FNX NOW: Tourism Surges Post-Pandemic
(film reel clattering) - [Sandy] I'm Sandy Close, director of EMS, and really fascinated to hear from our speakers today on the topic of tourism. [background music] As the summer starts this is also the real acceleration of the tourist season in many regions of the country. And, a great opportunity to explore a topic that we rarely get to discuss on these briefings. During the COVID-19 pandemic, most of the world shut down its doors and tourists stayed home. The U.N. estimates the pandemic cost the global tourism sector, $2 trillion lost revenue in 2021 alone.
[background music] Tourism is expected to rise by 30% this summer from pre-pandemic levels, although the sector will not fully recover until 2027. Even amid unprecedented levels of street crime and homelessness, some cities like New York, San Francisco and Los Angeles remain among the top tourist destinations. [glitchy Zoom audio] Speakers today will address questions about how tourism impacts downtown economies; whether much of the U.S. tourism market is fueled by international travelers, such as from Mexico, China, and India; whether the industry can continue on its growth trajectory, and the factors allowing it to do so. When you realize that tourism accounts for the second largest sector of the service sector, you realize just how broad the ramifications are for tourism and whether or not we are lucky enough to attract tourists.
So welcome, and a special thanks to our speakers: Cassandra Costello, executive vice president, chief policy and external affairs officer for San Francisco Travel Association; James Altucher, podcaster and author of "New York City is Dead Forever"; Dr. Frederic Dimanche, director, Ted Rogers School of Hospitality and Tourism Management, Toronto Metropolitan University. Now, I turn the microphone over to our health editor Sunita Sohrabji, your moderator for today. - Let's introduce Dr. Dimanche who will provide us with an overview of the global tourism industry post-pandemic.
Welcome! - [Frederic] My name is Frederic Dimanche. I normally work at Toronto Metropolitan University in Canada. So, as you said, during the infection, you know, the COVID has been [glitchy Zoom audio] for the travel and tourism industry, the current tourism industry is resilient.
(French accent) It's proved it in the past. Remember the terrorist attack of September 11th and others, some health issues before. But, they were never at the magnitude that we have seen with COVID where borders were closed, people had to be stuck at home, in many countries, and that obviously had a very detrimental impact on travel and tourism. What is going on now? This year we are seeing a very strong resurgence of travel and tourism. People are experiencing a hunger for travel like we have never seen before, I suppose.
Many people around the world have been stuck at home for a year, two year, three years, you know, depending on the country. And, there is definitely a strong will to travel at the moment. Despite some conditions that are typically against travel and tourism.
For example, we are all experiencing inflation. The cost of travel has gone up dramatically. If you look at the cost of air travel, particularly, you look at the cost of hotel, it seems like everybody's trying to catch up on [glitchy Zoom audio] the lost revenues of the COVID times, and all those businesses are trying to recover some of [glitchy Zoom audio] normal, and normal for us to refer to 2019 as a base period. Yet people continue to travel, people continue to book, and we may not be at 2019 levels yet, but there are some good reasons for that.
China is still slow with respect to international travel. The Chinese are not traveling abroad as much as they used to, yet. There is, of course, a war going on in eastern Europe, as you well know with Russia invading Ukraine, and that has had put a damper also on some eastern European travel and on Russian travel, obviously. But, despite that, you know, the trend has been very, very positive.
And, another thing that I would suggest is affecting travel and tourism at the moment is what we call the "labor gap." A lot of workers have left the industry during the COVID years for multiple reasons, mostly because the industry shut down. But, also, because people realized that they could get a better job, probably with a fairer income and better lifestyle. By this, I mean regular working hours as opposed to working in the hospitality or the tourism sector. And, all over the world, we see the need for travel and tourism workers. And, you know, it shows in airlines. It shows in airports.
It shows in hotels. It shows in restaurants. And, as a result, the quality of service that is being provided may not be as good as it used to be. So, like I said, people are so hungry for travel right now that I suppose they're willing to (chuckling) forgive the industry for not providing the type of quality service that is being expected, especially with the high prices that the industry is asking consumers to pay. Now the question is, "Will it last?" Personally, I think if the industry continues to go at this level of pricing, it's not going to last. The consumers are buying right now.
They're traveling right now because there is a strong need for it. And, remember also that a lot travel and tourism is related to visiting friends and relative. And, there is another factor that on the need to travel, the way they travel, the distances that they travel to. And, also, governments at one point or another are going to have to take this very seriously, and probably impose taxes that some of us may call "eco taxes" in a broader way to work on achieving the goals that governments have set for themselves with respect to global warming. So, all of those factors considered, I think we'd better take advantage of the rise in travel and tourism that we have this year, because the years ahead may not be so good.
