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HOSPITALITY 2010
The Future of Hospitality and Travel
Library of Congress Cataloging-in-Publication Data
Cetron, Marvin J.
Hospitality 2010: the future of hospitality and travel / Marvin Cetron, Fred
DeMicco, Owen Davies.—1st ed.
p. cm.
Includes bibliographical references,
ISBN 0-13-147579-7
1. Hospitality industry. 2. Tourism. I. DeMicco, Fred. II. Davies, Owen.
III. Title.
TX911.C42 2006
647.94-dc22
2004028354
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To our families.
We hope it will be a very hospitable future for them.
Foreword xi
Acknowledgments xvii
PART S Common Concerns for the Hospitality Industry
Chapter 1 Practical Prophecy for Beginners 3
Consulting the Oracle 4
Fictional Futures 5
If This Goes On . .. 6
National Stability 7
Looking Ahead 12
Chapter 2 Coming Global Growth Is Hospitable for Hospitality 22
Looking Up 23
Consumers Invite Caution 25
A Few Challenges 26
As We See It 28
World Tour 29
A Benevolent Cycle 34
Key Trends for the Economy 36
Chapter 3 "Bang, You're Dead!" Hospitality in the Age of Terror 47
In the Crosshairs 48
Weighing the Risk 51
Dangerous Ground 52
Future Shocks 54
Safety First 56
Identity Concerns 57
Site Safety 58
Key Trends for Security 60
vii
Contents
PART II Sector Forecasts

Chapter 4 If This Is Tuesday, It Must Be Kuala Lumpur 67
Expanding Travel 67
Places to Go, Things to Do 68
Travel Markets 69
Forty Percent of the World 71
Key Trends for Tourism 74
Chapter 5 Away on Business: The MICE Market 81
Prosperity Rebounds 84
Growing Older 85
Infotech Unites the World 86
Society Goes Global 88
Tourism Expands 88
We Travel Faster 89
Specialization Is Spreading 89
Better Pay for Women 90
Work Ethic Wanes 90
New Generations Dominate 91
Seconds Count 92
Businesses Shrink 92
Key Trends for Meetings and Expositions 96
Chapter 6 Water, Water Everywhere: The Cruise Industry 102
U.S. Economy 103
Aging Population 104
Tourism Grows 105
High Tech, High Touch 106
Economical Energy 107
Cleaning Up 107
Technology Improves Transport 108
Cyber-Cruising 108
Time Is Precious 110
Bang, You're Dead 111
Savvy Consumers 112
Shock and Aahs 113
Competitive Advantage 114
Yield Management 115
Ten Trends 115
Through 2010 116
Key Trends for the Cruise Lines 116
Chapter 7 Clipped Wings: Troubled limes for the Airlines 122
One More Perfect Storm 122
Current Status 123
Contents ix
Money Matters 125

Tomorrow's Passengers 128
High Altitude, High Tech 129
Big and Small 131
The Bottom Line 134
Key Trends for the Airlines 135
Chapter 8 Tasty Trends for the Restaurant Industry 139
Diners Change, Restaurants Adapt 141
Tourists Eat, Too 143
Dining for Health As Well As Pleasure 143
Consumerism Compounds 145
High Tech, High Touch 146
X's and Dots 147
Clock-Watching 148
Government Watchdogs 149
Security That Isn't Social 150
The Rich Get Richer 151
In All... 152
Key Trends for Restaurants 152
Chapter 9 The Past Is Prologue 157
Appendices
Appendix A 52 Trends Now Shaping the Future 165
General Long-Term Economic and Social Trends 165
Trends in Values, Concerns, and Lifestyles 176
Energy Trends 183
Environmental Trends 188
Technology Trends 195
Trends in Labor Force and Work 203
Management Trends 211
Institutional Trends 215
Appendix B Vital Signs of National Stability 220
Sociopolitical Indicators 220
Economic Indicators 222
Technology Indicators 223
Military Indicators 224
Appendix C Hospitality Associations and Publications 225
Listing of Associations 225
Publications and Journal Publishers 231
Appendix D College Programs in Hospitality 236
x Contents
Appendix E Annotated Bibliography 246

Airlines 246
Cruise Lines 246
General Trends 248
Technology 250
Hotel Management 252
Restaurants 254
Security 264
Travel and Tourism 267
Index 274
orewor
In a fast-changing world, there are a few enduring issues that people in any
business must focus on if they are to be successful. This book deals with one of
them. Here I want to consider another.
The first issue, and the subject of this volume, is change itself. When
today's senior executives were beginning their careers, we were just starting to
understand that something new was abroad in the world, a process of trans-
formation that our parents had not recognized and our grandparents had not
faced. After World War II, most people had expected things to go "back to nor-
mal" Twenty-five years later, many of us were still adapting to the idea that it
was not to be.
The process of constant change began earlier—arguably much earlier—but
it became a way of life in the 1950s, when American executives fanned out
across the world, spreading the gospel of capitalism; their students built Ger-
many, Japan, and other countries into mighty international competitors. Peo-
ple whose grandparents had been born, lived, and died on the family farm began
following their jobs from Nebraska to Texas to New York and Oregon. Tiny
restaurants specializing in hamburgers and fried chicken spawned vast chains
that transformed the world s eating habits. Hotels proliferated to meet the grow-
ing demand for accommodations. First airlines and then telecommunications
knitted the world together into one global economy. Hospitality companies were
born, grew, shrank, merged, and grew some more.
Somewhere along the way, we came to understand that change is now a
permanent part of our lives, and one that is moving faster every day. No one can
manage a business or plan a career without being able to anticipate where tech-
nology, demographics, and other transforming forces will lead us. Unfortu-
nately, making successful forecasts has been a difficult skill to learn, not only
because forecasting itself is challenging, but because few specific resources
have been available to help with the task.
xi
xii Foreword
This is where Hospitality 2010 shines. Marvin Cetron is a pioneer of fore-

casting, with a remarkable record of successful predictions in business, tech-
nology, politics, and lifestyles; he has been working with hospitality executives
to project the course of our industry for some 30 years. Fred DeMicco is one of
the leading educators specializing in the hospitality industry, and he too has
demonstrated a consistent ability to anticipate our needs. If anyone can teach
practical forecasting for hospitality and show us what lies ahead, these authors
are the obvious choices.
In fact, they have managed this task remarkably well. In the pages ahead, the
authors explain the basics of forecasting as it is done by one of the art's most ca-
pable practitioners. Then they examine specific areas of hospitality—airlines, ho-
tels, restaurants, and others—and spell out where current trends are leading our
industry. By the time you are done reading, you should have a much better sense
of what lies ahead and be ready to begin making sound forecasts of your own.
However, change is not the only critical issue in hospitality It is not even
the most important, as the authors themselves clearly recognize. More than
any other, the hospitality industry exists to provide service to its customers.
The quality of our service is the issue that dominates my work day, and the one
that I want to consider here. It is the issue that should most concern you.
There was a time when hospitality providers could compete effectively on
the basis of location and price. Today, multiple hotels are available almost any-
where people want to stay, and the Internet enables consumers to find the low-
est price for everything they buy or do. Much of the same trend is seen in other
branches of the hospitality industry.
This competitive pressure has begun to remove the traditional selling
points from the customer's decision making. For repeat guests, the most im-
portant issue is how satisfied they were on their last visit. For new patrons, one
of the most important is the reputation we have built among other consumers.
That is where service comes in. It is the one area left in which we can distinguish
ourselves from everyone else who wants the customers business.
When we look at trends in the hospitality industry, we are trying to antic-
ipate, more than anything else, what services our guests will value in the fu-
ture. Then we must figure out how best to meet those changing needs. This is
a constant challenge.
There are eight insights that can help companies improve their perfor-
mance, They form a "how-to" for better customer service that everyone in the
hospitality industry should keep in mind.
1. Build a strong foundation.

Service does not happen in a vacuum; it grows out of a complete mastery
of the basics. Just for a start, you need to know the strengths and weaknesses
Foreword xiii
of your own business, understanding what is necessary and doing it well. For
a restaurant, this can mean anything from providing quick and accurate service
at the drive-through to visiting the docks as the fishing boats arrive to select the
absolute best of the day's catch. The details vary with the business; only the
mandate is constant.
If there are problems, they need to be caught and fixed quickly. Left un-
attended, they will alienate customers and harm your reputation.
Finally, get to know your guests personally. Customers always come back
to a restaurant whose maitre d' addresses them by name and recalls what they
enjoyed a year earlier. Fortunately, computers now can bring this kind of per-
sonalized service within reach of hotel and restaurant staff even if they lack
such a remarkable memory themselves.
All this boils down to a single piece of advice: Be brilliant on the basics. It
requires no more than constant, almost obsessive, attention to detail from every
member of your staff.
2. Make every customer feel special.
Customers are individuals, and they should be treated as such. This means
giving them choices wherever possible, making them feel important, and build-
ing personal relationships with them. (See the previous rule.) Treat customers
like family, and they will keep coming back.
3. Have the courage to set bold goals.
It is no longer enough to be good at what you do. Continued success re-
quires constant improvement, and often the development of entirely new abil-
ities to meet your customers' changing needs.
This is a mandate for setting long-term goals. Make broad plans to meet
your customers' needs. Then choose concrete targets, begin work immediately
to achieve them, and make sure that your people have the tools they need to get
the job done.
It often helps to bring in someone from outside to provide a fresh per-
spective or to aid in accomplishing your objectives. Talk to people from other
departments. Recruit suppliers and vendors to help. Even work with competi-
tors when it will bring mutual benefit.
4. Simplify, simplify, simplify.
This is a powerful idea, and it reaches into all aspects of your business. Think
of the craftsmen of an earlier era. Their priorities were clear and few: Deal with
people plainly and honestly, and give customers what they want without needless
complications. And if some other rule or procedure gets in the way, bend it, break
it, or get rid of it entirely. Those priorities made things simple for the craftsman
and easy for his customer. They can do the same for your company today.
xiv Foreword
Make each decision pass a litmus test. Is this good for our people, cus-
tomers, and profits? If it's good for all three, then do it. If it's good for two, talk
about it. If it's good for one, you should probably skip it. And if it doesn't add
value, eliminate it.
That kind of simplicity will make your company more efficient and your
customers happier.
5. Make technology your servant.
In the 1980s and early 1990s, many executives seemed to think of tech-
nology as a kind of magic: Buy some computers, and your business would sud-
denly be more profitable. It did not work out that way.
Technology adds value only when it helps you meet the customer's needs.
It does so by gathering useful information—for example, customer feedback,
which should be collected and acted on within 24 hours—and routing it to the
people who can apply it. Make sure that technology is easy for your staff to
use—the people who will have to work with your IT system should help design
it—and transparent for your customers.
Used properly, technology can be a powerful ally in giving each customer
a highly personalized experience, and this can be one of your most valuable
tools in cultivating repeat business. This is one place where the authors' fore-
casts directly advance the quest for better service. Several of the chapters ahead
offer concrete suggestions for using technology to individualize your dealings
with customers.
6. Measure well, act fast.
One purpose of technology is to measure things so that you can act on
them. How close are you to meeting your goals? How satisfied are your cus-
tomers? What are their most important needs? If you don't know—and by that
I mean if you do not have sound quantitative data for analysis—you have little
hope of doing better. But with the data that technology provides, you can focus
your efforts on the areas that will do you and your customers the most good.
One critical area for measurement is customer ^satisfaction. Only about
5 percent of dissatisfied customers will actually complain about what bothers
them. However, seven out of ten will tell their friends what a bad job you did.
(Contrast that with the number who will tell their friends what a good job you
did: only 30 percent!) In the age of the Internet, those "friends" may be thou-
sands of people all over the world, and a single negative report on the right Web
site can deter motivated consumers for years.
Fortunately, measuring results quickly and accurately also makes it eas-
ier to deal with complaints fast, and to build personal relationships with your
customers. And their emotional response to that kind of service can turn them
into loyal visitors for years to come.
Foreword xv
7. Unleash the power of people.

This process begins when you first think about recruiting a new worker.
Begin by analyzing your best performers and figuring out what makes them
special. Then you can hire people like them. You will look for basic skills, but
chances are that you will wind up hiring for passion and personality.
Once on staff, your people deserve your trust, respect, and support. They
require recognition when they do well, training when it is needed (and not when
it isn't, or they will lose interest), and the authority to work like they own the
place.
That last requirement is becoming more important every day, As the au-
thors point out later in this book, today's younger workers have a powerful need
to do things their own way. So long as they accomplish the company's goals, how
they do it must increasingly be up to them. Loyalty to employers is foreign to
under-40 employees; you will have to give them all the leeway you can to keep
them working efficiently.
8. Lead with care.
Leaders create an environment in which people make an effort because
they want to do their job, rather than because they must. The leader's role is to
provide inspiration, integrity, and vision. There are two keys here: how you
treat employees and how you treat yourself.
This late in our discussion, it should be clear how successful leaders deal
with employees. They give workers the power to make decisions and trust them
to make good ones. They pare away needless rules that can leave workers feel-
ing harried, underappreciated, and stifled in their jobs. They live up to their
commitments. In short, they treat workers like family. Do this consistently, and
workers will consistently give you their best.
How successful leaders treat themselves is less obvious. A good place to
start is by seeking out a mentor who has already mastered the art of firing his
own enthusiasm. Take time off from work to recharge by spending time with
friends, family, and hobbies. Then go back to work refreshed and ready. A
leaders passion for the job is one of his company's most precious assets. It de-
serves the same care that he gives the firm's property, personnel, and customers.
The future is about quality and service. Exactly what that means depends
on your business. For a hotel or resort, it can be developing the friendliest, most
informative data systems so that guests can make reservations effortlessly over
the Internet and your staff will "remember" their preferences from previous
visits. For a quick-service restaurant, it can be providing an extra drive-through
lane to speed traffic and installing better loudspeakers so that customers and
staff can understand each other. For full-service restaurants, it might be
xvi Foreword
improving the menu, listing calories and carb counts not only for the entrees
but for salad dressings and other options. New possibilities will arise daily, as
your customers' needs change and technology brings new ways to meet them.
The ideas above provide a framework for your efforts, and the chapters
ahead can help you to anticipate future needs. Yet in the end, your own atten-
tion to detail will be the most important factor in your company's success.
Marv Cetron tells of staying at a top-of-the-line hotel, part of a chain that
is well known for its devotion to quality and customer service. One of the chain's
customer-pleasing efforts was a money-back guarantee that room service would
deliver breakfast in ten minutes. While waiting for his breakfast one morning,
Marv happened to open the door to the hall—and there was the waiter, looking
at his watch and carefully counting down so that he could deliver the rapidly
cooling meal in exactly ten minutes, just as the company had promised!
No matter how hard you try, there is always some way to make your ser-
vice just a little bit better. Identifying that opportunity can be a challenge, but
your customers will appreciate the results. So will your bottom line.
Roger Dow
President and Chief Executive Officer
Travel Industry Association of America (T.I.A.A.)
Acknowledgments
That only the authors get to put their names on a book's cover is one of life's
great inequities. Invariably, there are many others whose contributions de-
serve equally public acclaim. Yet it falls to us to recognize their efforts here,
on an unjustly inconspicuous inner page. So be it. In no particular order, we
wish to thank:
Vernon R. Anthony, our skilled and patient editor at Prentice Hall, whose
guidance and encouragement were critical factors in bringing this effort
to fruition.
Beth Dyke, editorial assistant at Prentice Hall, without whose diligent ef-
forts Hospitality 2010 would still be in preparation.
Roger Dow, president and CEO of the Travel Industry Association of Amer-
ica. His generosity in sharing his unique insights into the hospitality in-
dustry, and in contributing a sterling Foreword, made this a far better and
more useful book.
Ilsa Whittemore, executive editor of HSMAI Marketing Review, for en-
couraging us to write the columns on which this work was based, and too
often for her patience while those columns were in the works.
Justin Cetron and Wayne Jackson, undergraduate and master's students,
respectively, with the University of Delaware hospitality program. Their
long hours of research provided most of Appendices C, D, and E and use-
ful data for other portions of the book.
And Mike Remillard and his colleagues at Pine Tree Composition, who
converted our manuscript to the printed page quickly, efficiently, and
without so much as a typo that we were able to find—an amazing
performance!
xvii
xviii Acknowledgments
No doubt many others should have been included here, and we apologize
for their omission. Our thanks to them all. They deserve much of the credit for
all that is good about Hospitality 2010.
Of course, the blame for any mistakes of fact or interpretation rests solely
with the authors.
HOSPITALITY 2010
The Future of Hospitality and Travel
Parti
Common Concerns
for the Hospitality Industry
Chapter
Practical Prophecy
for Beginners
Do you worry when attending meetings off the beaten path? Imagine being
taken hostage by terrorists while vacationing in the Middle East or visiting a
supplier in South America? Limit your options to jobs or investments in the
United States, because you never know what's going to happen in foreign lands,
even when they appear to be stable?
Who could blame you? Whether you are a student thinking about gradu-
ate school abroad or a business executive scoping out foreign competition,
national stability is one of the most important factors to consider in mak-
ing plans that involve other countries. It also can be one of the most difficult.
After all, stability is not a single factor, but a complicated vector sum of
economic conditions, demographic trends, political forces, religion, tech-
nology, personalities—an endless list of factors. If revolutions, coups, wars,
and weapons tests regularly take the CIA by surprise, how can you be ex-
pected to know what's brewing in far-away places with strange-sounding
names?
That reasoning applies just as well to a host of other problems you will in-
evitably face in a career in the hospitality industry. How will demographic
changes affect the food preferences of diners at mid-priced restaurants? How
will technology continue to change hotel management? What can you expect
from the economy over the next one, five, or ten years? You will encounter these
and many similar issues in the years ahead. And despite the CIA's problems,
you will be expected to assess them correctly.
We can help. In fact, that is the whole purpose of this book.
Over some five decades of work, Forecasting International (FI)—the firm
founded by one of the authors and long employing another—has spent much
of its time evaluating the stability of nations for clients ranging from the De-
partment of Defense to Fortune 500 companies to foreign governments. In the
3
4 Chapter i
process, we have managed to anticipate calamities that took many onlookers by

surprise, from the fundamentalist revolution in Iran to the Los Angeles riots in
the wake of the Rodney King beating.
The credit goes to a series of tools and techniques that make it possible to
evaluate the vital signs of the future, much as a doctor takes your temperature
and blood pressure to evaluate your health. They can ease your worries—or
steer you out of potential trouble.
CONSULTING THE ORACLE

One common forecasting technique is the Delphi survey or poll. In a Delphi
poll, a panel of experts fills out a questionnaire designed to elicit their views
about the issues under study. The answers from this first survey are then cir-
culated among participants, and the poll is repeated. In the second round of
questioning, participants reconsider their original views in light of the opin-
ions of their peers. This usually results in a narrower range of replies and a
more "solid" consensus, as the extreme views are mitigated by further thought,
and perhaps a bit of peer pressure. The Delphi technique has been used in sev-
eral thousand studies and is generally held to produce the most reliable analy-
ses and forecasts available.
Forecasting International has used Delphi studies with considerable suc-
cess in a wide variety of fields. However, we often modify the basic method by
including a number of participants who are professional forecasters, rather
than subject specialists. This change frequently produces useful results that a
more narrowly focused study might overlook. The forecasters tend to consider
data from other fields that the specialists would not, and their insights trigger
new ideas from the specialists in the second round of questioning.
For example, we consulted both forecasters and subject specialists for a
study of future terrorism carried out for the Department of Defense in 1994.
Nearly seven years before the September 11 attacks, we were able to predict
virtually the entire course of terrorism as it has developed since then. Specific
predictions included the rise of international terrorism based in the Muslim
extremist movement; a second, much more successful attack on the World Trade
Center; a terrorist incident in the Midwest by an American-born extremist con-
nected to the militia movement; and even the deliberate crash of an airplane into
the Pentagon. (The State Department made us omit that last item for fear of giv-
ing someone ideas.) In reviewing this study, we concluded that it would not
have been nearly so wide-ranging and accurate if it had been limited to terror-
ism specialists. This experience has led us to adopt this more inclusive kind of
study panel whenever we use the Delphi technique.
Practical Prophecy for Beginners J i
FICTIONAL FUTURES
Another useful tool is the scenario. Webster's first definition of the word scenario
is "an outline or synopsis of a play." As descriptions borrowed from other fields
go, this one is not bad. Scenarios are portraits of alternative futures that might
conceivably develop from today's world. They are not forecasts in that we do not
expect tomorrow's reality to resemble them, save in limited and unpredictable
ways. A good scenario can make us see the evolution of a future we would
scarcely recognize if we were magically transported into the middle of it.
That is very much their purpose. Scenarios often are used in developing
forecasts, to help identify issues that need further research. They also can
broaden our imaginations, allowing us to envision a wider range of possible
futures. Sometimes we use them to broaden the imaginations of our clients,
enabling them to consider forecasts that they otherwise might find too "far out"
to be taken seriously.
Scenarios begin with drivers, a defined set of forces that we choose to ex-
amine. Will new technologies dominate future society? Will the capitalist eco-
nomic model continue to spread throughout the world? Will a sudden change
of heart sweep across the globe, so that environmentalism guides our decisions?
Scenarios can spin out any combination of postulates, each one leading to a dif-
ferent, yet convincing, future. The only limitation is that scenarios must be in-
ternally consistent. A scenario of economic decline, for example, is unlikely to
include full employment or a wealthy middle class; joblessness and privation are
the order of that future day.
One of the most commonly used scenarios, and one that has had a pow-
erful influence on the work of Forecasting International, is the 2050 Global
Normative Scenario, evolved by the United Nations Millennium Project. It
represents a consensus vision of the future compiled from the ideas of
over 1,000 participants in a continuing attempt to anticipate what is to come.
In the Millennium Project's scenario, the world of 2050 has changed in many
ways. Predictably, it is driven and dominated by science and technology. The
Internet, biotechnology, nanomachines, and space all have contributed to
this prosperous new world. In all, technology, global communications,
human development, and enlightened economic policies have worked together
to make the world a better place than seemed possible at the end of the 20th
century.
Another tool uses three scenarios: one optimistic, one pessimistic, and
one that deliberately parts company with most of the trends we see around us
today. These scenarios grew from the work of the Global Scenario Group of the
Stockholm Environmental Institute. Over the last few years, the Brookings
Institute, the Santa Fe Initiative, and FI all have employed them in a wide
6 Chapter i
variety of contexts. They are commonly known as "Market World," "Fortress

World," and "Transformed World."
"Market World" projects a glowing capitalist vision of economic reform
and technological innovation. In this scenario, developing regions are quickly
integrated into the global economy. Countries privatize government-run in-
dustries, cut through tangled regulations, trim public spending, and let the mar-
ket have its way. In the real world, this formula has turned many backward
Asian lands into industrial powers.
"Fortress World" represents the dark side of capitalism. Economies grow
rapidly, but the boom leaves whole regions of the world untouched. The poor
become poorer. The environment suffers. Terrorism grows. By 2050, all we can
see ahead is growing desperation and violence as what little remains of the so-
cial contract continues to disintegrate.
"Transformed World" steps outside the either/or of capitalist vision and
nightmare. In this scenario, a pragmatic idealism replaces consumer society's
will to get and spend with an altruistic desire to provide for basic human needs
and the shared vision of a better life for all. Environmentalism prospers. Urban
crime, drug use, and poverty decline as education, employment, and the city en-
vironment improve. By 2050 democracy has become almost universal. With
many shared values and general tolerance for what differences remain, the
world has all but achieved a single global civilization. It is a stable and happy
place at last.
These three scenarios are largely generic, and that is much of their value.
In the process of adapting them for each study, we often learn things that would
not turn up in a more straightforward examination of the future. Dozens of
forecasts have been performed for the hospitality industry. So far as we know,
none of them anticipated the sudden collapse of travel that followed the Sep-
tember 11 terrorist attacks, nor the effect of SARS on Asia. These are insights
that could have been derived only by asking "What if?" And that is the realm of
the scenario.
IF THIS GOES ON . . .
One of the most valuable forecasting techniques is trend analysis. It comes in
two forms: trend extrapolation and trend correlation. The basic idea of trend
extrapolation is that the changes we see happening around us are likely to con-
tinue, and the future will grow out of them. Any reasonable forecast has to as-
sume that technology will continue to deliver new miracles, that countries where
birthrates are out of control are likely to have much larger populations in the
years ahead, and so on. We need good reasons to deviate from those straight-
line projections, and those reasons can be among the most useful insights de-
rived from a study.
Trend correlation is even simpler in principle. Some trends follow others.

