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Global transformation and the consequences for our industry

Digitalisation, demographic change and the energy transition were the main topics at an ITB Berlin Convention session with Clemens Fuest

May 11, 2023

Global transformation processes are presenting every industry with huge challenges. At the ITB Berlin Convention Prof. Dr. Clemens Fuest, president of the Munich-based ifo Institute for Economic Research, examined the main findings and potential impact on the tourism industry. After an introduction by Prof. Dr. Harald Pechlaner, Tourism Faculty chair and director of the Centre for Entrepreneurship at Katholische Universität Eichstätt, Fuest began by explaining how 2021 had led to a strong recovery, before 2022 marked an economic downturn with the start of the war against Ukraine. In 2023 there were still obstacles, while the outlook for 2024 was largely better. Difficulties however still remained in the building industry.

Looking at Germany, an important market, autumn 2022 was when the mood among entrepreneurs was at its lowest ebb, However, it had improved significantly since then. One important question now was whether companies would continue to raise prices. According to Fuest, inflation was due to recede, and currently the travel industry was optimistic too.

Fuest then examined the main aspects of the transformations taking place now and in the future. Besides demographic change these were above all decarbonisation and the energy transition. Europe mostly lagged behind in these areas, as was evident with the energy transition. On the subject of digitalisation, the USA in particular was out in front, and with the exception of Denmark most European countries ranked somewhere mid-table.

The current energy crisis was a genuine damper as far as the energy transition was concerned. There was also noticeably less trade with China and more money was being needed for arms and defence. On the other hand there were naturally positives too, with decarbonisation gathering pace and migration exerting a positive effect on the job market, assuming countries actually made use of this opportunity. Migrants were an important factor particularly in the tourism industry. Demographic change was also creating big opportunities – baby boomers often had far more money, and that had to be spent. According to Fuest, the impact of automation on the industry was if anything low, due to it being a service business and the fact that replacing humans was comparatively difficult.

Overall, it was now up to the industry to stabilise itself again. In case that failed however, it also had to be prepared for certain scenarios. Accordingly, there was a need for greater flexibility and resilience, for example with increasingly diverse products that were within the range of every budget.

Regarding sustainability, an important topic, the president of ifo emphasised that while many people showed great interest in it, they were often not willing to make the relevant sacrifices. In many cases companies repeated mantras and engaged in greenwashing, but often without tackling the real issues. It was something that generated huge bureaucracy while often producing too little in the way of actual results.

A question from the audience addressed the issue of migration. Its impact on our job market might well be positive, but it also depleted the workforce of the Global South. Clemens Fuest agreed with that to a certain extent. Usually it was skilled younger workers and people with good qualifications who departed poor countries, with those staying behind feeling abandoned. According to Fuest, Germany took too much upon itself in order to stabilise other countries. Integrating people at home was responsibility enough.

Towards the end of the session, discussion again focused on inflation and ways that companies might employ to handle it. Should they raise prices? Should tourism become a luxury consumer item as a result? What was clear, Fuest said, was that inflation would not disappear overnight. Once pent-up demand for travel had been satisfied, difficult times most probably lay ahead. On the one hand there were baby boomers with a large disposable income, but on the other hand there would also be many people in future who had to make ends meet in one way or another – even if that was not evident right now.