed much further.

Finally, if travel and tourism is to grow it must grow in a way which is socially and environmentally acceptable. All economic growth has costs as well as benefits, and some of those costs are evident in the UK, particularly in congestion. Encouraging a greener tinge to the business is in any case good economic sense. Part of the process of pushing the industry up-market is making its output less damaging to the environment - the less attractive resorts on the Mediterranean are also the cheapest.

How you do that - how you make sure that expansion of tourism does not damage the very things that tourists seek - needs the most careful thought. But there are success stories - the Norfolk Broads is a good example - which show that tourist pressure can be accommodated. That is a relief, because unfettered growth is worse than no growth at all.

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