Thus, when you know where one trend is headed, you can be reasonably sure
about the other. For example, a rise in the number of construction permits is-
sued in a community reliably foretells an increase in the number of buildings
built. A rise in birthrates presages a long-term increase in the demand for hous-
ing, schools, and eventually hotels, restaurants, and other aspects of the hos-
pitality industry.
About fifteen years ago, we developed a unique tool to help with trend
analysis. You will find it in Appendix A. After nearly thirty years in forecasting,
we reviewed what we knew about the future and condensed our knowledge into
a list of trends that we could see changing the world. We have updated that list
frequently over the years. The number of entries varies from time to time as
trends mature and die and new forces arise to shift the course of events. At the
moment, FI is tracking 52 major trends in world politics, technology, national
and international economies, and other important aspects of global society.
These are the broad forces that will help to shape the future, and they give us
a necessary context in which to consider any specific subject.
Since developing our list of trends, we have used them to predict the fu-
ture of companies, industries, and entire countries. In each study, we look at the
specific circumstances of the subject—say, the hospitality industry—and try to
figure out how they will interact with the broader trends. How will the economy
affect them? What about demographics, technology, and changing societal
values?
Trend extrapolation does have its limitations. Unlike scenarios, this is not
a technique for "thinking the unthinkable," as the pioneering forecaster Her-
man Kahn wrote in a book about nuclear war. Over time, surprises occur that
cumulatively change the course of events. Bairing a surprise on the scale of Sep-
tember 11, forecasts are likely to be very accurate over the next year or two,
slightly less accurate over five years, significantly off course after ten years, and
seriously wrong twenty years ahead. However, extrapolating trends can be use-
ful even for long-range forecasts, because the process itself helps us to identify
the areas in which surprises are most likely to occur and will have the greatest
impact. In this way, it provides a basic framework for understanding the future.
Trend analysis is the most valuable tool we have for charting the most
likely path of future events. The chapters ahead all grew out of this process.
NATIONAL STABILITY
In an age of terrorism, and for an industry that is exposed to risks all over the
world, one of the most important issues is the stability of foreign lands. Do
we dare to put a new hotel, resort, or restaurant in a given country? Should
27 Chapter i
we consider moving out of existing operations there? Can airlines and cruise
ships safely stop at its air and sea ports? We have seen all too often that a
country that appears stable today can erupt into violence almost without
warning.
And yet, there invariably are subtle warnings, if only we recognize them.
Identifying them, and figuring out what they mean, is one more job for
forecasting.
For this purpose, we supplement our trends with a series of indicators
that we collect for each country under study. These include a wide range of eco-
nomic, demographic, technological, and military data. Virtually all of them are
readily available. After half a century of working with classified information
under government contracts, we have found that at least 95 percent—and prob-
ably closer to 98 percent—of what you need to know comes from unclassified
sources.
Whenever possible, we like to find the same information from two or more
independent authorities, just for confirmation. We use the Bureau of Labor
Statistics and the U.S. Census for economic and demographic data, Jane's for
military data, the Worldwatch Institute for environmental data, and The Econ-
omist and Christian Science Monitor for a wide variety of information. Other use-
ful sources include Web sites operated by the United Nations, the World Bank,
and the International Monetary Fund. We read The Futurist as well, for in-
valuable background in thinking of things to come.
The indicators in Appendix B: Vital Signs for National Security have
proved to be extraordinarily useful and versatile. Not all indicators are impor-
tant for every nation. Each must be weighted according to the conditions in
the country at hand, and thus far that is largely a task for experience and human
judgment.
FI tracks more than forty indicators that can be valuable in evaluating the
stability of a nation, and for a definitive analysis we wish to include as many
of them as possible. Yet for a quicker, and still very good, investigation, the list
can be pared significantly. The accompanying tables give basic data for a num-
ber of important countries.
As they stand, these tables have important limitations. For a practical
study, we would have to fill in some gaps.
Only the most prominent countries in each category are included in each
table. The United States is listed in the tables for GDP and nuclear warheads,
for example, but its oil reserves and number of environmental treaties are omit-
ted, while Indonesia appears only in the tables of the opacity index and num-
ber of trouble-prone young men. For a real-world study, the missing data would
have to be added. Fortunately, nearly all these figures can be found readily on
the Internet.
In these tables, the countries are simply rank-ordered. The land with the
greatest supply of water per person, the largest GDP, or whatever stands in first
position, with the remainder trailing down the table. For practical work, we
would need to weight each indicator to reflect its significance to the countiy. For
example, the United States does not appear on the list of nations with the largest
oil reserves, yet that very lack of supply is extremely important to the economy.
Iceland has more fresh water per person than any other country on the planet,
but this asset has not given it prominence on the global stage.
Weighting these factors correctly sometimes requires practice, but sim-
ple logic will carry us through most studies. It helps not to view the data as a
mass of discrete facts but as elements in a complex network of mutual influ-
ences. You will get the hang of it.
Most importantly, the data presented here are single points. They present
a snapshot of each country, when a video would tell us much more. For any
study we carried out at FI, we would look not at GDP or military spending, but
at trends in those data. The whole point of forecasting is not to find out where
the subject stands, but where it is going.
For a better idea of how this works, let us take a country and see what we
can find out about it. We will look at Britain, which is globally significant and
is represented in many of the tables. On the way by, we will supplement the ta-
bles with data that is readily available online, and perhaps with some of our own
background information.
For a start, the United Kingdom has a GDP of $1.52 billion, making it the
seventh largest in the world. A quick look at the online edition of the CIA World
FactBook shows that this translates to a comfortable $25,500 per capita, which
places Britain at roughly the same level as France and Germany, a bit behind
Japan, and significantly behind the United States.
Britain is a major exporting country, sixth in the world, and ranks sixth in
the World Economic Forum's index of business competitiveness. When you
think about it, that is a remarkably good performance. Britain exports over 39
percent as much goods, in dollar terms, as the United States with less than 21
percent of the population. Of course, the other way to look at it is that the
United States is so large and prosperous that it can use most of its products at
home.
One other economic factor seems interesting. Britain still has not adopted
the euro, the currency of nearly all its partners in the European Union. This
means that its companies may face some risks from currency exchange even
when they trade within the EU. It also suggests that some people visiting the
continent from abroad may decide to stay there, rather than going through the
hassle of converting their money to pounds Sterling in order to see England,
while those who visit Britain may not travel further. This is not likely to be more
29 Chapter i
than a small handicap for the British hospitality industry, but it could be worth
looking into in a more thorough study.
In resources, the United Kingdom does not have enough oil or fresh water
to rank among the top ten in either table, and it is not among the ten largest ex-
porters of farm products. However, it does rank as the eleventh largest agricul-
tural exporter. This is an interesting accomplishment for a few small islands, and
for some studies we might want to look into that further. In addition, we re-
member that Britain once pumped quite a bit of oil from the North Sea, and an-
other check with the CIA World FactBook reveals that there are large reserves
of coal and natural gas as well as oil, so that primary energy production con-
tributes no less than 10 percent to the nations GDP; this is one of the highest
shares among the industrialized nations. It would be nice to know how long
that oil can be expected to last, but we will ignore that issue for now.
The United Kingdom has a solid base in technology. Its scientists have
won 47 Nobel prizes, compared with 137 for the United States and 49 for Ger-
many. It ranks eighth in the number of Internet users, despite a relative short-
age of personal computers. There have been news stories, too, in the last few
years that some American scientists are emigrating to Britain, where they can
experiment with cloning and perform stem-cell research without the restric-
tions placed on them in the United States. However, according to the table, in
the number of patents granted it falls somewhere behind Luxembourg and Fin-
land. This seems odd, and it might have something to do with patent law rather
than inventiveness. It might also be that whoever compiled the table just skipped
over the United Kingdom. Then again, it might not. Depending on the purpose
of our study, this could be worth more research.
Britain also may have the kind of social base that contributes to a stable,
economically successful society. With roughly two rooms per person, it ranks
in fourth place for its housing supply. However, the U.N. Human Development
Index does not seem to rate its quality of life among the top ten, and it lags in
the number of university students per 100,000 population. This data category
also may justify more study.
Militarily, the United Kingdom is the worlds third-largest spender; yet the
budget for its armed forces is barely more than one-tenth that of the United
States. It is the sixth-largest weapons exporter, though only 18 percent as large
in this market as the United States and 12 percent as large as Russia. And with
200 warheads, it owns a significant nuclear deterrent.
Diplomatically, Britain is a permanent member of the United Nations Se-
curity Council, which gives it much more power than mere size would suggest.
It also ranks fifth among the world's donors of foreign aid, which confers some
status of its own. It does not rank in the top nine signatories of environmental
treaties, but what that indicates will not be clear without further study.
Britain's opacity index is only 38, signifying that its business and political
operations are relatively open to public scrutiny. This tends to be a sign of basic
stability, as the governments of unstable countries seldom want anyone watch-
ing their actions too closely.
The table of young-male populations does not include the United King-
dom. (It is not a top-ten list, but a group of countries that interested us when
it was compiled.) However, the UN's World Population Prospects database
(http://esa.un.org/unpp/index.aspPpanelas2) reports that in 2000 there were 5.5
million males in the violence-prone ages between 15 and 29, or about 9.3 per-
cent of the total population. This is roughly the same as Egypt and India, which
are not the world's most stable places. This may be one country where the in-
dicator should be weighted less heavily than in other lands.
Culturally, data from the movie industry suggest that Britain consumes
the good-life fantasies of Hollywood more than it exports its own. It ranks sev-
enth in the number of movie tickets sold each year, third in the motion-picture
industry. However, it is not among the top ten producers of feature films.
Without going into depth, the data we have collected thus far paints a pic-
ture of the United Kingdom as a significant economic, military, and diplomatic
power in the world. It also suggests that we can expect Britain to remain eco-
nomically comfortable, stable, and influential for some time to come. In a for-
mal research project, we would collect much more data and try to fill in the
details of this quick impression.
However, even this brief—extremely brief—study raises some interesting
questions:
How long will that North Sea oil last? And how will the economy react
when it runs out? Will Britain's environment suffer if the country reverts to
burning coal? Will the United Kingdom become as dependent as the United
States on oil from the Middle East? We clearly have more work to do in this area.
How long can Britain remain a global economic leader? The world in-
creasingly depends on technology, and the United Kingdom does not seem to
be producing all that many college graduates. Can it maintain a strong tech-
nology base without them? Does Britain have some alternative way of training
engineers and technicians that does not show up on college data? Perhaps a
system of technical schools, possibly supplemented by on-the-job training? Or
does it rely on technologically sophisticated immigrants from India and other
lands? For a serious study, we would have to know.
And what does that large population of young males indicate? The well-
educated industrialized lands almost all have low birthrates. Does Britain have
an unusually large, fertile immigrant population? If so, where are they from?
Recent news reports have said that militant religious leaders in Britain may be
attracting young Muslims to the jihad against the West, and even against their
12 Chapter i
adopted homeland. How many of Britain's young men are potential converts to
Muslim extremism? Flag this area for much more research! It could be critical
to the economic and political stability of the United Kingdom, and to the safety
of the hospitality industry there.
We see in these questions the power of trend data. Some of them would
be answered if we were working with trends, rather than looking at single
data points. That issue of how long the North Sea oil will last is an obvious
example.
We see also the value offered by even a cursory look ahead. In a few min-
utes of thinking about the most basic data, we have identified several important
issues that must be examined further before we can feel confident that our
image of Britain will not change abruptly within just a few years. Forecasters
often carry out such preliminary studies to learn whether a subject merits
greater effort.
Most of us learn best by doing something, not by reading about it. So for
a more valuable introduction to forecasting, why not try this on your own? Pick
a country, and make your own forecast. Gather the necessary data, see what
the trends and indicators imply for it, and evaluate that nation's stability and
future. Then see how things are likely to evolve over the next ten years or so, and
try to figure out the merits of siting a new hotel or resort there. This exercise
will give you a far better sense of how much can be accomplished using pub-
licly available data and relatively simple methods of analysis.
If you want a really interesting challenge, try looking at India. It is a huge
country, with an extraordinarily varied population and culture, and it is chang-
ing rapidly in ways that are likely to be felt around the world. Compare India
with China, and you will have seen the future of one of the world's most im-
portant bilateral relationships, two of its largest and fastest growing markets,
and 40 percent of its population.
LOOKING AHEAD
In a fast-changing world, the cost of being unprepared seems to grow every
day. A glance at eight-track tapes or a beta-format VCR moldering in the attic,
or the memory of buying tech stocks just before the NASDAQ crash, should be
enough to convince anyone that we all need better information about the future.
It is available. With a little effort, we can diagnose the future as a doctor
diagnoses a patient. The vital signs are there to be read.
This chapter can provide only a brief sample of the ways in which fore-
casting methods such as our trends and indicators can be used to anticipate
developments affecting the hospitality industry, and in turn many aspects of
our own lives and careers. It should be a good place to start your own study of
the subjects that concern you, and a guide to the kind of reasoning that can
give you a leg up in many other fields as well.
"If only I had known then what I know today. . . How often have you
heard that said? How often have you said it yourself? Learn to look ahead as
forecasters do, and you may never say it again.
MILITARY INDICATORS
Table 1-1 Military Spending Table 1-2 Nuclear Warheads

Rank Country In biilions Rank Country Total
1 United States $335.7 1 United States 10,640

2 Japan 40.7 2 Russia 8,600
3 United Kingdom 36.0 3 China 400
4 France 33.6 4 France 350
5 China 31.1 5 United Kingdom 200
6 Germany 27,7 6 Israel 100-200 (est.;
7 Saudi Arabia 21.6 7 India 30-35 (est.)
8 Italy 21.1 8 Pakistan 24-48 (est.)
9 fran 17.5 9 North Korea 20-40 (est.)
10 South Korea 13.5 10 Iran ?
Table 1-3 Weapons Exports

Rank Country In billions
1 Russia $5.9
2 United States 3.9
3 France 1.6
4 China 0.8
5 Germany 0.7
6 United Kingdom 0.7
7 Italy 0.5
8 Canada 0.3
9 Ukraine 0.3
10 Netherlands 0.3
14 Chapter i
ECONOMIC INDICATORS
Table 1-4 Total GDP Table 1-5 Competitiveness*

Rank Country in billions Rank Country 2002-03 rank
1 United States $10,082 1 Finland 2
2 China 6,000 2 United States 1
3 Japan 3,550 3 Sweden 6
4 India 2,660 4 Denmark 8
5 Germany 2,184 5 Germany 4
6 France 1,540 6 United Kingdom 3
7 United Kingdom 1,520 7 Switzerland 5
8 Italy 1,438 8 Singapore 9
9 Brazil 1,340 9 Netherlands 7
10 Russia 1,270 10 France 15
*Worid Economic Forum Ranking of Business Competi-

tiveness 2003-04
Table 1-6 Exports

1 United States $731

2 Germany 608
3 Japan 384
4 China 313
5 France 308
6 United Kingdom 286
7 Canada 261
8 Italy 259
9 Netherlands 222
10 Hong Kong 191
RESOURCE INDICATORS
Table 1-7 Oil Reserves Table 1-8 Freshwater Supplies

Billions Cubic meters
Rank Country of barrels Rank Country per capita
1 Saudi Arabia 261.8 1 Iceland 294.34
2 Canada 180.0 2 Gabon 176.37
3 Iraq 112.5 3 Papua New Guinea 154.61
4 UAE 97.8 4 Canada 84.51
5 Kuwait 96.5 5 New Zealand 79.81
6 Iran 89.7 6 Liberia 58.85
7 Venezuela 77.8 7 Norway 57.71
8 Russia 60.0 8 Congo 53.89
9 Libya 29.5 9 Bolivia 51.39
10 Nigeria 24.0 10 Peru 47.55
Table 1-9 Agricultural Exports

1 United States $55.6

2 France 34.5
3 Netherlands 32.5
4 Germany 26.6
5 Belgium 18.6
6 Italy 17.5
7 Brazil 16.7
8 Canada 16.5
9 Spain 16.4
10 Australia 15.4
16 Chapter i
TECHNOLOGY INDICATORS
TabJe 1-10 Nobel Prizes

In Science Table 1-11 Patents Granted
Rank Country Total' Rank Country Per million people
1 United States 137 1 Japan 994

2 Germany 49 2 South Korea 779
3 United Kingdom 47 3 United States 289
4 France 18 4 Sweden 271
5 Netherlands 11 5 Germany 235
5 Russia/USSR 11 6 France 205
6 Switzerland 10 7 Luxembourg 202
7 Japan 8 8 Netherlands 189
7 Sweden 8 9 Finland 187
8 Canada 6 10 Switzerland 183
'1901-2003
Table 1-12 Internet Users Table 1-13 Personal Computers

Rank Country Percent Rank Country Per 1,000 people
1 Iceland 76 1 San Marino 738

2 Sweden 68 2 United States 574
3 Denmark 63 3 Sweden 507
4 Netherlands 61 4 Denmark 503
5 Hong Kong 60 5 Switzerland 493
6 Norway 59 6 Norway 486
7 United States 59 7 Bermuda 469
8 United Kingdom 57 8 Australia 460
9 Australia 54 9 Luxembourg 446
10 South Korea 53 10 Singapore 436
DIPLOMACY SNDiCATORS
Table 1-14 Donors of Foreign Tabic 1-15 U.N. Security Council

Aid
Membership
Rank Country In billions Rank Country ends
1 United States $12.9 1 China Permanent

2 Japan 9.2 1 France Permanent
3 Germany 5.4 1 Russia Permanent
4 France 5.2 1 United Kingdom Permanent
5 United Kingdom 4.8 1 United States Permanent
6 Netherlands 3.4 2 Angola 2004
7 Italy 2.3 2 Chile 2004
8 Canada 2.0 2 Germany 2004
9 Sweden 1.8 2 Pakistan 2004
10 Norway 1.8 2 Spain 2004
Table 1-16 Environmental Treaties

Rank Country Number
1 Norway 26
2 Netherlands 25
3 Sweden 24
4 Denmark 23
5 Switzerland 22
6 Canada 21
7 Austria 20
8 Bulgaria 19
9 Luxembourg 19
10 Czech Republic 18
18 Chapter i
SOCIAL INDICATORS
Table 1-17 Housing—People Per Boom

Rank Country No. of people
1 Norway 0.5
2 Sweden 0.5
3 Canada 0.5
4 Belgium 0.5
5 Australia 0.5
6 United States 0.5
7 Iceland 0.6
8 Netherlands 0.6
9 Japan 0.6
10 Finland 0.6
Table 1-18 Quality of Life* Table 1-19 University Students

Rank Country Rank Country Per 100,000 adults
1 Norway 1 Canada 5,997

2 Sweden 2 South Korea 5,609
3 Canada 3 Australia 5,552
4 Belgium 4 United States 5,339
5 Australia 5 New Zealand 4,508
6 United States 6 Finland 4,190
7 Iceland 7 Norway 4,164
8 Netherlands 8 Spain 4,017
9 Japan 9 Ireland 3,618
10 Finland 10 France 3,600
"UN Human Development index

CULTURAL INDICATORS
Table 1-20 Feature Film Production

Rank Country Films per year
1 India 1,200
2 United States 543
3 Japan 293
4 France 200
5 Spain . 137
6 Italy 130
7 Germany 116
8 China 100
9 Philippines 97
10 Hong Kong 92
Table 1 -22 Movie Tickets

Table 1-21 Film Investment Sold/Year
Rank Country In millions Rank Country In millions
1 United States $14,461 1 India 2,860

2 Japan 1,292 2 United States 1,421
3 United Kingdom 852 3 Indonesia 190
4 France 813 4 France 155
5 Germany 687 5 Germany 149
6 Spain 304 6 Japan 145
7 Italy 247 7 United Kingdom 139
8 India 192 8 Spain 131
9 South Korea 134 9 Mexico 120
10 Canada 133 10 Canada 113
SECURITY INDICATORS
Table 1-23 Opacity Index

Country index
Singapore 29
Chile 36
United States 36
United Kingdom 38
Hong Kong 45
Italy 48
Mexico 48
Israel 53
Egypt 58
Peru 58
Colombia 60
Japan 60
South Africa 60
Argentina 61
Brazil 61
Taiwan 61
Pakistan 62
Venezuela 63
India 64
Thailand 67
South Korea 73
Turkey 74
Indonesia 75
Russia 84
China 87
Table 1-24 Trouble-Prone Young Men

