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Around the World Economy in Tourism-ways

March 19th, 2013
in contributors

The Shadow World Economy of Tourism Booms: Why Starwood Stock Bounced Twice As High As the S&P 500 since March 2009

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Leaving aside the hangover from the debt bubble that is not yet even half-cured by the toxic-cocktail of QE flavored with the bitter spice of austerity...life goes on. At least outside of the parts of the world that can be controlled by central bankers and what passes for adult supervision in government these days.

Follow up:

One way to get a feeling for the pulse of the economy that no one controls, located literally, in the stratosphere or close-by, is to look at how much of that allegedly soon-to-be-worthless fiat-money real-people are spending on real-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.

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Armageddon or not, that chart suggests either the price of oil drives tourism travel (and business travel too) 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:

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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 in Dubai 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 of "beach" rooms; 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:

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The start of the crash in international hotel stock prices started along with the start of the decline of the stock markets, but the bottom 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?

Certainly the performance of the Big-Three hotel chains (Hilton is privately held); made the bounce of stock prices since March 2009, look positively pedestrian, by comparison:

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International hotel chains don't own hotels, they own brands and Standard Operating Procedures and they have loyal trained employees, plus they own sophisticated revenue management systems PLUS they own Brands!!!

That's good old-fashioned Made in America with PRIDE excellence being exported all over the world, except of course the money is being made outside America; in fact it's made pretty-much outside anywhere. These days most people buy their hotel room, on the Internet, they pay on the Internet, and the profit on that goes...wherever.

And if the King of Bongo Wongo decides one day to tax hotels 100%, well all that happens is that the hotels in Bongo Wongo are empty, the owners (not the hotel operators) go bust, and all the tourists go and spend their money somewhere else.

Looks like there is a world out there that no politician, tax-man, Rambo-lookalike, or central banker can meddle with, and truth be told business has never been better.

So BIG DECISION, where do you want to put your money? In Bongo Wongo or another place that's falling to bits; or somewhere some-place in-between cyber-space and the stratosphere?

 









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