Economies: double whammy hits tourism and travel

Singapore is a fascinating place on many levels. It has wonderful roads : it's a city that is interconnected like no other. Yet the government actively discourages - with a system of restrictions on ownership and use plus penal taxes on purchase of vehicles and hefty road pricing and a desperately inconvenient way of paying for car parking (if you can find a car park) - both the purchase and use of cars.

But to do so, it first created an efficient and effective and inexpensive public transport system. An integral part of that system are taxis that are, for the most part, the envy of the region. Compared to most nearby countries, the taxis are expensive - but they operate highly efficient booking systems by voice and sms, they are on time, most drivers know their way around and speak two or three languages to a reasonable degree of proficiency. Yes, there are the additional rush-hour and after midnight charges, plus peak in-city charges, which rack up seemingly ridiculous bills but compared to owning a car, it's not bad.

Taxis are a very egalitarian form of transport in Singapore. And so they are a barometer of the state of the real-world economy, both in terms of available cash and sentiment.

Thus the news that a sustained fall in passenger numbers, almost 10% from a year ago, is a sign of how real people view the economy.

Some of those "missing passengers" are tourists and visiting businessmen: in the first six months of this year, Singapore has seen a year-on-year fall of more than 11% and a reduction in tourist spend of more than 13%. The Singapore Tourist Board said that its biggest spenders were Indonesians, Chinese, Australian and Indian visitors, in that order with the Indonesians far and away the highest value group.

Hotel occupancy, the Board says, fell by more than 11% in the first six months, leading to a fall in average room rates of more than 21%. The overall room revenue fell by a third.

It's not just economic conditions that are causing the problems: would-be travellers are wary of catching A(H1N1). Although there are significant numbers of deaths all over the world, it's not the deaths that are causing problems.

Business travellers are more worried that they will be quarantined abroad with the costs and disruption to their businesses that that causes.

And so IATA's figures published yesterday show that global air traffic has fallen 14.5% as against a year ago.

But a year ago, recession was a long way this side of the horizon and fuel prices were pushing up fares to unsustainable levels. And that recession, already under way in a real if not technical sense a year ago, still saw freight volumes more than 16% higher than now.

And, says IATA's DG and CEO Giovanni Bisignani, things don't look good in the near future: "Airlines are seeing international revenue falls of up to 30 per cent at the start of the busy June-August period when airlines traditionally make their money. The outlook remains bleak.'

He says that falls in demand have exceeded cuts in capacity (hinting at more code-shares on quiet routes). But volumes are not so bad on the face of it: in June the drop in capacity as against June 2008 was 7.9%. That's better than the previous month's comparison of 9.3%. But that figure is false comfort: revenue fell by somewhere between 25 and 30%.