Country Males, Age 15-29
Number (thousands) in 2000 Percent of population
Iraq 3,335 28.3%

iran 10,645 21.6
Algeria 4,681 15.5
Turkey 9,946 14.6
Indonesia 30,800 14.6
South Africa 6,416 14.6
Mexico 14,366 14.5
Brazil 24,490 14.3
India 142,384 14.0
Egypt 9,436 13.9
Afghanistan 2,974 13.9
Pakistan 19,337 13.6
Gaza and West Bank 431 13.5
China 165,111 12.9
Kazakhstan 2,011 12.9
Argentina 4,785 12.9
Israel 774 12.8
Cuba 1,307 11.7
Greece 1,193 10.6
Japan 13,294 10.5
United States 29,951 10.5
Chapter 2
Coming Global Growth

Is Hospitable for Hospitality
In September 2004, nearly three years after the recent recession officially ended,
many Americans are still acting like bears waking from hibernation after a long,
cold winter. They are looking around, sniffing the air, and hoping that the worst
is finally over. Yet it seems that many are not yet convinced. And as we will see,
they have reasons for concern. So does the rest of the world, because the United
States plays such an enormous role in global trade. When America gets a cold,
the rest of the world gets pneumonia.
Nonetheless, at Forecasting International (FI) we believe that any risk of
a "double-dip" recession is long past. That unfamiliar perfume on the nations
atmosphere is the scent of new growth, and most economists and business lead-
ers are convinced that it represents sustainably better economic times, not just
a temporary recovery in a protracted slump.
The United States is not alone in its recovery. In Europe, several key
economies are growing after long stagnation. Even Japan seems to have
emerged at last from a decade of recession.
Why we believe that global prosperity is at hand, what this means for the
hospitality industry, and how things still might go wrong are the subjects of
this chapter. Unfortunately, the explanation will require spending more time
poring over dry economic statistics than most of us would prefer.
For the hospitality industry, the arrival of a solid worldwide economic re-
covery is the best possible news. People seldom take expensive vacations when
they feel poor or fear for their jobs, and in bad times companies cut back on
meetings and business trips. When prosperity returns, travel and tourism re-
cover as well.
It can't happen too soon. Over the last few years, American economic
problems have been felt throughout the world. According to the Italian Na-
tional Tourist Office, the number of Americans visiting Italy declined by 15
22
Corning Global Growth Is Hospitable for Hospitality 23
percent between 2000 and 2002—before the dollar lost much of its value in
international currency markets—and by 25 percent in 2003. With the dollar
so weak and travel to other lands comparatively expensive for Americans in
2004, they expect that when the numbers are all in tourism will turn out to
have been down throughout Europe by 20 to 30 percent. Early in the year,
business at restaurants in major European tourist destinations was off by 40
to 50 percent. And when Americans do travel, they have been staying at cheap
hotels near the bus station, rather than pricey ones in the scenic districts,
and going to cafeterias instead of more expensive restaurants. Economic re-
covery in the United States should help to bring the tourists back. Prosper-
ity in other lands could turn the coming good years into an all-out boom for
the global hospitality industry.
LOOKING UP
In fact, the American recovery started quite a while ago. According to the Bu-
reau of Economic Analysis, the U.S. economy has been expanding continuously
since the fourth quarter of 2001. In 2003, it grew by 3.1 percent for the year,
peaking at a spectacular rate of 8.2 percent annually in the third quarter. In the
first three months of 2004, the GDP grew at an average annual rate of 3.9 per-
cent. For the year, growth is expected to come in at 4 percent or so, a level that
most economists believe can be sustained for several years.
Economic data through late spring and early summer confirmed that a
strong recovery is well under way in the United States:
a By early February 2004, the Standard & Poors Index was up 43 percent
in eleven months. By August, despite several down months in response
to the threat of higher interest rates, it retained more than three-fourths
of its gains. Investors, at least, expected the current economic growth to
continue for the next six months or more.
o Retail sales were up 0.7 percent in July 2004, a bit less than expected, but
marking 19 months of almost continuous growth since January 2003.
® Durable goods orders rose 1.7 percent in July, the best gain in four
months. This is strong evidence that the current economic expansion
can be expected to continue.
• The Institute for Supply Management Index, another respected measure
of manufacturing strength, came in at 62.0 in July 2004, slightly higher
than expected. Any reading over 50 signals growth in this crucial sector.
® Unemployment seems to have stabilized at 5.4 to 5.6 percent in the first
eight months of 2004—not the 4 percent seen at the height of the boom
in the 1990s, but typical of a healthy American economy.
Chapter 2
• Job growth, long lagging the rest of the economy, finally broke out in
March 2004, with a spectacular increase of 308,000 in nonfarm em-
ployment. Job growth has lagged since then, but remained positive
through August.
® Inflation, however, is beginning to cause concern. The Consumer Price
Index was up 0.5 percent in March 2004, for an annual inflation rate of
6 percent. Virtually all of this and later increases have come from the en-
ergy sector, owing to the Iraq war, OPEC policy decisions, and the Yukos
dispute in Russia. In response, the Federal Open Market Committee has
been gradually raising interest rates.
® The Conference Board's Index of Leading Indicators, which foretells fu-
ture economic growth, rose 0.3 percent in March 2004, its seventh in-
crease in six months. However, slight declines in June and July—the first
since March 2003—despite a spike in oil prices suggests that no major
inflation is news.
All this speaks of economic strength, both present and future. The con-
sensus among economists is that the recession of 2001 was the briefest, shal-
lowest on record, with just three quarters of consecutive decline, and that it is
unlikely to return. In this, the economists are clearly correct.
American consumers seem to agree, at least if we look at their behavior.
With the exception of the first three months of 2000, when the economy was still
growing, and September 2001, when the country was reeling from the terror-
ist attack on the World Trade Center and Pentagon, they have continued to
spend freely, a little more each month. Between April 2003 and July 2004, the
most recent data yet available, only September 2003 showed a decline in per-
sonal consumption spending, and the dip was more than made up by Novem-
ber. After a flat month in April 2004, consumer spending grew at a rate of about
4 percent in May and June, twice as fast as it had a year earlier. This is impor-
tant, because consumer spending makes up about two-thirds of the American
economy. It was consumers, not business, whose spending carried the country
through the recent recession.
When American consumers are asked how they feel about the economy,
the picture also was brighter in mid-2004 than it had been a year earlier. With
interruptions of no more than a month or two, the Conference Board's Con-
sumer Confidence Index declined from 120 in June 2001 to just over 60 in
March 2003. By July 2004, it was back to 105.7. The University of Michigan's
Index of Consumer Sentiment declined steadily from mid-1999 through early
2003 and then began to rise. In July 2004, it stood at 96.7, up nearly 25 points
from its low some 18 months earlier.
So happy days are here again. American tourists will hurry back to Euro-
pean hotels and restaurants, executives will make more business trips, and
cruise passengers will finally be willing to pay full fare for their sea-going va-
cations. Right?
CONSUMERS SNVSTE CAUTION

Not necessarily. Consumer confidence took a hit in August 2004, with the Con-
sumer Confidence Index down to 98.2 and the Index of Consumer Sentiment
off to 95.9. And anything that threatens consumer confidence invites concern
about the future of the hospitality markets.
One problem is the situation in Iraq. In September 2004, the number of
American deaths since the war began topped 1,000, and more than 7,500 have
been injured. Despite many optimistic forecasts from Washington, the death
rate for Americans in Iraq remained high even after the Iraqi interim government
assumed something resembling sovereignty at the end of June 2004. And when
Americans worry about anything, it colors their feelings about the economy.
The other problem is jobs. According to most estimates, there were about
1 million fewer of them in the United States in August 2004 than there were in
2000. This represents the first sustained decline in employment since the Great
Depression of 1929. In fact, from one point of view the situation may be worse
than it appears. According to several estimates, if the current recovery had fol-
lowed the track of previous upturns, the economy would not have lost jobs but
instead would be something more than 3 million jobs to the good. Some econ-
omists therefore argue that the U.S. is suffering a jobs deficit, not of 2 million
jobs at its low point but more like 5.3 million. According to the Economic Pol-
icy Institute, if we include laid-off workers who want jobs but have become too
discouraged to look for them, and therefore are not included in the official
numbers, the unemployment rate would not be 5.7 percent, but more like 7.5
percent. That is bad, even for the middle of a recession.
The job picture has improved in late spring and early summer, and we
will get to that in a moment. For now, however, we will continue to examine
why employment statistics have weighed so heavily on consumer confidence
and sentiment. This process will provide a useful context for interpreting the
latest job figures.
It takes around 150,000 new hires each month just to absorb the extra
workers being added to the labor pool. At this point in the recovery from a re-
cession, new jobs are usually appearing at a rate of 200,000 to 300,000 per
month. Yet this time new jobs remained scarce for a long time. Government
forecasters predicted that 150,000 jobs would be created last December; only
8,000 were. They said that 175,000 jobs would appear in January 2004; 97,000
26 Chapter i
did. In February, the number was back down to 21,000. It has remained erratic,
but generally lower than expected, ever since.
These hard, well-publicized numbers contrasted unfavorably with the an-
nual Economic Report of the President, which forecast that average payrolls in
2004 would be 2.6 million jobs larger than in 2003. Administration officials
quickly backed away from that prediction when skeptics pointed out that meet-
ing the target would require creating about 320,000 jobs per month for the rest
of the year.
In an election year, all this is big political news, and it has many working-
class Americans worried. What if the economy is not as strong as those GDP
numbers suggest? What if companies just don't need well-paid American work-
ers anymore to produce their goods? What if the government hasn't a clue how
to fix the situation? Hence February's decline in consumer confidence.
A FEW CHALLENGES
There are several issues to look at here, and we will take them in turn.
One is labor productivity. During the recession, companies maintained
profits by cutting payrolls, learning better ways to use all those computers they
bought in the 1990s, and pushing their remaining employees to turn out more
work per hour. Now that the recession is over, they are still pushing. Labor pro-
ductivity has risen almost uninterruptedly since 1990, and it rose almost twice
as fast between January 2000 and mid-2004 as it did in between 1992 (the base-
line year) and 1999. At the end of 2003, American workers turned out nearly 30
percent more goods and services per hour than they did in 1992. That means
companies need fewer employees to get their work done.
When economists know how fast the economy and productivity are grow-
ing, they can get a fairly good idea of how many new jobs the economy will
create. With GDP growth of 4.5 percent per year, cutting productivity growth to
1.5 percent per year would create 320,000 jobs per month and lead most con-
sumers to start thinking about their next vacation. Productivity growth of 2.7
percent would force employers to create 150,000 new jobs per month, or enough
to absorb the new workers coming into the labor market. In 2003, labor pro-
ductivity actually rose by 4.1 percent, and that allows room for hardly any new
hires at all. Productivity growth in 2004 seems likely to average about 3 per-
cent-it was 2.9 percent in the second quarter-leaving job creation to limp along
much as it did in December 2003 and January 2004.
Another issue is outsourcing. Increasingly, companies are cutting costs by
shipping jobs to low-wage countries like China, Russia, and especially India,
where universities graduate more English-speaking scientists, engineers, and
technicians than the rest of the world combined. Outsourcing is where many
of those lost factory jobs, the ones not displaced by computer-aided design and
manufacturing, have been going since the 1980s. Today the trend is being felt
in computers and information technology, telephone customer support, many
services, and even some professions. No fewer than one-third of American pro-
grammers and software engineers are expected to lose their jobs to outsourc-
ing in the next six years; in the most vulnerable segments of the industry, salaries
for the survivors have already fallen by nearly 10 percent.
There are few industries where outsourcing will not make itself felt. Ar-
chitects and consultants are safe; their customers like to be able to talk with
them in person. So are construction workers and auto mechanics. Relatively few
jobs will be lost from the hospitality industry; no one in Bangalore can clean a
hotel room in New York or cook a restaurant meal in Chicago. But not all physi-
cians have to see their patients, so a few hospitals already are e-mailing X-rays
to be read by Indian doctors. And a growing cadre of accountants is preparing
U.S. tax returns in India. Of the top 1,000 American companies, more than 400
will have at least pilot projects offshore before 2006 is over. A recent study at
the University of California at Berkeley found that 14 percent of all American
jobs could eventually migrate overseas.
This trend is spreading around the world. Germany and Britain have well-
established outsourcing movements, and the process is getting under way in
the Netherlands, Belgium, Sweden, and Switzerland. Even France is beginning
to experience outsourcing, despite some of the world's most restrictive labor
laws and powerful unions. In the future, India will begin outsourcing its labor
to former British colonies in Africa, where English is spoken and labor costs will
remain low. Ghana, South Africa, and Zimbabwe all are beginning to profit
from outsourcing. As outsourcing spreads in Europe, French-speaking Africa
will benefit from this trend as well.
A few economists deny that outsourcing has really cost significant num-
bers of American jobs. Some say it actually creates new employment. In Feb-
ruary, Gregory Mankiw, chairman of the President's Council of Economic
Advisors, found himself in hot water for publicly applauding the process. Out-
sourcing, he said, cuts costs, and that will make the economy stronger and
Americans more prosperous. In the long run, he was probably right, but it was
not what increasingly skittish consumers wanted to hear.
Finally, a few economists doubt that the country really is short of jobs at
all. The federal Bureau of Labor Statistics performs two different surveys in an
effort to track the nation's employment status. The one we all hear about each
month comes from payroll records at 400,000 companies, and it shows that the
country has lost 716,000 jobs since the bottom of the recession in November
2001. The other survey, much less publicized, asks 60,000 households about
their employment. This study says that the economy has not lost jobs after all;
it actually has created 2.2 million jobs since the end of 2001, 496,000 in Janu-
ary alone! This obvious conflict puzzles many economists.
28 Chapter i
AS WE SEE IT
Here is how Forecasting International makes sense of all this:
The American economy really is growing at a rate that should average
about 4 percent in 2004. That represents a solid, sustainable expansion that
should continue for several years.
In any previous recovery, it would have resulted in the rehiring of laid-off
workers and the creation of more than enough jobs to employ all the new work-
ers who enter the labor force each month. New hiring was delayed because ser-
vices are now automating their processes, much as manufacturing has been doing
for 20 years, and because outsourcing truly is draining jobs from the United States.
We do not fully understand why official unemployment rates have re-
mained so much lower than many economists would have expected. In part, it
is because people who lost their jobs in the last few years eventually gave up
looking for work and are no longer counted in the official government figures.
However, the Bureau of Labor Statistics puts the number of "discouraged work-
ers" at only 514,000, compared with 8.4 million unemployed persons in March
2004. This is not enough to raise the unemployment figure significantly.
Some of the unemployed have found work of sorts—there really are more
jobs than the payroll survey shows—but it is not always the kind of work anyone
can be happy about. Perhaps one-third of displaced manufacturing workers and
engineers have had to settle for service jobs that pay much less than they were ac-
customed to and provide no health insurance or other benefits. Many of those jobs
are part time, and many are off the books. Increasingly, workers get paid in cash
and employers bury the cost in other parts of the balance sheet. These jobs are
uncounted and untaxed. They explain much of the difference, between the BLS
payroll survey and the household survey. In fact, BLS reports that fully 97 per-
cent of the jobs added to the household survey between March and June 2004
were part-time. This does not qualify as a major recovery in employment.
It also is true that outsourcing will strengthen the American economy, and
the economies of many European nations as well. Cutting costs makes busi-
ness more efficient and reduces the price that consumers pay for goods and
services, and the money saved is eventually reinvested, creating new jobs. How-
ever, that is a process for the long run. At the moment, there simply aren't
enough white-collar and factory jobs to go around. That means the retraining
programs some politicians have suggested will not work; there is no point in
training the unemployed for jobs that do not, and will not, exist. Many dis-
placed workers have had their lives permanently changed for the worse. Until
job creation catches up with labor supply, many workers will have to settle for
jobs far below their talent, skill, and ambition.
And yet, in the long run outsourcing may not be quite as disruptive as it now
seems. Many employers have found that moving their operations offshore does
not work out as well as they once hoped. Dell, for example, found so many cus-
tomers were dissatisfied by the support work done at a Bangalore call center
that it shifted the operation back to Texas and Tennessee. Others have found
that offshore support costs were more than they expected, and their numbers are
likely to grow quickly. Salaries for Indian programmers already are beginning to
rise, even as American wages decline. In five years, IT workers in Bangalore and
Hyderabad will receive not 10 percent of American salaries, but 40 percent, and
that will remove much of the incentive to send jobs there. China, however, will
remain an extremely low-cost alternative to American workers. Current esti-
mates say that outsourcing will leach 3 to 10 million jobs from the American
economy over the next ten years. At FT, we believe the number will be near the
lower end of that range. This will be painful for the individuals whose jobs move
overseas, but the dislocation will not be as severe as many now fear.
In September 2004, the economy seems to be at a turning point. The
healthy employment growth seen from March through May suddenly dipped to
only 78,000 new jobs in June and 32,000 in July. Until June's employment
numbers came in, it appeared that the expansion had finally become self-
sustaining-at least until the next downturn. August's preliminary figure of
144,000 new jobs is not really enough to confirm that better times are ahead.
Yet on balance the outlook still seems positive. If this proves correct, we can ex-
pect to see continuing expansion in jobs, improved consumer confidence, and
better times ahead for the hospitality industry.
As the economy labors to put the finishing touches on its somewhat flawed
recovery, both the U.S. and the world's hospitality industry are receiving valuable
help from around the globe. Japan, China, India, and significant parts of Europe
all are enjoying prosperity of their own, which in some cases has been a long time
coming. Its arrival just when America can most benefit from vital trading partners
promises widespread economic growth that should continue at least for several
years. Current estimates put world GDP growth in 2004 and 2005 at about 4 per-
cent, a bit better than average, and we expect this expansion to continue for some
time. This means that travel and tourism, and all the industries that depend on
them, should enjoy good times through 2008 and perhaps beyond.
WORLD TOUR
Let us look at some of the major contributors to the coming global wave of
well-being.
China The world s largest country also is one of the fastest growing. Over
the last twenty years, this largely rural nation has transformed itself into the
fourth-biggest industrial producer, after the U.S., Japan, and Germany. It man-
ufactures more than half of the world's cameras, 20 to 25 percent of its major
Chapter 2
kitchen appliances, and about 37 percent of its hard drives. As a competitor,

China has a big advantage over other nations: Wages there still average just
$0.40 an hour, one-sixth the price of labor in Mexico. It also has a government
that is solidly behind capitalism. The National People's Congress, once devoted
to Mao's austere brand of communism, now has many members who formerly
headed private companies, rather than government departments.
All this has turned China into a trading powerhouse. Chinese exports grew
no less than 50 percent in the five years ending in 2002 and are continuing to ex-
pand by an amazing 20 percent per year; in the United States, they are credited
with knocking several percent off the price of consumer goods. In return, the
cheap dollar helped U.S. exports to China grow by some $6 billion in 2003, to a
total of $28.4 billion. Even with the SARS epidemic to slow it down, the Chinese
economy grew by no less than 9.1 percent in 2003, rising to 9.9 percent in the
fourth quarter and a torrid .10.7 percent in the first quarter of 2004. After that per-
formance, a dip to 9.6 percent growth in the second quarter actually came as good
news: It seems that China may be achieving a "soft landing," at a growth rate it can
sustain, rather than collapsing into a recession as some economists had feared.
The future is looking even better. Demand for raw materials such as steel
scrap is credited as a major cause for the faint stirrings of price inflation now
being seen in the United States. China's extraordinary growth could slow a bit
in the next couple of years, as Beijing—under heavy pressure from its trading
partners—finally allows the undervalued yuan to rise in the world's currency
markets. Yet that increase and the resulting slowdown both will be limited. At
the same time, Citigroup, along with the Hongkong Shanghai Bank Corpora-
tion, recently received approval to issue credit cards on the mainland. Allowing
foreign banks to operate in its territory no later than 2006 is one requirement
that China accepted when it joined the World Trade Organization in late 2001.
Living up to that commitment nearly two years before the deadline should re-
assure outside investors that China means to bring its policies in line with those
expected of capitalist nations. At the same time, Beijing has committed to de-
veloping a h^ of new tourist destinations in the next few years and training
100,000 hospitality professionals by 2010. And all this can only be good for
China's economic prospects.
India The world's second most populous country once was viewed as a
perpetual beggar-land. Today, it fairly radiates economic health. India's GDP in
2003 expanded by about 8 percent, after years of growth in the range of 4 to 6
percent; not even the so-called "Asian flu" that decimated economies through-
out the region in the late 1990s did much to slow India's economy. Goldman
Sachs, a leading American investment bank with a good record of prescience,
forecasts that India's GDP will continue to grow by an average of 5 percent
annually for the next half century. According to the report, the Indian economy
will be bigger than Japan's by 2032. By 2050, the country's per capita income
will grow by 3500 percent!
To achieve this fantastic success, India needs to meet several challenges.
It must continue to strip away the protectionist trade barriers and bureaucratic
red tape that long stifled its economy, eliminate the corruption traditionally en-
demic in both industry and government, diversify the economy, slow its popu-
lation growth, bring its massive government debt under control, clean up the
environment, and provide education for its young people, nearly 20 percent of
whom receive no schooling at all. It also needs to make peace in Kashmir.
For a day or two, that process seemed endargered by the stunning upset
that returned the Congress Party to power in the 2004 general election. After all,
the Congress Party, under the Nehru family's leadership, created the socialist sys-
tem that stifled India's economic growth for decades. However, the appoint-
ment of Manmohan Singh as the new prime minister went a long way to relieve
those worries; it was Dr. Singh, an Oxford-trained economist, who formulated
the economic reform plan responsible for India's current prosperity. Thus far,
he has made no significant changes in the economic policies he established in
the early 1990s and the former BJP government followed later on.
None of India's problems will be easy to solve, but after carrying out a
year-long study of India recently we believe that India will succeed. The gov-
ernment's Central Vigilance Commission already has cleaned up most of the
country's banking system, a good start on a long and difficult process. Wireless
Internet is bringing classes to rural areas and beginning to cut the rate of illit-
eracy, which is estimated at 35 percent. And because education gives women
more control over their reproductive lives, the birthrate is beginning to fall.
With these issues in hand, it becomes possible to conquer the rest.
With 4,000 years of civilization behind it, India is a paradise of exotic
travel destinations. The holy Ganges, the Taj Mahal, and the old city of Bom-
bay hardly begin the list of cultural attractions now being developed and pro-
moted for tourism. Even Kashmir, one of the most beautiful parts of the
subcontinent, is beginning to draw visitors now that peace with Pakistan seems
to be a realistic possibility.
As the Indian economy expands, the country's middle class—now esti-
mated at about 300 million people—is growing even larger and more prosper-
ous. Thus, India also will become one of the largest sources of tourists to Europe
and America. For the world's hospitality industry, the rise of India will be one
of the most important trends of the next 30 years.
japan After a dozen years of stagnation, and sometimes outright reces-

