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14 Oct, 2002

Industry Executives Begin to Brace for Fallout from Attack on Iraq

The Asia-Pacific tourism industry is beginning to prepare for yet another crisis that is expected to follow an attack on Iraq, an informal survey of regional industry executives reveals.

Mr Ken Boundy, managing director of the Australian Tourist Commission, said ATC executives have met with all the CEO’s of the state tourism organisations to start the contingency planning.

“A lot of this surrounds information: How various markets will be impacted, what airlines will be doing with routes, etc. Our responsibility will be to make this available to industry and to use it to drive our own marketing campaigns.

“In the event of an attack on Iraq it is likely that we will give greater emphasis to the markets in closer proximity like Asia, Japan and New Zealand. We are in the process of developing more specific plans in conjunction with the Commonwealth and our State colleagues.”

Mr Chanin Donavanik, executive director of Dusit Hotels and Resorts said he feared that this ‘new’ Iraqi war, will not be the same as the 1990-91 Gulf War or the war with Afghanistan.

“On the two previous wars, the US has a good reason to go in, but this one there are different opinions. I think the war to gain control of Baghdad will be short, but the US will have more difficulties long term. The problem is that there will be more tension in the Middle East.”

He added, “I think the impact on Asian tourist will be short, and we should see little impact in the European market, unless something really goes badly wrong. With the American market, we will have more problems.

“What bothers me the most is that, the world economy is having major problems, and no one is speaking out to try to find solution to solve this. I think a MAJOR slowdown in the world economy will have a much larger impact on the world tourism, including in Asia. And we may see a few years of slow growth, or even negative growth, especially from our traditional good market such as Europe.”

Mr Chanin said he was unsure what the tourism industry could do because no one really knows what will happen. “I guess we have to be more careful with expenses, and have to push for more business.

“Due to both the Iraqi war, plus the slowdown in the world economy, I think the next few years will be slow. So we just have to be very careful with spending, new investment, and must try to diversify our businesses.”

Mr Peter Hook, Director of Communications for Accor Asia-Pacific, said, “Australia/New Zealand is already well-prepared for the possibility of war and its impact on world travel. We have lived under these conditions for the past year.

“Accor is fortunate in that its portfolio is the most balanced on any hotel groups. War inevitably affects US-branded hotels that cater for large US and Japanese inbound sectors. The evidence of September 11 showed that this sector lost between 25% – 30% overnight and hasn’t fully regained lost ground in the past year.

“Accor has a 70% domestic and 30% international balance and has only a small percentage of top-end US and Japanese business. Europe and Asia were the least affected markets in the past year and that is where Accor is strongest.”

He added, “Accor is still developing its 2- and 3-star hotel brands because there is continued growth in these sectors, while our entry into the backpacker market reflects the resilience of the business. Basically, the lower you go down the star ratings, the more resilient the market is.

“While some business will be affected, we operate on a very lean and efficient basis – forced upon us as much by the collapse of Ansett as September 11 – and we see few difficulties adapting to what is now an almost permanent state of international economic and political uncertainty.”

Asked “do you think there should be a war in Iraq,” Mr Hook replied point-blank: “No.”

Mr Leo Fewtrell, General Manager of Dnata Holidays in Dubai, said much will depend on the extent and length of actual hostilities.

“Short term will see total drop in leisure travel in the Middle East and major drop in outbound travel everywhere. Mid term, after hostilities cease, (we can predict an) increase in Gulf & neighbouring states travel, sharp drop in long distance travel to Europe/USA. Long term, (we see a) gradual increase in business to normal as no-one really cares about the cause, just a settlement of the affair.”

As for the contingency plans, he said, Dnata Holidays is reducing the number of areas to produce the breaks for the upcoming Christmas and Eid ul Fitr (the end of the fasting month of Ramadan) holidays. “We are not pre-blocking seats or hotel allocations due to the uncertainty.”

Mr Peter Harbison, Managing Director of Asia-Pacific Aviation Analyst, said, “The prospect of intensified or protracted conflict in the Middle East threatens the tenuous recovery currently underway in global aviation.

“If war breaks out in Iraq, two things are certain: (1) a return to stable economic and market conditions will be deferred, probably until 2004 at the earliest; and (2) all airlines will suffer financially.

“Ultimately, the timing of a recovery will depend not just on the duration of hostilities in Iraq, but on the ongoing civil or terrorist disturbance that might be anticipated beyond there – and the role, if any, of aviation in the process.

“A second major shock to the industry in little more than 12 months would upset the still fragile balance achieved by airlines still struggling after September 11.”

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