And, I'll end on this. Goodbye, everyone! - Alright, take care. - Thank you. - [Sunita] We move on to Cassandra Costello who joins us. Welcome, Cassandra! So, what draws travelers to San Francisco despite all the negative press we've been getting recently? - Thank you so much for the question. I'm gonna back up even just a little bit more if I may, Sunita, and just talk a little bit about where we are as a destination and as a city, and then move in to other topics. So, tourism, as you know, is an essential part of San Francisco's economy.
In fact, it's the largest generator of outside revenue to the city. So, as you can imagine, when we were the first U.S. city to shut down at the start of the pandemic and one of the last to open back up, our industry's path to recovery has been long. But, we have really good news! We're seeing major gains, here. So, just last year in 2022, our visitor arrivals grew by 29% to 21.9 million people.
And, that included a 211% increase in international visitation. The international market is a really important market for San Francisco and we are a gateway destination with our award-winning SFOs. We wanna welcome back those international visitors. In addition to those visitors coming back, we also had a lot of new tourism products hit the market.
We had over a thousand outdoor dining and new rooftop bars and restaurants open in San Francisco. We also had new luxury and boutique hotels coming onto the scene. So, we had a lot of great news to share that we're working to get out there to counter some of the negative media that you referenced, Sunita. This year in 2023, leisure travel is expected to continue our steady recovery. Overall visitation is expected to reach almost 24 million this year, in 2023.
And, international arrivals expected to grow to two million people in 2023. And, again, you can't talk about international-- you can't talk about tourism to San Francisco without talking about international. We're really focused on the European traveler. They're really what drove our international visitation this year. Coming into this coming year, we do anticipate our top five markets to be Mexico, Canada, the U.K., India, and France. India has been an emerging market and there's a lot of pent up demand to visit here.
So, they're a continued growing market here, especially as we work to bring China back. India has definitely been a fast-growing market for us. And, what's interesting-- just wanna share a statistic about the importance of international travel to San Francisco.
Although they comprised 24% of overnight visitor volume, it's over 60% of our visitor spending. So, bringing back that international visitation is incredibly important for the economy of San Francisco, for the community, for our destination. I mentioned India emerging as a fast-growing market? Last year just in India alone, 120% year-over-year growth.
And then, this year coming 36% on top of that. So, that is a tremendous growth in that growing market. And, this demand from these international travelers led to introduction of new airlifts. So, we have new routes to SFO. This summer, Norse Atlantic, for example, will be providing three direct flights per week from SFO to London Gatwick.
Level Airlines introduced nonstop flights from Barcelona. Air India expanded the number of direct flights, and ZIPAIR started offering direct flights from Tokyo. To your original question, Sunita, "Why are people coming to San Francisco?" So, San Francisco continues to attract visitors.
We have the core bones. We've got iconic scenery. We have an experienced-- a rich history, culture, and it's no mystery we have an award-winning dining scene. We also have incredible neighborhoods, an eclectic diversity of special and unique neighborhoods that really have something for everybody. And, what makes those neighborhoods unique and special are the people, the community, and the small businesses that really make these places unique.
For example, we have the emerging Dogpatch neighborhood which has welcomed new arts experiences including Dogpatch Arts Plaza, and the ICA SF which is a free non-collecting art museum. Speaking of "free", there is so much to do in San Francisco that is free, whether it's parks and open space to free arts exhibits and immersive experiences. Japantown has welcomed new hotels and restaurants and community art projects that have kept that jewel just so special and vibrant. In Chinatown, we have a new amenity, the Edge on the Square, open. That's a new media and cultural exhibition and visitor center showing the stories of Asian Pacific Islanders. In addition to new attractions, restaurants and art throughout the city have opened to create thriving neighborhoods and encourage tourists to really explore.
We have a walkable city. We encourage tourists to traverse our hills, to discover, to find those surprise-and-delight moments around every corner. And, we also have plenty of nature and outdoor experiences to discover. And, that can be from the majestic Golden Gate Park to the hundreds of neighborhood parks, plazas and open spaces in San Francisco. You really don't go far without finding open space and a beautiful park. In fact, last summer, the Presidio Tunnel Top Park? You might have seen a little bit of a media splash with that new amenity.