sion, it looks like this one-time powerhouse may finally be back on track. Japan's
Chapter 2
economy grew at a yearly rate of 7.3 percent in the fourth quarter of 2003 and
6.1 percent in the first quarter of 2004. (This compares to an average of only 0.4
percent per year from 1998 through 2002!) Exports surged by 17.9 percent an-
nualized in 2003, yet foreign demand added only 1.6 percentage points to fourth-
quarter growth. The remainder came from domestic consumption and
corporate capital spending, a strong hint that both consumers and companies
are beginning to anticipate a brighter future. The Conference Boards leading
index for the country suggests that they may be right; by August 2004 it had been
rising almost continuously for 16 months and was headed up at a rate of 3 to
5 percent annually.
Europe The entire region did poorly throughout 2002, with just 0.9 percent
GDP growth for the year, and 2003, which came in at only 0.4 percent. Business
and consumer confidence for most of the period were weak, thanks largely to the
Iraq war and to the cheap dollar, which has cut demand for relatively expensive
European exports throughout much of the world. Germany, Italy, and the Nether-
lands were officially in recession in the first half of 2003, while the French econ-
omy shrank owing to widespread strikes. The region actually lost jobs for the first
time since 1994, which also hurt consumer spending.
In 2004, those problems are largely past. The decline in Europe bottomed
out in the second half of 2003, sentiment indicators improved, and retail sales
began to pick up throughout most of Europe in August and September. Even
manufacturing, which had lagged other segments of the continental economy,
began to pick up toward the end of the year.
Several policy changes should keep the recovery going. Toward the end of
2004, the United States has begun to raise its interest rates, and while German
economics minister Wolfgang Clement is pushing the European central bank to
bring theirs down, from 2 percent to 1 percent. This will raise the price of the dol-
lar on currency markets, while lowering the value of the euro. These changes will
effectively reduce the cost of European exports and of foreign travel to the con-
tinent, improving the balance of trade and bringing a lot more American tourists
back to Europe. It helps also that the European Union has already decided to
suspend limits on budget deficits in member countries, allowing national gov-
ernments to spend more on stimulating their economies. All these developments
point to a slow but steady recovery, which now seems well under way.
In the long run, one more change should help the EU. This is the addition
of ten new member states in April 2004. Those countries, most of them formerly
belonging to the Warsaw Pact, are much less prosperous than existing mem-
bers. Yet they still represent the markets and productive capacity of 75 million
people. Over the next ten years, those new resources will make themselves felt.
France Economic growth was weak or nonexistent through most of 2002
and the beginning of 2003, thanks in part to the Iraq war, oil worries, and labor
unrest. Things turned up in the fourth quarter, which delivered 2.5 percent
growth, and another 3.1 percent in the first quarter of 2004. Yet consumer
spending remains weak, thanks to unemployment of over 9 percent.
Nonetheless, by January 2004 the Conference Board's leading index for
France had been rising solidly for five straight months; it did not show an ac-
tual decline until May-even then the decrease was a mere 0.1 percent-and it
began to rise again almost immediately. In 2004 the second-largest economy in
the "euro zone" is projecting GDP growth of 2 to 3 percent in anticipation of
more business investment and a bit of new hiring in the second half of the year.
A rise in tourism as the American economy continues to rebound should go a
long way toward restoring prosperity to France. A general recovery in Europe
will help as well; 60 percent of French foreign trade is within the continent.
And perhaps best of all, in these relatively promising times France is dusting off
its dormant plans to privatize some government holdings. Air France and at
least some of the state's 97-percent holding in Aerospatiale are slated to go on
the auction block. This can only make the French economy more efficient and
improve the nation s chances of achieving sustained growth.
Germany Europe's largest economy, and the world's fifth-largest, has been
sluggish since 2002, with little or no growth last year and unemployment hov-
ering around 10 percent. Blame this on a combination of high taxes, high-priced
labor, copious red tape, the continuing cost of absorbing the former East Ger-
many (about $70 billion per year), and—again—the weakness of the dollar,
which here as elsewhere discourages both exports and tourism.
However, since mid-2003, both consumer and industrial demand have
been improving gradually. Growth in 2004 now is expected to come in at a mod-
est 1.6 percent, and 1.75 percent in 2005. Again, that could be improved by a
stronger dollar, but any significant benefit is unlikely to be felt before the sec-
ond quarter of 2005.
United Kingdom Britain has outperformed both the United States and the
rest of Europe since the high-tech bubble burst at the end of the 1990s: It barely
avoided recession. Yet the slowdown in global financial services has hurt. Fi-
nance is a major part of London's economy, and that accounts for 17.5 percent
of the nation's GDP. Productivity growth is declining as well, and it seems that
the economy—like that of the United States in 2002 and 2003—has been held
up only by consumer spending.
However, it appears that things are looking up. The index of leading indi-
cators was rising at 3 to 5 percent annually as of May, held even in June, and
dipped only slightly in July. Corporate investment and net exports are beginning
to quicken, and household spending is still rising gradually. Unemployment has
hovered in the neighborhood of 5 percent, and inflation has remained under
34 Chapter i
control. All these point to future GDP growth, most likely close to 3 percent in
2004 and 2005.
Russia Three weeks before his expected coronation in the election of
March .14, 2004, Vladimir Putin fired his prime minister and the entire cabinet.
At the time, it seemed little more than a Soviet-style power grab, intended pri-
marily to get rid of Prime Minister Mikhail Kasayanov, a Yeltsin holdover.
Kasayanov's replacement turned out to be the relatively little-known Mikhail
Fradkov, a Soviet-era trade minister and later chief of the tax police who had
been serving as Russia's minister to the European Union. In addition to taking
the blame for future cuts in subsidies for housing, education, and healthcare,
Fradkov is expected to build closer ties between Russia and Western Europe,
particularly in the areas of trade and tourism.
Economically, Russia has been doing pretty well of late. Since the collapse
in 1998, the country's GDP has grown rapidly—more than 6 percent per year in
1999, 2000, and 2001; 4.2 percent in 2002; a claim of 7 percent in 2003; and an
expected 4.5 percent in 2004 and 4.2 percent in 2005.
That is not good enough, however. Much of that growth comes from the
strength of the worlds oil and gas markets; Russia owes roughly one-fourth of its
GDP to petroleum. And the unstable price of a commodity, even oil, is a fragile
basis for the prosperity of one of the worlds largest countries. (It has been made
even less stable by Putin's war on Yukos, the country's second largest oil producer,
but in late September it appears that this long-running conflict is at last being
settled.) Add in metals and timber, and raw materials account for 80 percent of
Russian exports. Even in these relatively comfortable times, 25 percent of the na-
tion's population live below the local poverty line; 53 percent earn less than $4 per
day. In a general downturn, the economic situation would be grim indeed; in
1999, 40 percent of the population was considered impoverished.
Putin's cure for instability is to diversify the economy, and his chosen tool
is tourism. Most tourists visit only St. Petersburg and Moscow. In the future, he
hopes foreign visitors will fan out across the country, taking trains and river
barges, and visiting less well-known destinations. In the process, those tourists
will employ Russian citizens and earn foreign currency in a field not directly de-
pendent on the price of oil and gas. At the same time, the new attractions will
provide investment and marketing opportunities for hospitality concerns
throughout the world.
A BENEVOLENT CYCLE
In all these countries, we see the results of a cycle that has existed since World War
II. When the American economy declines, economies around the world follow;
when it recovers, the rest have at least the chance to grow. In the next few years,
prosperity in each country will create new affluence for all its trading partners,
which will generate still more wealth at home. Though some displaced white-
collar workers will miss out on the coming good times, as laid-off manufacturing
workers did in the boom of the 1990s, we are entering a period of growing afflu-
ence that should last for at least four or five years. It could endure longer than that.
This promises new prosperity for the hospitality industry around the
world. Wealthy people have continued to travel throughout the recession; the
slowdown had little effect on their disposable income. This is why the most ex-
pensive resorts remained full and Cunard had so little trouble marketing rooms
on the Queen Mary 2. It was the middle class that had to cut back during the re-
cent downturn. As the nascent expansion continues to develop, those vaca-
tioners, probably feeling a bit deprived, will loosen their purse strings.
Americans who now visit Orlando will return to Europe, and those who have
still been traveling abroad will find their way back to city-center hotels and
restaurants with better food and more pleasant surroundings than cafeterias can
offer. European tourists, though, may stay closer to home as the dollar gains in
value and American vacations again become more costly.
The new prosperity is likely to have one more effect as well. Global eco-
nomic expansion has brought new wealth to many developing countries whose
economies depend heavily on mining and trade in raw materials. Some of the
profits will be invested to develop new tourist destinations, which serve as more
stable sources of foreign currency. Expect to see new resorts and exotic-tour
possibilities opening up throughout Asia and sub-Saharan Africa.
Although we at FI are optimistic about the course of economic events in
the next few years, it is important to note that at least three factors could de-
rail this optimistic scenario.
In early May 2004, China experienced its first death from SARS since the
epidemic of 2002 ended. Another outbreak of SARS, an epidemic of bird flu
among humans, or some other contagion in Asia would trigger a rerun of the
chaos in 2003. This would hit the regions hospitality sector hard and cause
milder damage to other industries. Yet it is difficult to see this having a major
impact outside Asia. It might even help some regions in the United States and
Europe if international meetings scheduled for Asia had to be hastily relocated.
In the long run, failure to control growing deficits in the United States
could have a greater impact. Eventually, America's creditors abroad will grow
tired of buying U.S. debt and defending their export markets; Japan spent an
estimated $80 billion to prop up the dollar in January 2004 alone! When that
happens, the Federal Reserve Board will have to raise interest rates significantly
to attract overseas bond buyers. That in turn will raise the rate of inflation, rein
in the stock market, and reduce the capital available for future growth. Fur-
ther cuts in federal spending will do relatively little good; there just isn't that
much left to cut, with defense, Social Security, and interest payments essentially
36 Chapter i
off limits. That leaves raising taxes to bring down the deficit, and this again
could slow the nation's economic growth.
Finally, and most threateningly, another major terrorist incident could be
catastrophic, particularly if it caused another round of American retrenchment.
The September U attack cost the U.S. economy an estimated $100 billion
in immediate property losses, repairs, and lost productivity. Add in the loss
of stock-market wealth, and the cost of the event was probably closer to $2
trillion—and this does not include the ancillary costs of the war in Afghanistan.
Before September 11, no one was quite certain the United States had entered
a recession; after September 11, no one doubted it. Another such attack could
easily trigger a major downturn and eat up much of the capital that otherwise
would power the next expansion.
However, these potential disasters are significant only because their impact
would be so bad, not because they are at all likely. The most probable scenario
is the one we have described above. For the next few years, global prosperity
should ensure growth of travel and tourism. The good times should last at least
through 2008, and very possibly into the years beyond.
KEY TRENDS FOR THE ECONOMY

(Trend numbers below and in the following chapters correspond to the list in
Appendix A.)
1. The economy of the developed world will continue to grow for at
least the next five years. Any interruptions will be relatively short-lived.
Summary: After a brief but painful recession, the U.S. economy has been
growing steadily for nearly three years, through the first quarter of 2004. Job
creation lagged far behind GDP growth, but it too appears to have begun a sub-
stantial recovery.
Similar improvements are being seen around the world. Many of the Eu-
ropean economies are emerging from years of stagnation, while Japan is see-
ing its first significant expansion in a decade. India and China are achieving
GDP growth that averages 6 percent or better each year.
Barring another terrorist incident on the scale of 9/11, or some equivalent
shock, this widespread prosperity should feed upon itself, with each trading
nation helping to generate the continued well-being of its partners. It can be sus-
tained for some years to come.
Implications for the Economy: This widespread prosperity should feed
upon itself, with each trading nation helping to generate the continued well-
being of its partners.
Labor markets will remain tight, particularly in skilled fields. This calls for
new creativity in recruiting, benefits, and perks, especially profit sharing. This
hypercompetitive business environment demands new emphasis on rewarding

speed, creativity, and innovation within the workforce.
In the United States, the growing concentration of wealth among the el-
derly, who as a group already are comparatively well off, creates an equal de-
privation among the young and the poorer old. This implies a loss of purchasing
power among much of the population; in time, it could partially offset the forces
promoting economic growth.
2. The world's population will grow to 9 billion by 2050.
Summary: The greatest fertility is found in those countries least able to
support their existing populations. Populations in many developing countries
will double between 2000 and 2050; in the Palestinian Territories, they will rise
by 217%. In contrast, the developed nations will fall from 23% of the total world
population in 1950 and about 14% in 2000 to only 10% in 2050. In 10 years or
so, the workforce in Japan and much of Europe will be shrinking by 1% per year.
Implications for the Economy: Rapid population growth will reinforce
American domination of the global economy, as the European Union falls to
third place behind the United States and China.
To meet human nutritional needs over the next 40 years, global agricul-
ture will have to supply as much food as has been produced during all of
human history.
Unless fertility in the developed lands climbs dramatically, either would-
be retirees will have to remain on the job, or the industrialized nations will
have to encourage even more immigration from the developing world. The third
alternative is a sharp economic contraction and loss of living standards.
Barring enactment of strict immigration controls, rapid migration will
continue from the Southern Hemisphere to the North, and especially from for-
mer colonies to Europe. A growing percentage of job applicants in the United
States and Europe will be recent immigrants from developing countries.
3. The growth of the information industries is creating a knowledge-
dependent global society.
Summary: Information is the primary commodity of more and more in-
dustries. As a result, 80% of companies worldwide expect to have employees
who work at home by 2005, up from 54% in 2003. By 2007, 83% of American
management personnel will be knowledge workers, and Europe and Japan are
not far behind. Computer competence is rapidly approaching 100% in these
countries. The Internet makes it possible for small businesses throughout the
world to compete for market share on an even footing with industry leaders.
Implications for the Economy: Knowledge workers are generally better paid
than less-skilled workers, and their proliferation is raising overall prosperity.
Even entry-level workers and those in formerly unskilled positions require
a growing level of education. For a good career in almost any field, computer
Chapter 2
competence is mandatory. This is one major trend raising the level of education
required for a productive role in todays workforce. For many workers, the oppor-
tunity for training is becoming one of the most desirable benefits any job can offer.
New technologies create new industries, jobs, and career paths, which can
bring new income to developing countries. An example is the transfer of func-
tions such as technical support in the computer industry to Asian divisions and
service firms.
For some developing countries, computer skills are making it faster and
easier to create wealth than a traditional manufacturing economy ever could.
India, for example, is rapidly growing a middle class, largely on the strength of
its computer and telecom industries. Many other lands will follow its example.
4. The global economy is growing more Integrated.
Summary: The Internet is reshaping sourcing and distribution networks
in many industries by making it practical for companies to farm out secondary
functions to suppliers, service firms, and consultants, which increasingly are lo-
cated in other countries. At the same time, relaxation of border and capital con-
trols in the European Union, and the use of a common currency and uniform
products standards there, are making it still easier for companies to distribute
products and support functions throughout the continent. NAFTA has had a
similar, but much less sweeping, effect in the Americas.
Implications for the Economy: The growth of commerce on the Internet
makes it possible to shop globally for raw materials and supplies, thus reduc-
ing the cost of doing business. In niche markets, the Internet also makes it
possible for small companies to compete with giants worldwide with relatively
little investment.
Demand for personnel in distant countries will increase the need for foreign-
language training, employee incentives suited to other cultures, aid to executives
going overseas, and the many other aspects of doing business in other countries.
As eastern Europe integrates more fully with the European Union, a major in-
vestment in personnel development will be needed over the next few years.
In the wake of the "Asian flu/' Western companies may have to accept that
proprietary information will be shared, not just with their immediate partners
in Asian joint ventures, but with other members of the partners' trading con-
glomerates. In high technology and aerospace, that may expose companies to
extra scrutiny due to national-security concerns.
5. Societal values are changing rapidly.
Summary: Industrialization raises educational levels, changes attitudes
toward authority, reduces fertility, alters gender roles, and encourages broader
political participation. This process is just beginning throughout the develop-
ing world. The future will be dominated by the materialistic values of Genera-
tions X and Dot-com.
Implications for the Economy: Narrow, extremist views of the left and right
will slowly lose their popularity in the developed lands. This should bring more
pragmatic government that will bring consumers greater security, and thereby
promote economic growth.
Growing demand for quality and convenience is creating many new niche
markets. This will be a prime field for entrepreneurs over the next ten years, in
hospitality and many other industries.
The demand for greater accountability and transparency in business will
be crucial, not only in the United States business community, but also for coun-
tries that wish to attract international investors.
Reaction against changing values is one of the prime motives of cultural
extremism, particularly in the Muslim world and in parts of India. As values
change in those lands, terrorism is likely to proliferate, slowing economic
growth and raising the cost of doing business.
6. Young people place increasing importance on economic success,
which they have come to expect.
Summary: This is characteristic of Generations X and Dot-com through-
out the world. These are the most entrepreneurial generations in history, pre-
ferring to found their own business rather than to become a political leader or
high-level executive at a major corporation. In the United States especially,
most young people have high aspirations, but many lack the education to
achieve them.
Implications for the Economy: Gen-X and dot-com entrepreneurs are largely
responsible for the current economic growth in India and China, where they are
becoming a major force in the Communist party. In India, the younger genera-
tions dress and think like their American counterparts, not their parents.
If younger-generation workers find their ambitions thwarted, they will
create growing pressure for economic reform and deregulation. If reforms do
not come fast enough in the developing world, disappointed expectations will
raise the number of young people who emigrate to the developed lands.
Disappointment also will drive underemployed young men in the de-
veloping world into fringe political and religious movements. This could
cause a new wave of terrorism and instability in the years after 2005 or so,
with profound effects on the economies of the United States and other tar-
get countries.
7. Tourism, vacationing, and travel (especially international) will con-
tinue to grow in the next decade, as they did throughout the 1990s.
Summary: Once current worries over the threat of terrorism recede, Amer-
ican tourism will resume its traditional 5% annual growth. Other countries—
particularly China and India—are contributing to this demand, as their economies
grow and their citizens become more free to travel. Tourism will benefit as
Chapter 2
Internet "virtual" tours replace printed brochures in promoting vacation desti-

nations and provide current, detailed information on travel conditions.
Implications for the Economy: The hospitality industry will grow at a rate
of at least 5% per year for the foreseeable future, and perhaps a bit more.
Tourism offers growing opportunities for out-of-the-way destinations that
have not yet cashed in on the boom. This will make it an important industry for
still more developing countries.
The number of people whose jobs depend on tourism will approach 14
percent of the global workforce.
8. Consumerism is still growing rapidly.
Summary: A networked society facilitates a consumerist society. Shoppers
increasingly have access to information about pricing, services, delivery time,
and customer reviews on the Internet. In most industrialized countries, their
needs are increasingly being written into laws and regulations, which are gen-
erally enforced.
Implications for the Economy: This is a mandate for quality. Brands with
good reputations will have a strong market advantage over lesser competitors
and unknowns.
A second-rate or poor reputation will be even harder to overcome than it
is today.
It will take very few mistakes to undermine a reputation for quality.
9. Oil prices are stable at $25 to $28 per barrel; they rise above that
level only in times of trouble.
Summary: In Autumn 2004, OPEC's aim was to hold the price of oil at rel-
atively high levels, and the instability in the Middle East is making this relatively
easy. However, keeping prices high requires a unity of purpose that member
countries have never been able to sustain for very long. The cost of raising a bar-
rel of oil from the ground in this region is around one-tenth the wholesale price.
New oil supplies coming on line in the former Soviet Union, China, and other
parts of the world will make it even more difficult to sustain prices at artifi-
cially high levels. Prices above $28 per barrel are simply unsustainable.
Implications for the Economy: One of the major costs of doing business
should remain under control. This will make it possible for companies to earn
acceptable profits while keeping prices relatively affordable.
Inflation also should remain under control, with benefits for disposable in-
come and consumer confidence.
10. People around the world are becoming increasingly sensitive to
environmental issues such as air pollution, as the consequences of ne-
glect, indifference, and ignorance become ever more apparent.
Summary: Soot and other particulates are coming under greater scrutiny
as threats more dangerous to human health than sulfur dioxide and other
Corning Global Growth Is Hospitable for Hospitality 4!
gaseous pollutants. In the United States alone, medical researchers estimate

that some 64,000 people each year die from cardiopulmonary disease as a re-
sult of breathing particulates. In sub-Saharan Africa, the toll is between
300,000 and 500,000 deaths per year, and in Asia, between 500,000 and 1 mil-
lion people annually die of particulate exposure. Though government policies
in some developing countries—and the United States, at the moment.—rate in-
dustrial development more important, the trend is clearly toward a cleaner,
healthier environment.
Implications for the Economy: Demands for still more environmental con-
trols are inevitable, especially in relatively pristine regions. This will limit in-
dustrial development in these areas, but will leave them open to controlled
tourism.
Manufacturers throughout the developed lands will have to spend more on
pollution controls and recycling. This will eat into their net profits in the short
run, but eventually will make them more efficient and more profitable.
The developed countries will have to subsidize antipollution efforts in
many of the developing lands, which view the environmental movement as a de-
vious way for the industrialized countries to deprive them of their fair share of
the world's resources.
11. Industrial development trumps environmental concerns in many
parts of the world.
Summary: Studies in India, South Africa, and other countries show that
few citizens are concerned with environmental decay, but are very eager for the
wealth that comes from industrialization. China, India, and other developing
lands are generating increasing quantities of the pollutants that most of the in-
dustrialized world now seeks to eliminate.
Implications for the Economy: Broad regions of the planet will be subject
to pollution, deforestation, and other environmental ills in the coming decades.
Diseases related to air and water pollution will spread dramatically in the
years ahead. Already, chronic obstructive pulmonary disease is five times more
common in China than in the United States. As citizens of the developing coun-
tries grow to expect modern health care, this will create a growing burden on
their economies.
This is just a taste of future problems, and perhaps not the most trouble-
some. Even the U.S. government now admits that global warming is a result of
human activities that produce greenhouse gases. It now seems that China and
India soon will produce even more of them than the major industrialized na-
tions. Helping the developing lands to raise their standards of living without
causing wholesale pollution will require much more aid and diplomacy than the
developed world has ever been willing to devote to this cause.
Chapter 2
12. Technology increasingly dominates both the economy and society.

