Every year the World Economic Forum brings together political and business leaders in the Swiss mountain resort of Davos to discuss the outlook for the next 12 months. The 2023 edition was held under the tag line "cooperation in a fragmented world" and world events remain under the shadow of Russia’s invasion of Ukraine and the ongoing conflict in the region. But there are a number of reasons to be positive.
To get a feel for how this year’s meeting went, and the outlook for the year ahead, we spoke to Ian Goldin professor of globalisation and development at the University of Oxford. Goldin, who is the author of a number of books with the latest entitled Rescue: From Global Crisis to a Better World, will be speaking at this year’s International Hospitality Investment Forum in Berlin. You can register here and view the entire programme here.
Pandemic is behind us
In 2020 and 2021 the WEF was actually forced to cancel the event because of COVID-19 and last year’s gathering was pushed forward to the middle of the year. This then was the first time normality had returned since 2019 and there was a very real feeling that we have seen the back of the pandemic.
“In terms of the mood, I think it was surprisingly positive,” Goldin said.
China is opening up
One country that has struggled more than most in getting a handle on the virus over the last year or two has been China where the countries leaders employed a zero-COVID strategy, leading to an extensive lockdown in Shanghai for much of the first-half of 2022. Restrictions mostly came to an end at the start of December. Not only is this good news for global manufacturing but also for the outbound Chinese travel market, which before 2020 had been a significant area of growth for many European countries.
“China coming back is, I think, the principal source of the positive news,” Goldin said.
Inflation has peaked
Inflation was the big concern in the back half of 2022 but it looks like it may have peaked. Interest rates may have a little bit more to go but continuous rises are no longer baked in across many major economies.
“Certainly both the Fed and the European Central Bank, and other central banks are talking about that. But I think we're nearing the end of the tightening cycle,” Goldin said.
All this means that financing for hotel investors should start to get a little bit easier as the year progresses but there are question marks over other areas
“Anyone thinking about a new build now has really got to worry about what's going on the construction costs, which have gone up 30, 40% Since COVID, and then there's also the uncertainties regarding the supply,” Goldin said.
Experience economy keeps growing
One of the big differences between the middle classes now and the middle classes of 20 years ago is just what they choose to spend their money on. Where once it was about the accumulation of material possessions, now thanks to the internet and the rise of social media, it is all about collecting experiences.
“You increasingly spend your disposable income on services: services, like tourism, like medicine, like education, like massages, like good food, good quality experiences. And as you get richer, you focus more on quality, not quantity. You don't eat more and more food, you eat better food, you don’t go to more and more hotels, you go to better hotels. And that really is what underlines the transformation of the global economy,” Goldin said.
This is one area that bucks the trend for deglobalisation that many people have spoken about since 2020. Although we are seeing the return of protectionism in places like the US and also to some extent in Europe in areas like manufacturing, in digital cross border traffic it is growing, according to Goldin.
“I'm very optimistic about the prospects for hospitality and tourism. The composition is going to change dramatically, to be much more Asian, it's going to be much older as well,” Goldin said.