It opened in the historic Presidio. This was 14 acres of new parkland and new scenic overlooks that show the stunning views of the Golden Gate Bridge and the city. And, lastly, looking ahead, as we continue our path to recovery, SF Travel, and San Francisco, is continuing to invest in programs, events and initiatives to drive visitation to San Francisco.
We recently launched a new campaign called "Always San Francisco". And, the real spirit there was to celebrate our city's beauty and diversity. And, this campaign is mostly targeting visitors-- international visitors in Mexico, Canada, India and the Asia Pacific, as well as some key domestic markets, as well. We also just got back from a tourism and PR trip to Japan, Korea in April, aimed at promoting San Francisco and boosting these markets.
We're really excited! We're hosting APEC this fall. This will have a global impact. It's an opportunity to put us on the global stage. We are getting ready for it. We are very excited about it. And then, looking a little bit further ahead, we're hosting two of the world's largest sporting events.
In 2026, we have Super Bowl as well as World Cup. - Just stop for a second. What is APEC? - The Asian Pacific Economic Cooperation. We will have-- I believe it's 21 heads of state. It is such a large international diplomatic gathering. I'm actually at an event at The Westin St. Francis, here in San Francisco.
It's a Women in Leadership conference. We just had our lieutenant governor here speaking and she had a big focus on how exciting it is for us to put San Francisco on the international stage hosting all of these diplomats from around the world. So, lots of positivity to come in San Francisco.
We continue to welcome visitors here who when surveyed, 92% of them say, "That was a great experience. I'd love to come back." Really not meeting the narrative you're reading in the local media or in the international media.
So, happy to take any questions and I'm just so happy to be here with all of you today. - [Sunita] We move on to James Altucher who wrote a controversial op-ed in 2020 entitled "New York City is Dead Forever". The comedian Jerry Seinfeld challenged his premise. James, welcome. - Yeah, thanks for having me here.
You know, you bring up that article. I almost wish I didn't write that article because every week I still-- and this is three years later, I still get hate mail or even death threats. Even today, I got hate mail about that article. It was written three years ago, and I wish-- and there's been hundreds of other articles about the decline of New York City, but mine seems to be singled out for various reasons. But, the reason I wrote that article still holds true today, which is that I was concerned New York City was facing very important issues, mostly brought on by a lot of the pandemic lockdowns, and they haven't recovered from those issues. And, I'm worried some of the consequences of those issues are gonna be around for a very long time, if not, as I mentioned in the article, forever.
And, you know? Overall, New York City population is still way down from its peak. I would say it's peak was close to 9 million. Now, it's around 8.3 million or 8.1 million. So, again, just like San Francisco, just like many other cities, there's been a net outflow of population from not only New York City but New York State and other parts of the metro area. And, again, Texas and Florida have been the main beneficiaries but other states with, you know, let's say lower tax rates and, you know, better weather and cheaper living have also been a beneficiary.
And, I wanna mention too, that I know we're talking about New York City, San Francisco, other cities. But if you take a bigger picture, overall this has been a good thing for the country. When opportunity is not just found in one city or two cities, but in every city, when culture and talent and opportunities are found in every city this is a good thing for the U.S. in general, despite it being maybe a negative for New York City, San Francisco, Chicago, other cities. But, you know, there are issues. So, municipal employees in New York City are down around 30% to 40%.
Because of, again, remote work; they can't fill the jobs. Which means that social services, like services for the homeless, fire workers, sanitation workers, all of these issues are problems in New York City. Crime rates are up in New York City.
Now, crime rates for certain crimes are down, but overall crime rates year-over-year, at least as of Q1 2023, are up in New York City and are significantly higher than they were in 2019. Commercial real estate. This is gonna be a big issue in New York City. Vacancy rates in offices are at about 30% compared to what they were in 2019. Now we can argue, "Okay, this is because remote work".
But many companies are saying, "Oh, employees are gonna come back." I mean, this was one of Jerry Seinfeld's arguments in his op-ed piece that he wrote about me and my article is that, his quote was, "Nobody wants to work remote." This is coming from a guy, by the way, who never worked, period, in a corporate job.
And, the evidence shows that people do not-- not everybody, but more than 50% of people do like having the option to work remote and will work remote if they have the choice. So, this research has shown over and over again. You know, tourism is up since 2020, 2021. I think New York City had about 61 million tourists last year. It'll probably be up this year, but, overall, tourism's down from 2019. And, I agree with Cassie. We don't really know for sure yet
where this ends up. Like, you know, 2019 was the peak for San Francisco in tourism. It was a peak for New York City in tourism. You know, again, if you kind of do the math you can expect by 2027 or 2028 tourism will be higher than ever in New York City, but we don't really know. What we do know is that tourism is affected by crime rates, by inflation, by tax rates, and so on.