Summary: In all fields, the previous state of the art is being replaced by new
high-tech developments at an ever faster rate. Computers and telecommunica-
tions have become an ordinary part of our environment, rather than just tools
we use for specific tasks. Biotechnology, and eventually nanotechnology, may
do so as well. These developments provide dozens of new opportunities to cre-
ate businesses and jobs, but they often require a higher level of education and
training to use them effectively.
Implications for the Economy: New technologies should continue to improve
efficiency in many industries, helping to keep costs under control. However, this
increased productivity retarded U.S. job creation from 2002 through early 2004.
Other developed countries are likely to feel the same effect in the future.
New technologies often require a higher level of education and training to
use them effectively. They also provide dozens of new opportunities to create
businesses and jobs.
Automation will continue to cut the cost of many services and products,
making it possible to reduce prices while still improving profits. This will be crit-
ical to business survival as the Internet continues to push the price of many
products to the commodity level.
New technology also will make it easier for industry to minimize and
capture its effluent. This will be a crucial ability in the environmentally con-
scious future.
Consumers are increasingly shopping on the Internet, and posting their re-
actions there. One dissatisfied customers negative report on the Internet can in-
fluence the buying decisions of potential customers for years.
13. Research and development plays a growing role in the economy.
Summary: R&D spending is growing most quickly in the fields of infor-
mation technology, electronics, biotechnology, aerospace, pharmaceuticals, and
chemistry. In the developed countries, high-tech jobs are slowly replacing those
lost in low-tech manufacturing industries. R&D outlays have risen almost con-
tinuously in Japan but have declined in Britain and Russia. In the United States,
federal funding for basic research has almost disappeared, as Washington fo-
cuses on military research and engineering.
Implications for the Economy: The demand for scientists, engineers, and
technicians will continue to grow, particularly in fields where research promises
an immediate business payoff.
Low-wage countries such as China will continue to take low-wage jobs
from advanced industrialized countries such as the United States, but those
jobs will be replaced by higher-paid jobs in technology and service industries.
Countries like India, China, and Russia may continue to suffer a "brain
drain" as those with high-tech skills emigrate to high-demand, high-wage
destinations. However, there is some evidence that growing numbers of tech-

nology students and professionals are spending time in the West to learn
cutting-edge skills, and then returning to their native lands to work, start com-
panies, and teach. This trend may promote the growth of some developing coun-
tries while reducing the competitive advantages of the developed world.
By inhibiting stem-cell research, the United States has made itself a
less attractive place for cutting-edge biomedical scientists. The United King-
dom is capitalizing on this to become the world's leader in stem-cell re-
search. In the process, it is reversing the brain drain that once deprived it
of top scientists.
Washington's neglect of basic science is being felt in the declining fraction
of patents, Nobel prizes, and other awards going to American scientists. As
other countries become more skilled in critical high-tech fields, the United
States is fast losing its edge. If this trend is not reversed, it will begin to un-
dermine the American economy and shift both economic and political power
to other lands.
14. The Internet is growing logarithmically and globally.
Summary: In spring 2004, Net users number around 945 million world-
wide. This population is expected to reach 1.1 billion by 2005, 1.28 billion by
2006, and 1.46 billion by 2007. One reason for this is the rapid expansion of Net
connectivity in some developing lands. India had only 170,000 Net subscribers
in 1998; by 2004, it had 39 million. In early 2004, China's population of Net
users amounted to 96 million. Americans had declined from 42 percent of Net
users in 2000 to under 20 percent in 2004.
Implications for the Economy: Internet-based commerce is growing rapidly.
Total e-commerce revenue is expected to be about $2.7 trillion in 2004, $1 tril-
lion in the United States alone. Business-to-business sales passed $1 trillion by
the end of 2003.
B2B sales on the Internet are dramatically reducing business expenses
throughout the Net-connected world, while giving suppliers access to customers
they could never have reached by traditional means.
Internet-based operations require more sophisticated, knowledgeable
workers. People with the right technical training will find a ready market for
their services for at least the next fifteen years, as major businesses compete to
hire them. However, the specialties required in any given country will change
as some skills are outsourced abroad.
15. The service industry is the fastest-growing sector of the global
economy.
Summary: Data processing, health care, transportation, and other services
are expanding rapidly, even as manufacturing and resource industries decline
in the developed world. Service jobs have replaced many of the well-paid positions
63 Chapter 5
lost 111 the developed countries, especially the United States, but many are rel-
atively unskilled and poorly paid, and often part time.
Implications for the Economy: Services are now beginning to compete glob-
ally, just as manufacturing industries have done over the last twenty years. By
creating competitive pressure on wages in the industrialized lands, this trend
will help to keep inflation in check.
The growth of international business will act as a stabilizing force in world
affairs, as most countries find that conflict is unacceptably hard on the bottom line.
16. Generations X and Dot-com will have major effects on the future.
Summary: Members of generation X—roughly, the 30-plus cohort—and
especially of generation Dot-com, now in their 20s, have more in common with
their peers throughout the world than with their parents' generation. They are
entrepreneurial, well educated, and predominately English-speaking. Virtually
all are materialistic, many are economically conservative, and they care for lit-
tle but the bottom line—their own bottom line. Independent to a fault, they
have no loyalty to employers at all.
Implications for the Economy: Younger consumers tend to be extremely
well informed about their product choices, thanks in large part to their comfort
with the Internet. Net-sawy travel marketers have a strong advantage in reach-
ing this market.
Marketing to generations X and Dot-com requires a light hand, with strong
emphasis on information and quality. Brands credibly positioned as "afford-
able luxury" will prosper.
Any perceived inadequacy of service will send them to a competitor. Under-
40 customers make few allowances for other peoples problems.
However, they are relatively tolerant of impersonal service. What they care
most about is efficiency.
These generations also will be industry's future employees. The good news
is that they are well equipped to work in an increasingly high-tech world. The
bad is that they have little interest in their employer's needs and no job loyalty
at all. They also have a powerful urge to do things their own way.
17. lime is becoming the world's most precious commodity.
Summary: Computers and other technologies are making national and in-
ternational economies much more competitive. As a result, Americans have
lost an average of 140 hours per year of leisure time. European executives and
nonunionized workers face the same trend. In Britain, workers have lost an av-
erage of 100 hours per year of nonworking time.
Implications for the Economy: Stress-related problems affecting employee
morale and wellness will continue to grow. Companies must help employees
balance their time at work with their family lives and need for leisure. This may
reduce short-term profits but will aid profitability in the long run.
As time for shopping continues to evaporate, Internet and mail-order mar-

keters will have a growing advantage over traditional stores.
18. More entrepreneurs start new businesses every year.
Summary: Workers under age 30 would prefer to start their own company,
rather than advance through the corporate ranks. Some 10 percent are actively
trying to start their own businesses, three times as many as in previous gener-
ations. Like other Gen-X and Dot-com values, this preference is shared more or
less universally throughout the world. A large majority simply distrust large in-
stitutions. Most believe that jobs cannot provide a secure economic future in a
time of rapid technological change. By 2006, the number of self-employed peo-
ple in the United States will be close to 12 million, FI believes.
Implications for the Economy: This is a self-perpetuating trend, as all
those new service firms need other companies to handle chores outside their
core business.
Specialty boutiques will continue to spring up on the Internet for at least
the next twenty years.
This trend will help to ease the poverty of many developing countries, as
it already is doing in India and China. In turn, this will add to the demand for
goods and services, further accelerating economic growth.
19. International exposure includes a greater risk of terrorist attack.
Summary: State-sponsored terrorism appears to be on the decline, as
tougher sanctions make it more trouble than it is worth. However, nothing will
prevent small, local political organizations and special-interest groups from
using terror to promote their causes. And as the United States learned on Sep-
tember 11, the most dangerous terrorist groups are no longer motivated by spe-
cific political goals, but by generalized, virulent hatred based on religion and
culture. On balance, the amount of terrorist activity in the world is likely to go
up, not down, in the next ten years.
Implications for the Economy: Until the terrorist problem is brought under
control—probably not soon—the more volatile parts of the world will find it
difficult to attract outside investment capital. The exceptions will be develop-
ing oil states, such as Kazakhstan.
American-owned facilities, and those where Americans congregate, will
have to devote more of their budgets to security. This is rapidly becoming true
for companies from other Western lands as well.
Some of the most important security measures will be invisible to cus-
tomers, but highly intrusive for staff. These may include comprehensive back-
ground checks for new hires, much as airports need to screen such
behind-the-scenes personnel as baggage handlers and fuel-truck drivers.
The economies of the industrialized nations could be thrown into reces-
sion at any time by another terrorist event on the scale of September 11. This
65 Chapter 5
is particularly true of the United States. The impact would be greatest if the at-
tack discouraged travel, as the hijacking of airliners to attack the World Trade
Center and Pentagon did in 2001 and 2002.
The U.S. economy is being affected already by American antiterrorism
measures. Since Washington began to photograph incoming travelers and re-
quired more extensive identification from them, tourism to America is off by
some 30 percent. The number of foreign students coming to American univer-
sities has declined by a similar amount.
20. Institutions are undergoing a bimodal distribution: The big get
bigger, the small survive, and the midsized are squeezed out.
Summary: For at least 20 years, economies of scale have allowed the largest
companies to buy their smaller competitors or drive them out of business. At
the same time, thousands of tiny, agile companies are prospering in niche mar-
kets. We see this pattern among automakers, computer companies, airlines,
banks, and many other industries.
Implications for the Economy: Thus far, industries dominated by small, re-
gional, often family-owned companies have been relatively exempt from the
consolidation now transforming many other businesses. Takeovers are likely
even in these industries in the next decade.
This consolidation will extend increasingly to Internet-based businesses,
where well-financed companies are trying to absorb or outcompete tiny online
startups, much as they have done in the brick-and-mortar world.
No company is too large to be a takeover target if it dominates a profitable
market or has other features attractive to profit-hungry investors.
Chapter 3
® sa H®m ®
The world has lived with terrorism for decades, but in recent years things have
changed. Attacks now often are carried out by international groups with sweep-
ing cultural agendas, rather than national organizations with local goals. They
are bloodier, intended more to cause mass casualties than to win support for a
political cause. And it seems that the number of major attacks has grown since
the Iraq war began. These are worrisome trends, and they threaten the hospi-
tality industry more than any other sector of society.
Although the best known terrorist attacks are those with the highest death
tolls-the September 11 assault on the World Trade Center and the slaughter of
school children in Beslon, Russia, in September 2004-many of the most de-
structive incidents have struck at hospitality, tourism, and travel. Just since the
invasion of Iraq, these have included:
® the car bombing of the Mount Lebanon Hotel in Baghdad, with at least
seven dead—estimates ran as high as 28—and more than 40 injured;
• the bombing of the Marriott Hotel in Jakarta, where at least 13 people
died and 149 were injured;
• a series of bombings in Morocco, with targets that included the Safir
Hotel and the Casa de Espana restaurant, where 15 people died;
® the bombing of the Moscow subway by Chechnyan separatists, which
killed 39 people and wounded more than 130;
® and, of course, the railway bombings in Spain, with 202 fatalities.
These attacks are part of a continuing wave of violence that began with Al
Qaeda but is now being carried on independently by sympathizers around the
world. They differ from the terrorism of the 1970s and 1980s in a number of key
47
48 Chapter 5
ways: They aim less to promote specific political goals than to wage a cultural
war of Muslim extremists against, well, anyone who attracts their attention,
but especially the United States and its allies. They no longer aim for limited de-
struction that makes a point and allows the terrorists to fight another day; in-
stead, they are designed for mass blood-letting, to intimidate and destroy the
terrorists' chosen enemies, even when that means "martyrdom" for the perpe-
trators. And, government targets being increasingly well defended, they very
often aim at places where civilians congregate.
This is important for hospitality providers, not just because of the threat
itself, but because of the effect it has had on many of the industry's customers.
In late 2003, a poll asked more than 2,300 tourists in Southern California what
factors were most important in planning a vacation or convention. On a scale
of 1 to 10, with 10 being the most significant, domestic visitors gave safety an
average rating of 8.9. No fewer than two-thirds of international visitors said
that safety was their single most important concern. In choosing a hotel, 62
percent of domestic visitors and two-thirds of international travelers put safety
and security at the head of the list.
Under the circumstances, it seems necessary to weigh the industry's vul-
nerabilities and figure out what can be done about them.
IN THE CROSSHAIRS
Terrorists are targeting the hospitality industry for sound tactical reasons. Peo-
ple gather with their guard down at hotels and restaurants in every city in the
world. They pack into trains and planes. Often, they segregate themselves into
convenient groups, American military personnel in this restaurant, Western
tourists in that hotel, and no devout Muslims at all in the local bars and night
clubs. And with the exception of airlines, and to some extent cruise ships, se-
curity measures at potential targets tends to be lax or nonexistent. No other sec-
tor of business offers more easy and conspicuous victims than hospitality.
Here are some of the more obvious vulnerabilities:
® Hotels are popular targets, for good reason.
There are just so many points of access, and each one offers opportunities
for attack. Their lobbies are large, open spaces with multiple entrances and
hundreds of people moving through them every day. Driveways make it easy to
bring a car bomb right up to the door. Loading docks, garages, delivery vehicles,
and luggage storage areas all present risks of their own. Ventilation systems
and water supply also are vulnerable. And few hotel operators really want to pro-
vide effective security, for fear that airport-style lines and metal detectors will
put off customers even more than the fear of terrorism does.
"Bang! You're Dead!" Hospitality in the Age of Terror 49
« Transportation is a prime target for terrorists.

And attacks on the transportation system can be devastating for the hos-
pitality industry, as we know all too well. The bombing of Pan Am Flight 103
over Lockerbie, Scotland, in 1988 and the 1995 Sarin gas attack on the Tokyo
subway system rattled nerves around the world. The hijacking of four airliners
for use in the September 11 attacks all but put an end to elective travel for
months. By September 21, hotels in New York City that are accustomed to being
fully booked were running at 40 percent occupancy. Restaurants in European
tourist centers quickly saw their business drop off by 40 percent or more. And
over the next year, eight airlines either went out of business or filed for bank-
ruptcy protection. So did eight cruise lines.
Since then, security has been tightened dramatically for airlines and
cruise ships. Airline passengers and their carry-on luggage are routinely
searched. Airport personnel must survive rigorous background checks and
soon will be required to carry biometric ID cards. Cruise lines now forbid
anyone but passengers to board their vessels. Cruise ships now pick up half
a dozen sea marshals along with the harbor pilot to protect the bridge and en-
gine room and patrol the rest of the ship for signs of trouble. In the port of
Miami, divers even meticulously scan the hull for attached mines before the
vessel is allowed to enter the harbor, and a Coast Guard cutter accompanies
the ship to the dock.
Yet more travel-related attacks clearly are to come. Spanish authorities
recently found a partially completed bomb under railroad tracks running be-
tween Madrid and Seville. A week later, a French railroad worker discovered a
bomb under the line from Paris to Basel. It seems only a matter of time before
another railroad bombing is successful.
Travel in the United States may be even more vulnerable than it is in Eu-
rope. New York City alone has no fewer than 468 subway stations, all of them
inviting targets for a terrorist bomb. Much of the transportation on the East
Coast is routed through tunnels into New York City, Baltimore, Norfolk, VA,
and other cities. Much of the rest travels over major bridges. Al Qaeda leader
Khalid Sheik Mohammed reportedly instructed a subordinate in the United
States to look into blowing up the Brooklyn Bridge. On the West Coast,
bridges form a series of choke points for most of the highway traffic from
Seattle to San Diego. A single bus full of explosives could disrupt or block traf-
fic for months. And, of course, Al Qaeda has long been rumored to be plan-
ning another spectacular attack using hijacked planes to destroy American
targets. That could cause an all-out depression in the hospitality industry for
years to come. No less than $ 11 billion had been spent on air security in the
United States by early 2004, only $110 million on security for subways and
commuter rail.
Chapter 3
® Major sports events are terrorist magnets.

The assassination of 11 Israeli athletes at the Munich Olympics in 1972 set
a precedent that today's extremists must long to follow. Over the next 29 years,
until the September 11 attacks, no such assault ever garnered so much public-
ity for the terrorists' cause.
The Olympic Games in Athens in August 2004 were a rare opportunity for
mass slaughter, with thousands of visitors packed onto cruise ships that served
as hotels. Greece devoted a bit more than $1.2 billion to security for the
Olympics; it even installed sonar to scan the harbors for underwater threats. Yet
these events were extraordinarily difficult to protect against terrorists willing to
sacrifice their lives for the cause of wholesale killing. The Atlanta Olympics in
1996 had the tightest security the organizers and city could provide for them.
Yet someone managed to plant a bomb that killed one passing visitor. The
Athens games could have seen far worse.
This seemed particularly likely in light of the Athens bombings of May 5,
2004. In this incident, 100 days before the start of the Olympics, three bombs
severely damaged a police station in the densely populated Kalithea district
near hotels soon to be used by Olympic officials. Officials said the bombing ap-
peared to have been intended to cause as many casualties as possible. The fact
that no major terrorist incident marred the games, stands as an anti-terrorist
triumph. However, it does not make attacks any less likely at future sports events.
® Reporters follow the money; terrorists could keep it from going
anywhere.
An attack on the financial infrastructure could cripple the hospitality in-
dustry, at least temporarily. About 80 percent of bills in this sector are paid by
credit card. And in a recent study of terrorist risks to credit-card issuers, FI
found some methods of attack that could be orders of magnitude more de-
structive than the worst case of credit-card fraud ever recorded.
In the United States, just ten data-processing centers transmit everything
from huge corporate transfers to Social Security deposits to personal utility
payments—more than $3.5 trillion per day in all. The equivalent systems in Eu-
rope and Asia also are highly concentrated. An assault on those centers—by de-
stroying their telephone lines; detonating cheap, readily available (or easily made)
electromagnetic-pulse bombs to wipe the memories of their computers; or sim-
ply applying for janitorial jobs and carrying pipe bombs to work—could create
a liquidity crisis that would disrupt the global economy for weeks or months.
• Destroying data could be safe, easy, and disastrous.
Thus far, cyberterrorism has been more fantasy than reality; most ter-
rorists probably find it easier to build bombs than to learn about computers
and networks. Yet the risk is real. A virus that destroyed reservations or
billing records could cost a company millions of dollars immediately, and the
inconvenience to thousands of customers might ruin existing relationships

and future sales. And we know of at least one case where a malicious hacker
encrypted a company's data and offered to sell them the key for a hefty price.
At this point, most firms have installed at least rudimentary firewalls and
antivirus software, but we doubt that many could withstand the attention of
a skilled and determined cyberterrorist. The situation would be even worse
if the hacker were an employee or disgruntled former employee familiar with
the company's security systems.
WEIGHING THE RISK

Anyone with a morbid imagination can spin this kind of scare scenario almost
from thin air, and that can be a worthwhile exercise for hospitality executives
trying to identify their own facility's risks. And if amateurs can recognize a few
of their own vulnerabilities, terrorists can probably find a dozen more.
Nonetheless, it is important to keep the threat in perspective. The whole
point of terrorism is to create a maximum of fear with a minimum of resources,
so that small and weak forces can win out over an enemy they could not hope
to defeat in a heads~up battle. By definition, only a few of the potential targets
will ever be attacked.
In creating fear, terrorism clearly succeeds. Late in 2003, polls found that
70 percent of people in Italy and Germany were "somewhat worried" or "very
worried" about terrorism. In Spain, where a native Basque terrorist movement
is blamed for killing more than 1,000 people over a period of four decades, no
fewer than 85 percent of respondents were similarly concerned, months before
the train bombings in Madrid.
Yet consider these numbers: In an average year, roughly one in 4 million
Americans dies after being struck by lightning. According to David Ropeik of
the Harvard Center for Risk Analysis, the average American's chance of being
killed by a terrorist in any given year is just 1 in 9.3 million. Not many Ameri-
cans worry about being struck by lightning.
Even in the obvious hotspots, the fear of terrorism is much greater than
the actual threat. In Israel, 174 people died in terrorist incidents in 2003. (This
number excludes the terrorists themselves.) This is fewer than three for every
100,000 people, or about half the death rate from homicide in the United States.
However, the impact of a terrorist attack can be all out of proportion to the
event itself. As horrifying as the September 11 attacks were, they killed only 7
percent as many people as traffic accidents did in the United States that year.
Yet before it was all over, the worlds airlines lost an estimated $25 billion and
cut some 100,000 jobs. Eventually, eight airlines either went out of business or
filed for bankruptcy protection. So did eight cruise lines.
52 Chapter 5
In forecasting, we often distinguish among several different categories of

events. There are high-probability, high-impact events, for which we all must
plan. There are low-probability, low-impact events that can safely be ignored.
The remainder fall somewhere along the spectra of probability and impact.
Even for the hospitality industry, terrorist attacks in almost any individ-
ual location are very low-probability events. Yet their impact is so high that we
must plan for the possibility and avoid it as best we can, just as we avoid stand-
ing under trees during a lightning storm.
DANGEROUS GROUND
The Motel 6 on the outskirts of Rock Springs, Wyoming, is probably safer from
terrorist attacks than the Marriott in Islamabad, Pakistan—but you probably
had figured that out already. Fortunately, there are more useful things to be
said about where terrorists are likely to strike.
As we have seen in the United States, Spain, France, and too many other
countries, nowhere in the world is entirely safe from terrorism. Nonetheless,
there are some characteristics that the most unstable, terror-prone lands have
in common. We can avoid vacationing in places rife with terrorism today sim-
ply by watching the evening news. For investment and other longer-term plan-
ning, three factors are worth considering:
• How rich are the very rich? How poor are the very poor?
A wide gap between the richest and the poorest members of a society is
one of the most reliable warnings of the social and political instability that can
inspire terrorism.
To measure this gap, compare the share of total household income re-
ceived by the richest tenth of a country's population with the share received by
the poorest tenth. For example, in Brazil, the richest tenth of the population
receives 48 percent of the nation's total household income, while the poorest
tenth receives only 0.7 percent. That is, the rich receive about 68.6 times as
much income as the poor. Countries with an index over 45 are likely to be
highly unstable.
FI developed this indicator many years ago. It is the most valuable clue we
have that a country may be on the brink of chaos. Several years ago, the CIA
began to publish it in the CIA World Factbook, available online at
http://www.odci.gov/cia/publications/factbook/index.html. Unfortunately, fig-
ures are available only for a limited number of countries. For the rest, you will
have to dig out the data yourself.
• How many young men are there?
Throughout the world, the people most prone to violence, whether polit-
ical or otherwise, are males from 15 to 30 years old. It is this group that pro-
vides the majority of terrorists, rioters, and mujahideen.
This indicator clearly differs between the prosperous industrialized coun-

tries, where birthrates are low and young men are a relatively small part of so-
ciety, and the developing lands, where birthrates are high and this troublesome
group is larger. In the United States and Japan, men of this age make up about
10.5 percent of the population. In contrast, 14.5 percent of the population in
Mexico consists of men in their prime troublemaking years. In Iraq, the figure
is 28.3 percent.
This information is readily available from the U.N. Population Division's
World Population Prospects database, at http://esa.un.org/unpp/index.asp
?panel=2; only a little arithmetic is required to combine several five-year age co-
horts and convert the result to a percentage of population. The table contains
2002 data for 20 countries with large populations in this group, plus the United
States for comparison.
Males, Age 15-29
Country Number (thousands) in 2000 Percent of population
Iraq 3,335 28.3%

Iran 10,645 21.6
Algeria 4,681 15.5
Turkey 9,946 14.6
Indonesia 30,800 14.6
South Africa 6,416 14.6
Mexico 14,366 14.5
Brazil 24,490 14.3
India 142,384 14.0
Egypt 9,436 13.9
Afghanistan 2,974 13.9
Pakistan 19,337 13.6
Gaza and West Bank 431 13.5
China 165,111 12.9
Kazakhstan 2,011 12.9
Argentina 4,785 12.9
Israel 774 12.8
Cuba 1,307 11.7
Greece 1,193 10.6
Japan 13,294 10.5
United States 29,951 10.5
Of course, there is more to it than statistics. In almost any society where

there are enough young men, a few will commit political violence. Witness the
bombing of the federal office building in Oklahoma City.
However, two factors can dramatically aggravate the risk of terrorism.
These are employment and education. Where most young men have jobs, they
have a stake in "the system" and are much less likely to become terrorists. There
also is a good chance that they will be too tired after work to bother with activism
54 Chapter 5
in any form. But high levels of unemployment among young men create a reser-
voir of potential troublemakers ready to be exploited by unscrupulous leaders.
The situation is even more volatile where those young men have a good ed-
ucation. The poor and illiterate know they are likely to remain poor; they may
consider this unjust, but they have grown up with limited expectations and gen-
erally have come to accept them. But throughout the Middle East, and in some
other areas, there are hundreds of thousands of young men who were educated
for a middle-class life that is no longer available to them. Without prospects
and deeply embittered, they are the most ready of all to take up arms against a
world they feel has closed them out. In the most terror-prone countries, large
numbers of literate, unemployed young men face a life of poverty.
• How large and influential is the Muslim community?
It goes against the grain to single out any religion as a source of trouble.
Yet it has been clear for years that the Muslim lands face major problems with
religious extremists who are dedicated to advancing their political, social, and
doctrinal views by any means necessary. In our 1994 study of terrorism, the
spread of militant Islam was the single most obvious factor we found that would
increase both the frequency and the intensity of terrorist violence in the years
ahead. With deep reluctance, we gave in and added this to FI's list of major
trends shortly before the September 11 attacks.
Islam has never undergone the equivalent of the Protestant Reformation
or the Jewish Reform movement; thus the clergy remains the ultimate author-
ity in all matters, civil as well as religious. Thanks to the apparently liberal tenet
that Muslims can disagree in matters of dogma, yet remain true to the faith so
long as they subscribe to a few core tenets, there is no religious doctrine or au-
thority to weed out leaders whom other faiths would reject as vicious lunatics.
And the idea of jihad—religious war against "enemies of Islam"—remains strong
in the Muslim world.
This combination of factors—the availability of young men to act as foot
soldiers, the disappointed expectations of a middle class that has lost its future,
an untempered tradition of zealotry and religious war, and unscrupulous lead-
ers willing to exploit them—is the primary source of terrorism in the world
today. The most unstable, and often dangerous, countries in the years ahead
will combine all these factors. They are easy to identify, and steer clear of, for
anyone willing to do a little research when making long-term plans.
FUTURE SHOCKS
Terrorism is evolving in at least three ways: It is gaining a wider base of support,
it is becoming decentralized, and it is aiming increasingly at civilian targets. In
the years ahead, these trends will increase the terrorist threat to the hospital-
ity industry throughout the world.
Whatever else the Iraq war has accomplished, it has been a godsend for
the cause of terrorism. Iraq today is playing much the same role that
Afghanistan did in the 1980s. It is an inspiration, a recruiting tool, and a train-
ing ground for the terrorists of the future.
The occupation of Afghanistan by the Soviet Union was a cause that rad-
ical Islamists could rally around. All over the Muvslim world, extremists picked
themselves up and hurried to the front, where fellow Islamists trained them in
the ways of terrorism and the CIA provided weapons and supplies that are being
used against the West to this day. This is where both Osama bin Laden and the
Taliban's Mullah Omar got their start.
Afghanistan gave terrorists another useful tool as well, a global popu-
lation of sympathizers willing to look the other way as they go about spread-
ing fear and death. For every Muslim who went to Afghanistan, many others
could not make that commitment, yet were sufficiently radicalized to view the
terrorists as heroes, even when they continued bombing after the original
cause was won.
Post-Afghanistan, bin Laden concerned himself with three issues: the pres-
ence of "infidel" troops in the religiously important Arab land of Saudi Arabia;
the West's failure to deal effectively with the ethnic cleansing of Muslims in
Bosnia, Croatia, and Kosovo; and the bombing of Iraq by the United States and
its allies in the original Gulf War. These grievances resonated widely enough to
bring Al Qaeda an estimated 5,000 members worldwide.
A dozen years later, American troops remain in Saudi Arabia, the United
States has occupied Iraq, and in April 2004 American forces attacked a mosque
in Fallujah, which the Shia consider a holy city. This second Iraq war is in-
spiring a new generation of terrorists, just as Afghanistan and the Gulf War
did. It may be training and equipping them as well, given reports that foreign
fighters are entering Iraq through Iran and Syria and that resistance fighters are
using weapons the Americans supplied to the Iraqi police. We saw the result in
the Madrid bombing, even before the Sadrist uprising. Terrorists inspired and
trained by the American presence in Iraq will be responsible for many of the at-
tacks that afflict the world in the next ten years.
Those incidents will be harder to prevent, because the structure of the ter-
rorist community is changing. When Al Qaeda and its associated groups were
still largely unchallenged, there was at least some recognizable organization to
it. The 1998 attack by American cruise missiles on an al Qaeda compound in
Afghanistan may have failed, but at least it had an identifiable target. Security
officials still monitor 30 to 40 groups affiliated with Al Qaeda in Southeast and
Central Asia, the Caucasus, North Africa, and Europe. Yet those groups are los-
ing their significance. More and more, terrorists take inspiration from bin
Laden, but specific incidents are carried out more or less spontaneously by
small groups of like-minded individuals, who may have known each other for
56 Chapter 5
years. These cells are difficult to detect before it is too late, and virtually im-
possible to infiltrate.
In addition, terrorist groups that once focused on local goals, such as un-
dermining the stability of oppressive governments, are heeding the call to jihad.
The Pakistan-based Lashkar-e-Taiba used to concern itself only with "liberating"
Muslim Kashmir from India. Late in 2003, Australian authorities arrested a
member of the group believed to have been scouting out targets for attacks
down under. And since the Iraq war began, the radical Ansar al-Islam has spread
out from its base in the northern part of that country into parts of Europe,
where members are believed to be recruiting suicide bombers for attacks not
only in Iraq but on the continent. The group s founder, Mullah Krekar, now lives
in Norway and is believed to have been involved in the bombings in both Mo-
rocco and Madrid. This change too will make it more difficult to combat in-
ternational terrorism. For antiterrorism specialists, the world is becoming more
complicated every day.
However, the third development is taking place in part because govern-
ment security efforts have become a lot more vigorous in recent years. They
have had reason to. In 1996, a truck bomb at the Khobar Towers, in Riyadh,
Saudi Arabia, killed 19 American peacekeepers attached to the United Nations
and wounded 372 others. In 1998, terrorists associated with Al Qaeda used
truck bombs to destroy the American embassies in Dar Es Salaam, Tanzania,
and Nairobi, Kenya. In 2000, another Al Qaeda team killed 17 American sailors
and damaged the USS Cole in the harbor at Aden, Yemen. Though it took too
long, the lessons of those events have been learned.
Military bases and other government installations today are much harder
to attack than they were in the 1990s. As a result, would-be terrorists have been
forced to seek out civilian targets. With the exception of some pipeline bomb-
ings in South America, nearly all of the facilities attacked in the last six years
have belonged to the hospitality industry. Hotels, restaurants, and transporta-
tion systems are likely to remain in the crosshairs for as long as the battle
against terrorism continues.
SAFETY FIRST
Despite the horrifying headlines that regularly arrive from around the world,
many companies seem to have shrugged off the risk of a terrorist attack. Ac-
cording to a recent survey by the Business Roundtable, 85 percent of American
firms have increased their spending on security since the terrorist attacks of
September 11, 2001. Yet their budgets for this purpose have risen by only 10 per-
cent, on average, in nearly three years. Even in this time of relatively stable
prices, about half of that increase has gone just to keep up with inflation.
The situation is little better in the hospitality industry. Though some ho-
tels have added security cameras to their lobbies and installed electronic locks
on guestroom doors, many more have done nothing at all. A recent survey of
hotels in the volatile Pacific Rim, locale of the bombings in Jakarta and Bali,
found that only 25 percent had made any effort to bolster security.
That really is not good enough. Small facilities such as independent hotels
and restaurants, which cannot afford to set up their own security operation,
will find it increasingly necessary to hire a competent security firm to do the job
for them.
While that mandate applies to everyone in the hospitality industry, there
are places where it is particularly important. Las Vegas almost goes out of its
way to offend the sensibilities of fundamentalist Islam, which bans gambling,
alcohol, and any form of sexual activity by women that is not rigidly controlled
by their husbands. If terrorists strike at the hospitality industry inside the United
States, they are likely to hit Las Vegas first.
A hint at what even a small terrorist attack could accomplish there came
in April 2004, when a power line failed at the Bellagio Hotel & Casino, causing
a cascade of problems that eventually burned several thousand feet of cable. The
resort was shut down for more than three days at a cost of about S3 million
per day in lost revenue. A deliberate attack, calculated to cause as much dam-
age as possible, could have been far worse.
IDENTITY CONCERNS
Security begins with people. This is especially true for the hospitality industry,
where large numbers of workers are needed to serve even larger numbers of
guests. Being absolutely certain who all those people are is the first step in de-
fending against terrorism.
For any business, the most likely security threats come from disgruntled
employees and former employees. Before people are hired, they should be
screened thoroughly, not only to confirm their identity but to weed out those
with significant criminal records, suspicious associations, or other potential
risks. The screening procedure should be as rigorous at a hotel or restaurant as
it is at an airport or airline. This will be particularly difficult for companies that
hire large numbers of noncitizens, and particularly undocumented workers. Yet
no company that skimps on this process can hope to be safe from attack.
In a world of terrorism, this requirement extends not only to the firm's
own employees, but to those of suppliers, builders, and service contractors.
Someone who comes to repair the air conditioning could also release anthrax
into the system, and no one would find it easier to contaminate food than the
people who deliver it. Suppliers and contractors who cannot guarantee that
58 Chapter 5
their employees have been screened as rigorously as the facility's own workers
should be replaced by firms that can.
Having once screened their new hires, large-scale employers need to make
certain each day that someone presenting an employee ID really is that worker
and not an imposte.r. Even photographic identity cards can be tampered with,
so something more secure is required.
That probably means biometrics, the use of automated systems to match
people with their known physical attributes. Available technologies include fin-
gerprint and retinal scanners, facial recognition software, and pen-sized ac-
celerometers that can measure the precise hand movements used to sign one s
name—data far more difficult to disguise than the signature itself. These tech-
niques have undergone rapid development since 9/11, and many are now
deemed reliable enough for practical application. Installing a biometric iden-
tity system and training security personnel to use it is expensive. Yet it is by far
the best guarantee now available that someone who appears to be an employee
really is who he claims to be.
Identifying guests with any certainty is still more difficult. For restau-
rants and other businesses where customer turnover is extremely rapid, it
may be impractical or impossible. However, hotels, resorts, and conference
centers all need to be certain who is staying with them. This will be simpler
now that most foreign visitors need machine-read visas, fingerprints, and
photo IDs to enter the country. A national identity card, if one is ever issued
in the United States, could make the process easier still. These changes will
be especially welcome for international meetings, where asking guests for fin-
gerprints or other reliable identification has been an especially frequent and
difficult challenge.
On an industry-wide level in the United States, there is one other change
that could help to ease the process of "people security/' This is to work with the
Department of Homeland Security to identify potential problems. The Bureau
of Citizenship and Immigration Services (formerly the Immigration and Na-
tionalization Service), U.S. Immigration and Customs Enforcement, and U.S.
Customs and Border Protection all can provide valuable information about se-
curity threats such as known terrorists who are believed to have entered the
country. Developing close working relationships with these agencies should be
a priority for the Travel Industry Association, the American Hotel & Lodging As-
sociation, and other leading industry groups.
SITE SAFETY
Ideally, no one could enter a hotel, restaurant, plane, or train before his identity
had been confirmed and he had passed through a metal detector. Then security
guards would monitor all public spaces to make certain that no one had slipped
through inappropriately. That will never happen, of course, but most hospital-
ity locations could do a lot better protecting their premises than they do today.
We can see evidence of this in the amount that hospitality venues spend on
security. With all that they have to protect, average American hotels spend just 1
to 2 percent of their payroll on their security force. Contrast this with hotels in
Israel, which spend, on average, about 8 percent of payroll on the security force.
In Israeli hotels, there is none of the chaos typical of hotels elsewhere.
Guests are processed in an orderly, efficient, and highly security-conscious man-
ner. They are likely to enter through a single lobby entrance that is protected by
an airport-style metal detector. Guards patrol inside and out. At the most
security-conscious hotels in Israel, identity checks are performed outside the
hotel itself, and no one other than guests is allowed in at all.
Yet when it comes to hotel security, American casinos probably set the
standard. At the state-of-the-art Borgata, in Atlantic City, more than 2,000 video
cameras constantly watch the 125,000 square-foot casino floor, 70,000 square
feet of event space, a 50,000 square-foot spa, a 7,100-car parking lot, employee
areas, and access routes to more than 2,000 guest rooms. There even is an au-
tomatic face-recognition system to screen for known cheats—and to identify
VIP guests so that they can be quickly targeted for special service. If the gov-
ernment ever provides a database of terrorist photographs, which has been sug-
gested but not yet acted on, the system might be able to identify them as well.
At the Venetian, in Las Vegas, uniformed guards patrol the public areas,
while others are stationed at the entrances and at a security booth in the lobby.
Even before a major expansion, there were more than 200 guards in all, at least
40 on duty at any time; since then, both the number of rooms—now about
4,000—and the number of guards have doubled.
Place metal detectors at each entrance, and these casinos would be ready
to face the worst that the age of terror is likely to throw at them.
It is easy to argue against that kind of security. Setting up the systems re-
quires a big investment, and operating them involves substantial continuing
costs. Guests at a luxury hotel might be more put off by the presence of armed
guards and metal detectors than they are by lax security.
And there have been occasional excesses. For a time, the Bellagio Hotel
and Casino, in Las Vegas, reportedly blocked driveway access with a vehicle
parked across a blind corner. When guests stopped their cars, aggressive secu-
rity guards dressed in black and without visible identification approached and
demanded to look in their car trunks. Those who refused were rudely turned
away. It was a bad mistake, and it lives on in harshly negative customer satis-
faction reports that are widely available on the Internet.
Yet hospitality security need not be taken to extremes to accomplish its
purpose. It just has to be good enough to send would-be terrorists in search of
softer targets. That, at least, is possible. And there is every reason to believe that
60 Chapter 5
most guests would be willing to put up with a little inconvenience in return for the
knowledge that they are as safe as they can be in an increasingly unsafe world.
This widespread prosperity should feed upon itself, with each trading na-
tion helping to generate the continued well-being of its partners.
KEY TRENDS FOR SECURITY

stantial recovery.
Implications for Security: The gap between the world's have and have-not
nations will continue to widen. In the Middle East and the developing countries,
resentment against the prosperity of the West, especially the United States, will
inspire terrorist incidents with growing frequency. Many of these attacks will
strike at the hospitality industry.
This will be especially troublesome if Iraq continues in chaos and poverty
under American domination. The prototype for this version of the future is the
Palestinian intifada. The Iraqis are beginning to blame America for their prob-
lems, much as the Palestinians blame Israel for the problems in the Occupied
Territories. Ultimately, they will respond in much the same way, and with no less
determination. The turmoil in Fallujah and Najaf could be only the beginning.
The gap between haves and have-nots within the United States is growing
as well. This could eventually inspire protest movements against business and
government, but there is little possibility that they will resort to violence to gain
their ends.
by 217 percent. In contrast, the developed nations will fall from 23 percent of
the total world population in 1950 and about 14 percent in 2000 to only 10 per-
cent in 2050. In 10 years or so, the workforce in Japan and much of Europe will
be shrinking by 1 percent per year.
Implications for Security: Rapid population growth will reinforce Ameri-
can domination of the global economy, as the European Union falls to third
place behind the United States and China. Among the poor nations, this will fos-
ter still more resentment of the worlds most prosperous land.
Unfortunately, when populations grow faster than resources do, the gen-
eral quality of life inevitably declines. Since the wealthy are largely immune to
this loss, the poor and middle class not only suffer, but see that their rulers do
not. And because political leaders the world over find it convenient to blame
their problems on others, much of the resulting hostility will be aimed at the
wealthy industrialized lands, who will be reviled as exploiters of the developing
countries. Terrorist movements are one expression of the unrest that can be ex-
pected to grow as the world population does.
Barring enactment of strict immigration controls, rapid migration will
continue from the Southern Hemisphere to the North, and especially from for-
mer colonies to Europe. Culture clashes between natives and immigrants are
likely to destabilize societies throughout the developed world. Germany, Britain,
and other lands traditionally welcoming to refugees and other migrants already
are experiencing strong backlashes against asylum-seekers.
3. Militant Islam is spreading and gaining power.
Summary: It has been clear for years that the Muslim lands face major
problems with religious extremists dedicated to advancing their political, social,
and doctrinal views by any means necessary. Those problems often have spilled
over into the rest of the world. They will do so again. By 2020, a strong major-
ity of the world's twenty-five or so most important Muslim lands could be in the
hands of extremist religious governments. The United States massively forti-
fied the Muslim extremist infrastructure by supplying it with arms and train-
ing during its proxy war with the Soviet Union in Afghanistan. It is, in effect,
repeating this mistake in Iraq.
Implications for Security: Virtually all of the Muslim lands face an uncer-
tain, and very possibly bleak, future of political instability and growing vio-
lence. The exceptions are the oil states, where money can still buy relative peace,
at least for now.
The West, and particularly the United States, is likely to face more, and
more violent, acts of terrorism for at least the next 20 years.
Both Europe and the United States ultimately may face homegrown Mus-
lim extremist movements. Thanks largely to waves of immigration during the
1980s and 1990s, Islam is the fastest-growing religion in both regions. There are
Chapter 3
credible reports that extremist clerics in Europe are successfully recruiting