And, in terms of its effect on New York City's success, it's somewhat minimal. Tourism is not as big-- like, in terms of tax revenues collected, you know? Or, in terms of money spent, tourism accounts for about 5% or 6% of the money spent in New York City, maybe a little bit less. And, the taxes are relatively-- and sales taxes from tourism are relatively minimal compared to personal income taxes, corporate taxes, property taxes and so on, in New York City. So, tourism one way or the other, doesn't really affect the serious problems of, you know, commercial real estate declining, which is a big part of New York City's revenues; people leaving, you know, hundreds of thousands of people leaving New York City, which is the biggest part of New York City's revenues; the decline in social services in New York City, which is a critical issue. New York City is a tough place to live.
I've lived there all my life. My family lives there. My kids are adults now in New York City. They, of course, love it. It's a great place for kids. A great place, or-?
I say "kids"! 20 years old, 21 years old, 25 years old. It's a great place for young people to live in New York City. You get to easily meet people, and there still is opportunity there. But, again, there's been this disbursement of opportunity throughout the entire country because the numbers are real. There's been net outflows from Cal-- significant net outflows in the millions from California and New York State. New York State revenues as a state are way down year-over-year.
They just can't raise the money. The beneficiaries, Texas, Florida, other states that are making now money because of this. And, I don't know when that decline reverses. Again, New York City's an expensive place to live. If you can do remote work elsewhere, why live in New York City? And, again, I'm someone who don't currently live there.
It's an expensive, difficult place to live. New York City just appointed a commissioner for rats 'cause the number of rats are so-- are unbelievably large in New York City. That certainly slows tourism down! So, I don't know what will happen. In my original article, I said commercial real estate is gonna be a big problem for New York City. Turned out that, that is true. I said the population is gonna decline.
Turned out that was true. Tax revenues are gonna go down. It's unclear yet, you know, whether that's true, because even when you leave New York City, you still have to pay New York City taxes for a year or so afterwards.
It's very difficult to kind of remove yourself from that system. So, we'll see that more in 2024 and 2025. But, overall, I do not think the prospects are good for New York City. I do think San Francisco is booming in the good areas of San Francisco. The bad areas like downtown and the Tenderloin, they continue to get worse. You know, commercial real estate is collapsing in San Francisco, but similar to New York City.
So, I think the jury is still out. I hope these cities succeed, but I know in general, there's been a positive in around the country as talent has moved elsewhere. So, we'll see. That's kind of a summary of what I think,
and it all seems to be coming true. And, as I mentioned in my original article, I do not like this trend but it is what it is, and I hope it gets solved. - [Sunita] Thank you so much for joining us. Iuliana? - [Iuliana] Yes. Thank you, again. Despite all the challenges that I believe the industry is still facing, I do wanna point out a positive note, which is that we are still seeing increasing demand for the industry. People are still traveling.
We still have growth and demand, especially in airlines. You know, people are not giving up these experiences. So, the hospitality industry is not going away despite, you know, the dip that we experienced during the pandemic. So, I would say that given the strong demand that we're seeing, it's gonna be really important for hospitality companies to take this time to invest in their people who make these experiences, and industry, possible. - [Sunita] Thank you so much, Iuliana.
And, final word to you, James. - Yeah. I just wanna mention, everything is changing. Nothing is gonna be the same
as it was before the pandemic. [background music] Populations are changing; it's all moving around. People are migrating from state to state.
Inflation in part caused by some of the conditions in the pandemic has changed the hospitality industry. Hotel rates are rising, but there's not the employees to work there 'cause no one wants to work for cheap wages. Airline tickets are rising. Yes, tourism is still down from 2019, but the data is early. But, also, looking to industries like, you know, lower-cost tourism, like glamping or other types of, you know, outdoor activities, less expensive activities.
That's incredibly on the rise. The data is still unclear, but the whole world has changed and we can't expect it to go back to normal. There's gonna be, as they say, a "new normal." - Thank you to all our speakers and reporters for joining us today. This was a wonderfully-- I'm going to quote Vansh Gupta who says, "Thank you so much for the amazing insight.
Really engaging discussion today." And, I heartily agree with Vansh. Thank you all so much! ♪