young Muslims to the cause of jihad against their adopted homes.
Western interests also will be vulnerable in many countries outside the
Muslim core. The strong international ties formed among Islamic militants dur-
ing the anti-Soviet war in Afghanistan have produced an extremist infrastruc-
ture that can support terrorist activities almost anywhere in the world.
This development must be taken even more seriously, because for the first
time a Muslim country—Pakistan—has nuclear weapons, which Muslim ex-
tremists view as an "Islamic bomb/' available to promote their cause. As the
world has learned, some high-ranking Pakistanis already have been willing to
donate nuclear technology to other Muslims. From here on out, the possibility
of nuclear terrorism is a realistic threat.
Implications for Security: Reaction against changing values is one of the
prime motives of cultural extremism, particularly in the Muslim world and in
parts of India. As values continue to evolve in those lands, becoming more ma-
terialistic and Westernized as the younger generations achieve more influence,
terrorism is likely to proliferate. It will be exported to the Western countries
that radicals blame for the "contamination" of their traditional culture.
Summary: In autumn 2004, OPEC's aim is to hold the price of oil at rela-
tively high levels, and the instability in the Middle East is making this relatively
Implications for Security: Young men in Saudi Arabia and some other oil-
rich states once grew up knowing that government subsidies guaranteed them
a comfortable life. Today, they must earn a living on their own, often with in-
adequate preparation, in a troubled economy. Poverty rates are rising, even
while the Saud family and its hangers-on remain extremely rich—this in the
land of Mecca, dominated by the ultra-conservative Wahabi Muslim movement,
and host to American troops, some of them female. This is a recipe for terror-
ism and revolution. Recent attacks linked to Al Qaeda are likely to be only the
first in a long and bloody series.
Implications for Security: As technology brings extra productivity, it re-
tards job creation. We have seen the effects in the slow recovery of employment
in the United States from 2002 through early 2004. Other developed countries
are likely to feel the same effect in the future. This will increase the number of
disaffected people who feel they have no place in society. In rigidly conservative
countries, and in immigrant communities in more liberal industrialized na-
tions, resentment toward the prosperous will grow.
New technologies often require a higher level of education and training to
use them effectively. This too will limit opportunities for the unprepared.
Technology brings vulnerabilities of its own. Dependence on computer
data systems and telecommunications networks means that a single virus or
hacker attack can cost one company many hundreds of thousands of dollars.
The Melissa virus in March 1999 reportedly shut down the computer systems
of between ten and twenty-five Fortune 500 companies. There is no widely ac-
cepted way to measure the cost of virus attacks, but at least one estimate sug-
gests that computer viruses cost up to $18 billion in 2000 alone.
However, new technology is one of the most valuable tools against ter-
rorism. Improved detectors for metal and explosives will make it increasingly
difficult to plant bombs on aircraft and ships and in government buildings.
7. Generations X and Dot-com will have major effects in the future.
Summary: Members of Generation X—roughly, the 30-plus cohort—and
especially of Generation Dot-com, now in their 20s, have more in common with
Implications for Security: Radical conservatives in the Muslim and Hindu
worlds view the materialism of younger generations as proof that the West is
Chapter 3
contaminating, and degrading, their society. The backlash against this perceived
influence is one of the most powerful tools that unscrupulous leaders can use
to motivate potential terrorists to "defend their faith" by attacking Westerners.
tougher sanctions make it more trouble than it is worth. However, nothing
will prevent small, local political organizations and special-interest groups
from using terror to promote their causes. And as the United States learned
on September 11, the most dangerous terrorist groups are no longer moti-
vated by specific political goals, but by generalized, virulent hatred based on
religion and culture. On balance, the amount of terrorist activity in the world
is likely to go up, not down, in the next ten years.
Implications for Security: The growth of international business brings new
opportunities and targets for terrorism. The presence of Western-owned facil-
ities in Muslim lands also provides some extra motivation for terrorism. This
is particularly important for resorts and night clubs, where men and women
mingle in ways not approved by radical Islam.
Western corporations may have to devote more of their resources to self-
defense, while accepting smaller-than-expected profits from operations in the
developing countries.
Like the attacks on the World Trade Center and Pentagon, and the Amer-
ican embassies in Kenya and Tanzania before them, any attacks on major cor-
porate facilities are likely to be designed for maximum destruction and
casualties. Bloodshed for bloodshed's sake has become a characteristic of mod-
ern terrorism.
Where terrorism is most common, countries will find it impossible to at-
tract foreign investment, no matter how attractive their resources.
Though Islamic terrorists form only a tiny part of the Muslim commu-
nity, they have a large potential for disruption throughout the region from
Turkey to the Philippines.
The economies of the industrialized nations could be thrown into reces-
sion at any time by another terrorist event on the scale of September 11. This
is particularly true of the United States. The impact would be greatest if the at-
tack discouraged travel, as the hijacking of airliners to attack the World Trade
Center and Pentagon did in 2001 and 2002.
The U.S. economy is being affected already by American antiterrorism
measures. Since Washington began to photograph incoming travelers and re-
quired more extensive identification from them, tourism to America is off by
some 30 percent. The number of foreign students coming to American univer-
sities has declined by a similar amount.
Part II
Sector Forecasts
J
_L
Chapter 4
The global market for tourism has just doubled, for many practical purposes.
And that is only one of the changes that the tourist industry will be absorbing
over the next ten to twenty years.
Around the world, the cost of travel is falling, while the middle class is be-
coming more prosperous and eager to go places. At the same time, demographic
trends, changing values, and other developments are helping to bring some
highly profitable turmoil to this segment of the hospitality industry.
Two long-standing trends will remain unchanged as far into the future as
we can see: growth and globalization. Tourism is expanding rapidly, with more
travelers every year and a wider variety of destinations and activities.
EXPANDING TRAVEL
The world's travel and tourism industry has gone through some grim times of
late. First, air travel crashed after the September 11 terrorist attacks in the
United States; in 2002, the number of passengers on international flights was
down for the first time in more than ten years. Then SARS—severe acute res-
piratory distress syndrome—made Asia all but off limits to international visi-
tors; Asian carriers lost half of their passengers. The invasion of Iraq cut
transatlantic air travel by another 25 percent from the previous bad year; Amer-
ican domestic air travel was down by 15 percent. And no sooner was that worry
past than the dollar collapsed on international currency markets, causing Amer-
ican tourists to stay home in droves. Orlando prospered, but Europe lost an es-
timated 20 to 30 percent of its tourist trade. In all, the industry has yet to regain
the high-water mark it set in 2000.
Fortunately, bad times never last, and these seem to be just about over. In
the United States, 2004 forecasts call for a rise in travel and tourism revenues
67
68 Chapter 5
to about $568 billion, nearing the $570.5 billion seen four years ago. Globally,
the World Travel and Tourism Council (WTTC) predicts that all components of
the travel market will turn out to have grown in 2004. Spending on travel and
tourism, they estimate, will be up by 5.9 percent over 2003, to $5.5 trillion. The
industry will create 3.3 million jobs worldwide.
That is important not just to the industry, but to the world economy. Travel
and tourism is adding more than $1.5 trillion to the global GDP in 2004 and pro-
viding jobs for nearly 73.7 million people—and that is just the industry's direct
impact. Add in suppliers and other industries that depend on travel and tourism,
and the total impact is closer to $4.2 trillion—over 10 percent of the worlds
GDP—and 214.7 million jobs, or more than 8 percent of global employment.
Those numbers will be rising rapidly in the years ahead, just as they have
for most of the last half-century. Over the next ten years, travel and tourism are
expected to grow by an average of 4.5 percent annually. By 2014, that will
amount to a market of more than $9.5 trillion, adding nearly $7 trillion to the
world's GDP. Direct employment will not grow quite as quickly, but it will be up
1.7 percent annually, to nearly 87.5 million jobs, while indirect employment
will account for some 260 million jobs around the world.
Looked at another way, in 1950 the travel industry recorded just 25 mil-
lion international arrivals. (That includes both business and vacation travel,
but personal travel regularly makes up about 80 percent of the total.) In 2001,
arrivals were up to 693 million—and even that is just the beginning. By 2020,
forecasters predict that there will be 1.5 billion, a solid majority of them vaca-
tioners. And the grimness of 2001 will be long forgotten.
PLACES TO GO, THINGS TO DO

The tourism market expands when potential travelers have more disposable in-
come, and throughout the developed world, and much of the developing world,
they do. In the United States, 13 percent of households now have annual in-
comes over $100,000. They spend an average of more than $3,600 per year on
travel, nearly half again the national average. And 57 percent of these affluent
consumers have purchased a luxury travel product over the last year. The num-
ber rises with income. Among households with incomes over $150,000, 64 per-
cent have bought luxury travel products; over $200,000, the number is 68
percent. Similar trends are seen throughout Europe, Japan, and other relatively
prosperous regions. When people have money, they spend it on travel.
Given so many economically comfortable travelers, countries from Brazil
to Malaysia and Chile to Yemen have been working hard to attract their share
of tourist dollars. Overall, they have been extremely successful, not just bring-
ing in the wealthy, but attracting middle-class travelers as well. Heavy promo-
tion, together with the spread of lower-cost tour packages and discounted air
If This is Tuesday, it Must Be Kuala Lumpur 69
fares, have opened elite destinations to less wealthy tourists. Where Fiji, Tahiti,
and—for more adventurous tourists—the Antarctic, once were playgrounds of
the rich, merely-comfortable vacationers are now flocking to them. Cruise lines,
too, are seeking middle-class customers, with great success. At the same time,
relatively untraveled lands are fast building tourist industries. Nepal, Vietnam,
Malaysia, Dubai, and South Africa all are drawing visitors, especially from
within their own regions.
This same ability to spend has inspired a host of new tourism products
aimed at the relatively well-off. "Theme" and "total immersion" travel experi-
ences aim to provide guests with a complete escape from their daily routines.
Old-fashioned dude ranches have been joined by French cooking classes in
French chateaux, so-called "adrenaline vacations" like race-car driving schools
and bungee jumping in New Zealand, sailing on a clipper ship, and research ex-
peditions to tropical rainforests. One of the hottest markets is for "destination
weddings," where the entire wedding party flies to Mexico or the Caribbean for
an all-expenses-paid marriage celebration. With American weddings now av-
eraging $22,000, a three-day marriage weekend for $2,500—guests pay their
own way—can be awfully attractive.
TRAVEL MARKETS
Not all regions are benefiting from these trends equally. Europe and America
remain the world's favorite travel destinations, while Africa is at best an also-
ran. Here is a brief look at prospects for major regions of the world.
North America. Not long ago, industry imagined that travel in this region
would follow its accustomed patterns. Nearly half of all international tourism
would occur between the United States and either Canada or Mexico, while
most of the rest would be made up by a steady flow of American tourists to Eu-
rope and Europeans to the United States. North America would remain secure
in its place as the second-largest travel destination in the world.
It has not worked out that way. Travel to and from the United States has
remained depressed by the fear of terrorism and by the high cost of going to Eu-
rope when the dollar does not buy nearly as much as it once did. Recent de-
mands by American security officials have further suppressed travel to the
United States. Entry rules now require that most visitors submit to being pho-
tographed and fingerprinted; eventually most also will have to carry a "bio-
metric" passport that includes copies of their fingerprints and iris patterns.
Since American authorities made it harder to enter the country, tourist arrivals
have fallen to a level 30 percent from 2001.
This too shall pass. Growing prosperity in the United States, Canada, and
Mexico will sustain the expansion of travel within North America at about 3
percent per year. Eventually, the United States will find its way out of the morass
70 Chapter 5
of Iraq, the dollar will regain its exchange value, and tourists will find their way
between North America, Europe, and points East. Overall, international travel
will grow by a bit less than 4 percent per year in this region, somewhat below
the global average. Yet the United States will continue to lead the world in
spending on and earnings from travel.
Europe. The continent too is in for slower growth than its tourist indus-
try has been accustomed to. Overall, tourist arrivals are expected to expand by
only 3 percent per year, bringing 717 million arrivals in 2020. Many of those vis-
itors will bypass Western Europe, the traditional leader destination of choice.
Both Northern and Southern Europe also are in for faster-than-average growth,
as Asian tourists flock to Germany and Scandinavia, while others seek out the
beaches of the Mediterranean. However, the fastest growth will be in travel to
and from Central and Eastern Europe, where Soviet domination crippled
economies and kept travel demand bottled-up for more than 40 years. By 2020,
both Russia and the Czech Republic will join the world's top ten destinations
for international tourism.
The Caribbean makes up only a small piece of the travel market, with just
3 percent of international tourist arrivals. Yet it is the overwhelming leader
among cruise destinations, receiving nearly half of all cruises taken in the world.
Credit this to balmy weather, spectacular beaches, a highly competitive travel
industry, and proximity to the United States, which provides no fewer than 80
percent of all cruise passengers. None of these factors is likely to change, so
tourist arrivals in the Caribbean should double between 1997 and 2010, and
may nearly double again by 2020. However, there are natural limits to how
many tourists can be packed into relatively small islands. Sustaining this growth
rate will require the speedy development of resorts on relatively untapped is-
lands. In the end, this could homogenize the Caribbean experience and send va-
cationers looking for less heavily traveled waters.
Central and South America, recognizing the economic benefits of greater
tourism, have been positioning themselves as the natural destination for eco-
tourists. This strategy will serve the region well in the next 20 years. From the
lush rainforests of Costa Rica to the Amazon River Basin to the preserves of sea
elephants, seals, and penguins of Tierra del Fuego, South America offers won-
ders to delight nature-minded vacationers. Cultural attractions also abound in
pre-Colombian ruins and Andean villages far off the beaten path.
Developing these resources will not be easy, however. This regions at-
tractions have survived to be worth visiting largely because they are so hard to
reach, and many of them will be unable to accommodate large numbers of
tourists without being changed in essential ways. Nonetheless, tourism to South
America can be expected to grow by nearly 5 percent per year through 2020.
The Middle East does remarkably well on the international tourist market
for an area with such a reputation for volatility and danger. Among all the
world's regions, it was the second fastest growing tourist destination through-
out the late 1990s. It will continue to grow in the years ahead, from 19 million
tourist arrivals in 2000 to roughly 69 million in 2020.
Part of this growth can be attributed to the development of new attractions,
like the spectacular Bibliothèque in Alexandria and the Al Arab Hotel in Dubai,
where the seafood restaurant is reached by submarine. And even European
tourists have begun to make their way to resorts on the Red Sea. However, the
single biggest asset the region has to offer is Islam. Around the world, 1.3 bil-
lion Muslims look to the Middle East for inspiration and spiritual leadership.
Many of them are beginning to look there for luxury vacations as well. In 2001,
some 42,000 Indonesian tourists visited Qatar, Yemen, and other destinations
in the region, and the flow of Indonesian tourists to the Gulf states is expected
to grow by about 7 percent per year.
Africa south of the Sahara has it all—all but tourists, that is. Sun-baked,
surrounded by beaches, with a continent Ml of exotic wildlife, Africa still man-
ages to attract only 4 percent of the world's international tourists, and nets just
2.5 percent of the profits—and more than a third of these go to the desert lands
of Morocco, Tunisia, and Algeria in North Africa, not the lush southern region.
Even with natural resources to recommend them, the combination of deep
poverty and political instability is a hard sell.
This will be slow to change. Kenya recently received approval from Bei-
jing as a destination for Chinese tour groups, and South Africa's Sun City is
building a market among Asian tourists seeking a resort vacation closer to home
than more traditional destinations. Yet overall growth in tourism to Africa will
average about 5.5 percent over the next 15 years, according to the World Trade
Organization, and nearly all of that will occur north of the Sahara, where growth
rates are in double digits. So far as we can find, no one even bothers to estimate
the growth of tourism in equatorial and southern Africa.
FORTY PERCENT OF THE WORLD

Asia merits close attention. There is just so much of it, and the outlook for
tourism there is changing dramatically.
Just a few years ago, the international tourism industry in effect served less
than 20 percent of the world's population, the roughly 1 billion people who
lived in the United States and Europe and about 120 million Japanese. Other
regions might provide interesting destinations for wealthy tourists from the in-
dustrialized countries, but as sources of international tourism they might as
well have not existed.
China and India in particular had more than 2 billion potential tourists in
theory—populations of about 1.1 billion people in China and just under 1 billion
91 Chapter 5
in India—but essentially none in practice. Both national economies had been

virtually stillborn, thanks to excessive regulation and centralized planning by
governments philosophically opposed to free enterprise. As a result, neither
country had a viable middle class to pay for vacation travel and related ser-
vices. China also heavily restricted its citizens' movements outside the coun-
try; no international tourism was allowed until 1978.
In both countries, these conditions are changing rapidly. In 1978, China
opened its economy to small private ventures such as crafts operations and
family-owned restaurants. Over the years, a vibrant market economy has
evolved, the Communist Party has begun to admit the capitalists it once de-
spised, and China has joined the World Trade Organization. India, for its part,
has been chopping away at the endemic red tape and corruption that had hob-
bled business development throughout the world's largest democracy ever since
it gained independence in 1947.
The results have been remarkable. China's GDP quadrupled by 2000 and
is now growing—according to Beijing's official figures—at between 8 and 10
percent every year. The Indian economy has grown by an average of about 6 per-
cent per year since 1990. In both countries, the middle class is expanding
rapidly. At the end of 2003, one study found that 19 percent of Chinese—247 mil-
lion people—now qualify as middle class, and their numbers are growing by 1
percent per year. In India, there are more than 300 million in the middle class,
and their numbers are growing even faster. "Middle class" does not mean quite
the same thing in Asia as it does in the West—a net worth of $ 18,000 to $36,000
makes a Chinese family middle class, while in India this group spans yearly in-
comes with local purchasing power equivalent to anywhere from $20,000 to
$600,000. In any case, many of them can afford to travel abroad—an estimated
85 million in China alone.
Many of them do, and many more are doing so each year. An estimated 4
million Chinese vacationed outside the mainland in 2001, 10 million in 2003
(one estimate puts the number at nearly 12 million in the first eight months of
the year), with 16 million projected for 2005.
Tourism from India is growing as well. In 2000, an estimated 4 million
Indians vacationed abroad, spending about $380 million. By 2005, an estimated
10 million will follow them to Europe, Australia, New Zealand, and places closer
to home.
To date, these still are relatively small markets. By way of contrast,
Americans made 144 million international flights in 2000, a large majority for
tourism, before the September 11 terrorist attacks temporarily inhibited
travel. Yet tourism from China and Japan are growing far more rapidly. The
Pacific Asia Travel Association estimates that Chinese spending for interna-
tional travel will reach $ 100 billion by 2008. By 2020, according to the World
Trade Organization, an army of 100 million Chinese will fan out across the
globe, replacing Americans, Japanese, and Germans as the worlds most nu-
merous travelers. That same year, 50 million Indians are expected to tour
overseas.
Nor is all this travel one-way. China soon will be not only the world s largest
source of tourists, but the most popular destination as well, with 130 million ar-
rivals in 2020. The 2008 Olympics in Beijing will hasten this trend, but they are
only part of a massive effort to improve China s attractions and infrastructure.
Both the government and many private tour operators are working to develop
scenic, cultural, historical, and religious sites as tourist destinations, and Bei-
jing has announced a plan to train 100,000 tourism specialists over the next
ten years. The reward for all this effort will be an estimated 40 million new jobs
in the tourist industry.
Yet it is Chinese and Indian vacationers who are beginning to reshape the
map of world tourism. Although Europe remains the planets favorite travel
destination, and the top draw for Asian tourists with time on their hands, those
out for a quick shopping trip or just a few days off are heading for places much
closer to home.
In Europe, castles, the Autobahn, and snow are clearly big draws for many
Chinese tourists. Scandinavia is hosting waves of tourists from the PRC, and
Chinese vacationers racked up some 600,000 overnight stays in Germany in
2003, a number that is expected to double by 2008. Nearly all belonged to ap-
proved tour groups; individual tourists still were not allowed there without a
personal invitation and a German visa.
Indian tourists are spreading out a bit further. Shopping holidays in Dubai,
which is duty-free, and packaged tours to Paris, London, Switzerland, and Aus-
tria all are attracting visitors from the subcontinent in large numbers.
However, many more Asians are spending their vacations within the re-
gion. More than 7 million mainland Chinese sought R & R in Hong Kong last
year, roughly as many people as the territory's native population, and that prob-
ably is just the beginning. This year, 1 million Chinese tourists are expected to
visit Thailand, while 900,000 will travel to Malaysia and 700,000 will go to
Vietnam. For Indian tourists, Hong Kong, Singapore (again duty-free), and
Malaysia all offer shopping and quick getaways. Nepal has been a major draw
for cultural tourism, though the expanding communist insurgency has begun
to discourage travel there. Recently Sri Lanka has gained popularity for inex-
pensive beach vacations.
With so much tourist business at stake, many countries are working hard
to attract the new Asian travelers. All of the Scandinavian countries have
opened tourist offices in China, and Cuba has recently negotiated a memo-
randum of understanding that allows Chinese tour groups to visit. South
74 Chapter 5
Africa is marketing Sun City and other resorts to Indian customers. Nepal is
promoting no fewer than five new destinations in India. And the Australia
and New Zealand tourist offices have mounted campaigns to draw visitors
from both India and China.
This is a trend seen throughout the world. As travel and tourism expand,
new destinations and new attractions are opening up rapidly all over the world.
From small villages in Bolivia to five-star resorts on the beach in Morocco, the
world's tourists will have a growing smorgasbord of destinations to visit. In the
years ahead, not even the most experienced and jaded travelers will be able to
feel they have seen it all.
KEY TRENDS FOR TOURISM

stantial recovery.
Implications for Tourism: Tourism will continue to grow by at least its ac-
customed 5 percent per year for at least the next ten years.
Growing prosperity in China and India will quickly increase the number
of international tourists from those countries.
This will bring rapid expansion for destinations convenient to Asia. These
include Nepal, Malaysia, and Thailand; Australia and New Zealand; and parts
of Africa. Many new seaside resorts are likely to appear in the Seychelles, on the
eastern shore of Africa, and in Southeast Asia, much as did in Mexico when
Americans went looking for slightly exotic luxury.
The growth of tourist facilities in these far-off places will begin to draw
more visits from adventurous and well-to-do Americans and Europeans.
Russia and the more, stable parts of the former Soviet Union will contribute
growing numbers of tourists, particularly to Western Europe and the United States.
2. The population of the developed world is living longer.

Summary: Each generation lives longer and remains healthier than the
last. Life expectancy in Australia, Japan, and Switzerland is now over 75 years
for men and over 80 for women, and it is growing throughout the developed
world. As a result, the retirement-age population also is growing rapidly. It
may expand even more quickly than official forecasts anticipate, because they
assume that life expectancy will grow more slowly in the future. In fact, it is
more likely that new medical technologies will lengthen our lives still more
rapidly in the near future, and bring a better quality of life in the process.
Implications for Tourism: Older, but still vigorous travelers will be a grow-
ing market for international tourism. Well into their 70s, they will retain their
youthful interest in pastimes such as scuba diving, hiking, and other low-impact
activities with high "experience" value.
Nonetheless, facilities will require senior-oriented conveniences, such as
larger signs with easy-to-read type, door handles that can be operated easily by
arthritic hands, and fire and security systems that flash lights for those that are
hard of hearing.
Club Med and its competitors will become "Club Medic," with nurses and
emergency equipment on site and doctors on call, to care for guests who are less
healthy and more fragile.
Special tours and other activities should be ranked for the amount of walk-
ing, energy, or agility they require, so that older customers can easily choose pas-
times within their abilities.
It may also be necessary to increase staffing slightly, to provide older guests
with extra help in checking in, coping with luggage, arranging for local trans-
portation, and dealing with other chores that younger patrons could handle on
their own.
They also want to feel that they are recognized (especially if they are re-
peat customers) and catered to. Older patrons appreciate being addressed by
name, and as "Mr." and "Mrs." rather than as "you guys."
Because the oldest members of society also tend to be the wealthiest, lux-
ury cruise lines and high-end tour operators should do well as the Baby
Boomers enter their retirement years.
Retirees often are willing to travel off-season, spreading their vacations
evenly throughout the year. This already is helping to mitigate the cyclical peaks
and valleys typical of the tourist industry. Some 62 percent of American re-
spondents to a National Geographic TravelerfYahoo\ Travel poll reported plan-
ning a winter vacation of at least five days in 2004.
Despite their relative wealth as a group, many seniors are extremely care-
ful with their money. This will further raise the demand for vacation packages
that are comfortable, staffed by attentive personnel, and cheap.
95 Chapter 5
Mature travelers tend to be experienced travelers. Many are unforgiving

of lapses in service, facilities that are less than the best, or excessively familiar
tours or activities.
Implications for Tourism: The trend is toward extreme quality and conve-
nience. Customers want constant pampering, luxurious accommodations, and
fresh meals that seem like labors of love—all at a price that will not wound the
consumer's conscience.
Travelers used to focus on destinations; now they want experiences. Va-
cations thus are becoming more active and participatory, as tourists become less
interested in "go-and-see" and more eager to go-and-do. This is the trend behind
the growth of adventure tourism.
"Authenticity" is another key value. Tourists who go to see other lands,
rather than surf their beaches, want to find unique natural and cultural fea-
tures that survive as close as possible to their original form. Travel experiences
that remind guests of Navajo Indian blankets with "Made in China" tags will
turn a destination into one more shopping mall, leaving visitors feeling that
they might as well have stayed at home.
erally enforced.
Implications for Tourism: This is a mandate for quality. Brands with
good reputations will have a strong market advantage over lesser competitors
and unknowns.
It will take very few mistakes to undermine a reputation for quality, par-
ticularly when disgruntled consumers often voice their complaints over the In-
ternet, where vacation-shoppers may see them for years.
A second-rate or poor reputation will be even harder to overcome than it
is today.
Summary: In autumn 2004, OPEC's aim is to hold the price of oil at rela-
Implication for Tourism: One of the major costs of tourism should remain
generally under control, with oil prices falling to their normal range by 2006.
This will make it possible for travel companies to earn acceptable profits while
keeping prices relatively affordable.
environmental issues such as air pollution as the consequences of neglect,
indifference, and ignorance become ever more apparent.
Summary: The World Health Organization estimates that 3 million people
die each year from the effects of air pollution, about 5 percent of the total deaths
annually. The European Parliament estimates that 70 percent of the Continent's
drinking water contains dangerous concentrations of nitrate pollution. Though
government policies in some developing countries—and the United States, at the
moment—rate industrial growth as more important than dealing with envi-
ronmental problems, many others are working to clean up the air and water,
save rainforests, and protect endangered species. Overall, the trend is clearly to-
ward a cleaner, healthier environment.
Implications for Tourism: Demands for still more environmental controls
are inevitable, especially in relatively pristine regions. Many of the more pop-
ular or fragile destinations may limit the number of tourists allowed to visit
them each year.
Ecotourism will continue to be one of the fastest growing areas in the
tourism industry.
China is being forced to build new resorts where Western tourists will not
be exposed to power lines and cell-phone towers. Other developing countries
will face the same imperative.
Destinations and tour operators with access to rainforests, wilderness
areas, the ocean, and other unpolluted regions will find this trend highly
profitable.
Environmental science tours and research projects with working scien-
tists will continue to be a growing niche market.
97 Chapter 5

Implications for Tourism: New technologies should continue to improve
the efficiency of airliners and cruise ships, helping to keep travel costs under
control.
Tourism will benefit as Internet "virtual tours" replace printed brochures
in promoting vacation destinations. Web sites cover not only popular attrac-
tions, but also provide current, detailed information on accommodations, cli-
mate, culture, currency, language, immunization, and passport requirements.
These sites already have proved to be a major sales asset for some hotel chains.
Resorts and other destinations are likely to find them an efficient way to ap-
proach new customers.
Consumers are increasingly shopping for travel services on the Internet,
and posting their reactions there. One dissatisfied guest's negative report on
the Internet can influence the buying decisions of potential customers for years.
For the travel industry, the move to online sales promises more efficient
marketing and higher profits. Opt-in marketing campaigns online cost only $2
per sale (averaged over all industries), compared with $18 per sale for tradi-
tional direct marketing, and sellers have immediate feedback on the effective-
ness of their campaigns.
Automatic translators similar to a PDA—and perhaps built into one—soon
will make it possible for travelers to go off on their own in foreign lands with-
out worrying about communicating with natives.
Technology also makes it possible to maintain information about repeat
guests, who may find it increasingly tedious or difficult to provide necessary per-
sonal data. However, that technology must be entirely transparent to customers
who may find it impersonal or intimidating.
This technology will allow hotels to perform the kind of extremely per-
sonalized marketing typical of the best Internet marketers, such as Ama-
zon.com. Whenever a return guest arrives, he or she should be gently asked
a host of questions: Do you want the same breakfast as last time? Black cof-
fee with Equal? Shall we credit your stay to the same airline-miles program?
Would you like dinner at the same restaurant? Reservations to the opera
again? All this information can be automatically collected on the customer's
first visit. It can be retained and used transparently to make future stays as
comfortable as possible.
especially of generation Dot-com, now in their 20s, have more in common with

Implications for Tourism; Younger consumers tend to be extremely well
informed about their travel choices, thanks in large part to their comfort with
the Internet. Net-sawy travel marketers have a strong advantage in reaching this
market.
Generations X and Dot-com will be major customers for tourism in the fu-
ture. Marketing to them will require a light hand, with strong emphasis on infor-
mation and quality. Brands credibly positioned as "affordable luxury" will prosper.
Any perceived inadequacy of service will send them to a competitor for
their next vacation. Under~40 customers make few allowances for other peo-
ple's problems.
However, they are relatively tolerant of impersonal service. What they care
most about is efficiency.
These generations also will be the industry's future employees. The
good news is that they are well equipped to work in an increasingly high-tech
world. The bad news is that they have little interest in their employer's needs
and no job loyalty at all. They also have a powerful urge to do things their
own way.
9. Time is becoming the world's most precious commodity.
Implications for Tourism: Work pressure is eroding vacation time through-
out the industrialized world. One-third of Americans take 50 percent or less of
the vacation time their jobs theoretically allow. In Britain, 25 percent of em-
ployees take only part of their vacation time. In Japan, where employees are
legally guaranteed 17 days per year of vacation, the average worker takes only
9.5 days annually.
For those with little time but adequate funds, multiple, shorter vaca-
tions spread throughout the year will continue to replace the traditional two-
week vacation.
For well-off travelers, time pressure is a strong incentive to use travel agents
and shop for packaged tours, rather than doing their own vacation planning.
Less wealthy vacationers will speed the task of making travel arrange-
ments and broaden their selection of affordable vacation packages by doing
their shopping on the Internet.
99 Chapter 5
Anything destinations and tour operators can do to save time for their
customers will encourage repeat visits.
Implications for Tourism: Until the terrorist problem is brought under
control—probably not soon—tourism to the more volatile parts of the Middle
East will be a relatively hard sell for Western vacationers, despite the appeal of
historic places.
This stigma is likely to spread almost instantaneously to any destination
that suffers a major terrorist incident. That threat is likely to be one of the great
unpredictable risks of the international tourist industry for at least the next ten
years. It could last much longer.
Terrorist hazards are not limited to Muslim lands. The communist insur-
gency in Nepal already is inhibiting vacation travel from China and India.
American-owned facilities, and those where Americans congregate, will
have to devote more of their budgets to security.
Some of the most important security measures will be invisible to cus-
tomers, but highly intrusive for staff. These may include comprehensive back-
ground checks for new hires, much as airports need to screen such
behind-the-scenes personnel as baggage handlers and fuel-truck drivers.
Disgruntled employees and former employees are the single greatest threat,
because they are familiar with security procedures and weaknesses. Those re-
cently fired are a frequent source of problems.
Chapter 5
Away M on Business:
T h e MICE Market
MICE—meetings, incentives, conventions, and exhibitions—used to be one of

the easier, more profitable markets for the hotels and resorts that host them.
Booking them took work, but each meeting signed meant a block of rooms
filled, and payment for them was assured.
That has changed. Although the meetings and expositions industry has
flourished, and still represents a worthwhile market, it has been struggling with
difficult challenges. For the host destinations, this has meant more effort,
smaller profits, and a lot less certainty. Where meeting organizers once worked
six to eighteen months ahead, for many that lead time has shrunk to a few
weeks. Customers promise a series of meetings, then book them one at a time.
They demand meeting budgets in extreme detail, complete with greens fees.
Worse, most are willing to pay only for rooms actually occupied, not for the
number they reserved for expected participants.
This is a taste of things to come. In the years ahead, the global population
will continue to grow and change, science and technology will tighten their
hold on business and society, and the world will knit itself ever more tightly
into a single market. As a result, both opportunities and trials will abound in
this segment of the hospitality market.
More and more industries are relying on MICE to accomplish a variety of
important goals. Industries set up expositions to introduce new products and
services, to gauge their appeal, and to keep existing products before the public
eye. Companies use meetings to promote the exchange of ideas with cowork-
ers and competitors, and to train their people to deal with new products and
procedures. They use incentives to inspire and reward better performance from
their personnel. People attend meetings to "press the flesh" with colleagues
whom they ordinarily meet only through the impersonal media of telephones,
faxes, and e-mail. They also attend in order to escape daily routine in a way
8!
82 Chapter 5
that still counts as doing business. All of these functions are becoming more im-
portant as technology raises the pressure to increase productivity and strips
away opportunities for human interaction. Contrary to early fears, high tech
makes "high touch" even more necessary, not less so.
Yet technology has its downside as well. Meetings, conventions, and ex-
positions remain important for building new relationships, but the business
world's growing reliance on e-mail has markedly reduced the need for personal
contact in maintaining those associations. Thus, one primary impetus for meet-
ings and expositions may have begun to wane.
Until recently, another major reason for industry expositions was the in-
troduction of new products. By compressing the product cycle, technology is
displacing that function as well. In high tech especially, manufacturers who fi-
nalize a new product in January can no longer afford to delay its introduction
for a major trade show that may not take place until June; by then, it probably
will be obsolete. For this function, smaller, task-specific meetings are displac-
ing the giant industry blowouts that once hosted product announcements. This
may help to explain the sense of emptiness reported by attendees at recent edi-
tions of COMDEX, a meeting once renowned for sardine-can congestion.
However, attendee shortages are a problem at many large gatherings these
days, points out Skip Cox, president of Exhibit Surveys, in Red Bank, New Jer-
sey. Although meeting organizers have traditionally earned 70 percent of their
revenue from selling floor space to exhibitors, he comments, "Meetings live and
die by attendees, and they were in significant decline even before the terrorist
attacks of September 11 made people less willing to travel. In fact, traffic den-
sity has been falling for most of ten years, because people have been a lot more
successful at selling display space than at getting people to attend. As a result,
exhibitors are finding it a lot more difficult to compete for attention, and they
get fewer contacts for their effort. The industry is going to have to refocus its at-
tention on attracting people to meetings. We may see some 'right-sizing' as well."
This process is already under way, if the results of two polls are any indi-
cation. In one, Meeting Professionals International found that meeting plan-
ners in North America and Europe expected to see about 1 percent more
meetings in 2003 than were held in 2002; yet meeting budgets were shrinking
by more than 1 percent overall. At the same time, hospitality industry executives
were expecting an increase of 6 percent in both the number of meetings and in
revenue from the meetings they would host. This may have spelled disap-
pointment for some hotels, resorts, and conference centers.
According to the second survey, carried out by Jacobs Jenner & Kent Mar-
ket Research, 34 percent of the exhibition and convention executives re-
sponding expected fewer exhibitors at their meetings in 2003, 30 percent
had sold less square footage, and 28 percent expected fewer attendees. This
Away on Business: The M ÍCE Market 83
shrinkage was far from universal, however. Some 46 percent expected more ex-
hibitors, 41 percent had sold more square footage, and 39 percent expected
more attendees.
More recent reports have cited a gain in bookings at destinations near
major cities, particularly if they are flexible on price or can offer activities for
the families of meeting attendees.
The MICE market faces some challenges, which may help to explain the
differences uncovered by these polls.
Wall Street has been a continuing problem for meeting organizers. Its re-
lentless focus on earnings per share, and its refusal to look farther into the fu-
ture than the next business quarter, have forced corporate executives to cut
corners wherever they can, even if it means eliminating functions that could
have been profitable in the longer term. Often, it is meetings that get the ax.
Mergers and acquisitions are another major factor driven in part by in-
vestor expectations. As a result of mergers, the hardware industry now is dom-
inated by just five major companies. Forecasting International has long predicted
that there soon will be only three major airlines in the United States, a target date
that now seems likely to be met by 2006. And when two companies become one,
there are fewer potential exhibitors for the next meeting in that industry. Merg-
ing companies also tend to shed employees in the duplicated functions, and
thereby reduce the number of possible attendees for future meetings.
This is one aspect of a trend that FI calls "the bimodal distribution of in-
stitutions." As large companies merge and drive midsized competitors out of
business, thanks to their economies of scale, small "boutique" participants are
cropping up to serve niche markets in almost every industry. Working to attract
more exhibitors and attendees from among these micro-scale competitors may
be one way to make up for the losses at the top end of the corporate food chain.
Another trend that makes life harder for meeting managers is key account
selling. When companies focus their attention on the 20 percent of customers
who provide 80 percent of their sales, they are in daily contact with the clients
who matter to them most. Inevitably, they feel less need to see them in person
at large industry gatherings. This too has worked to slow the growth of demand
for meetings and expositions.
It also has helped to promote the growth of another important trend: Pri-
vate events are quickly eroding the market for industry trade shows. Not only
for key accounts, but for potential customers, companies increasingly prefer
to meet their contacts in seclusion, where they need not battle competitors for
attention. Some of these closed meetings are enormous, and they will continue
to make up a growing part of the total market for meetings and expositions.
Though most meetings count on the local market for their success—an
estimated 40 percent of attendees come from within 400 miles of the meeting
84 Chapter 5
site—international factors also are becoming significant for many exhibition

managers. In recent years, exotic meeting places have grown increasingly pop-
ular, both for small, high-end gatherings of top executives and for the promo-
tion of international trade. Some of the developing countries are particularly in
favor as venues for meetings and expositions—despite occasional problems get-
ting equipment in and out of the country—because they have low labor costs,
likely participants want the "bragging rights" for having been to them, and the
countries themselves are eager to showcase their assets.
Even more importantly, jobs themselves are moving overseas with in-
creasing speed. Manufacturing jobs are heading to China and other low-wage
countries. Telemarketing, sales, and customer service call centers are relocat-
ing to India and the Philippines. So are many thousands of computer pro-
gramming jobs. Ernst & Young even has 200 accountants preparing U.S. tax
statements at a processing center in Bangalore, India. Each of these offshore op-
erations represents a few executives who will not be attending meetings, and oc-
cupying rooms, in the firms' native lands. Of course, they may offer an
opportunity for destinations wishing to host conferences in Asia, and for orga-
nizers capable of arranging the meetings.
Yet, with all these specific factors to buffet the market for meetings and ex-
positions, the most general consideration for the immediate future is still the
most important. This is the global economy. If it improves, a rising tide lifts all
boats, and the market for meeting and exposition space is likely to grow rapidly.
However, a global recession would bring problems for all.
This is just one of a dozen trends that Forecasting International believes
will be critical to the meetings and expositions market in the years ahead. What
follows is a brief look at each of them.
PROSPERITY REBOUNDS
The slow, tentative recovery of the American economy is now looking remark-
ably solid, with more than a year of positive economic growth tallied six months
into 2004, including the spectacular 8.2 percent rise in the third quarter of 2003.
Forecasts now call for growth in the range of 4 percent or better for 2004. Sim-
ilar gains are being seen in much of Europe, and even Japan s long-sickly econ-
omy appears finally to have entered a growth period.
This new prosperity is already being felt in the meetings-and-expositions
market. Bookings reportedly are up from 25 percent to 50 percent for 2004,
thanks in large part to the economic recovery. (Repeat business and relationship
selling also come in for some of the credit.) Small meetings—100 guests and
under—still book only a month or so ahead, but larger meetings are beginning
to plan six months to a year ahead. Larger meetings are becoming just a bit
more common than they were at the bottom of the slump.
All this is a long way from the boom days of the 1990s, and even then the
market for meetings and expositions was tightening as companies tried to
squeeze more return from every dollar of investment. Yet steady economic
growth will ensure that major corporations and business organizations provide
steady demand for meeting space.
The growing unification of the world into a single market will bring fur-
ther demand for international meetings and expositions. Hotels and resorts
with good connections to the largest international managers of meetings and
expositions will be especially well positioned to benefit from this trend.
Destinations in some developing countries also will benefit from govern-
ment efforts to build international trade and from the "trendiness" of exotic lo-
cales. However, they will have to reassure meeting managers about issues such
as local manpower, equipment availability, and the financial risks of doing busi-
ness under an unfamiliar legal system.
However, the threat of international terrorism will be a concern for inter-
national meetings for many years to come—and especially while American
forces remain in Iraq, providing extra motivation for Muslim extremists. This
will require hotels and resorts in many areas to take extra care in arranging se-
curity for meetings. It also will slow the growth in international meetings sig-
nificantly below the pace it might otherwise attain.
One question yet to be answered is how much impact SARS—severe acute
respiratory syndrome—and avian flu will have on meetings and expositions in
Asia. In 2003, fear of SARS slashed attendance at industry gatherings in China,
Taiwan, Japan, Singapore, and Hong Kong. If we see a new round of SARS out-
breaks or the few cases of avian flu recently worrying doctors turn into another
unexpected epidemic, it may not matter how the global economy performs.
Asia could be off-limits to meetings and exhibitions for as long as it takes doc-
tors to develop vaccines against these diseases. The first SARS death of the year
was recorded in China in early May.
GROWING OLDER
Throughout the developed world, the retirement-age population is growing at
an astonishing rate. For example, the over-65 cohort will rise from 12.4 per-
cent of the American population in 2000 to more than 16 percent in 2020. The
same trend is seen in Europe, Japan, and even in some developing countries.
Indias over-60 population is expanding from 56 million in 1991 to 137 million
in 2021 and 340 million in 2051.
For destinations that host meetings and expositions, this offers one of the
most vibrant markets that will be available in the next twenty years, as recent
data shows. In 2002, attendance at trade shows overall shrank by 4.3 percent.
By contrast, according to Tradeshow Weekly, professional attendance at medical
86 Chapter 5
and healthcare shows rose no less than 8.2 percent. And in a tight economic cli-
mate, the number of companies exhibiting increased by 1.8 percent.
This market can only grow in the years ahead. A wide range of new
goods and services will cater to the needs of the elderly, and particularly for
healthy, active seniors throughout the developed world. At the same time,
the health care industry will continue to grow rapidly to meet the medical
needs of less fortunate seniors. The need to introduce these products and
services and keep them before the public will provide a fast-expanding mar-
ket for meeting and exposition space. Exhibitions will also be used to test-
market products redesigned for older consumers, another active niche market
for the hospitality industry.
At the same time, workers in the traditional retirement years represent
the fastest growing employment pool in many developed countries. It has yet
to be fully or efficiently tapped. Retirement-age workers are especially well
suited to the hospitality industry, because they are generally polite, well spoken,
and available for part-time work.
INFOTECH UNITES THE WORLD

Telecommunications has all but eliminated geographic barriers. A message
e-mailed from New York to Hong Kong arrives essentially instantaneously—and
costs less than a phone call to New Jersey. Copies can be sent to hundreds of dif-
ferent destinations all over the world with little added cost. In the next few
years, when telephone systems include hardware that can translate conversa-
tions among the most common languages in real time, the process of doing
business internationally will be easier still.
This has both good and bad implications for hotels, resorts, and confer-
ence centers with an eye toward MICE. The Internet makes it possible for
businesses throughout the world to compete on an even footing with indus-
try leaders. This means that smaller destinations in developing countries will
find it easier to target meeting planners who would like to find novel sites for
high-end gatherings. It also is increasingly possible to market directly to clients
such as companies planning small, private meetings, rather than going
through intermediaries. And as the Net spreads through neglected parts of
Asia and Africa, some of those locations too will become suitable sites for in-
ternational meetings.
This also makes it easier for business executives to keep in touch with col-
leagues and customers, and that makes it easier to spend time at a meeting
thousands of miles from the office. A few years ago, guests were impressed
when hotels provided a modem jack on the telephone. Today, they are de-
manding wireless Net access from rooms to restaurants to poolside. This means
investing in new hardware, and wireless Internet service is not even a strong
competitive advantage. But the lack of it is an increasingly serious handicap
when it comes to winning in the meeting market.
All this connectivity also has begun to change the way the hospitality in-
dustry does business. Potential customers now routinely shop for destinations,
begin negotiations, register for meetings, and book their rooms on the Internet.
This has forced hotel and conference-center executives to change their ways, but
has made for more efficient marketing.
The downside of telecommunications—particularly e-mail, business TV,
and computerized conferences—is that it has become easier for executives to
maintain contact with their customers and colleagues without actually meeting
them in person. These "virtual meetings" have begun to replace travel and face-
to-face meetings. This is especially true of trips by one or two executives from
site to site within big companies, which account for an estimated 80 percent of
business travel. However, virtual meetings also are having an impact on con-
ferences, where people used to reinforce their existing relationships. Now they
can meet someone in person for the first time and "meet" them online when-
ever they have business to discuss. So-called "face time" remains important,
but to some executives it seems no longer quite as important as it once was. This
is particularly true for the younger generations, who grew up with computers
and may have had close online friends whom they never actually met in the
real world.
All this has helped to drain business from many large trade shows. For
example, attendance at the giant COMDEX in Las Vegas peaked at 200,000 in
2000; two years later, it had slipped to less than 125,000 and parent company
Key3Media Group soon filed for Chapter 11. (Of course, the general high-tech
slump also contributed to COMDEX'S troubles; exhibitors were off from 2,337
in 2000 to barely 1,000 in 2002.) Online conferences will not replace real-world
events, but they will compete with hotels and resorts for the chance to deliver
information to busy executives. In the long term, a lot of business that still hap-
pens in person today will migrate to the Internet.
Technology is having another effect as well. Thanks to developments such
as computer-aided design and manufacturing, the product cycle is becoming
increasingly compressed. As recently as World War II, it took thirty years to go
from theoretical idea to the release of competing products in an established
market; in computing, it now takes eighteen months or less. Competition
among service providers is essentially instantaneous. Companies can no longer
afford to wait for giant, industry-wide trade shows to introduce new products,
so they are mounting their own smaller, highly focused events. These gather-
ings offer another hot market for destinations able to target corporate meet-
ing planners.
88 Chapter 5
SOCIETY GOES GLOBAL

Our beliefs and values are shaped by what we see and hear. Throughout the
United States, people have long seen the same movies and TV programs. These
media are achieving global reach. In the process, they are creating a truly in-
tegrated global society. Global migration, intermarriage, and the rapid growth
of travel, for both business and pleasure, all are hastening this process. In the
United Kingdom, some 21 percent of young adults answering a recent poll
viewed themselves as primarily European, rather than British. Some 31 per-
cent of French Gen Xers, 36 percent of Germans, and 42 percent of Italians
also said they thought of themselves as Europeans.
Over the next half-century, growing cultural exchanges at the personal
level will help to reduce some of the conflict that plagued the twentieth century.
This is likely to produce a reactionary backlash in societies where xenophobia
is common. Some of the most fervent "culturist" movements will spring from
religious fundamentalism. Would-be dictators and strong-men will use these
movements to promote their own interests, ensuring that ethnic, sectarian, and
regional violence will remain common.
Thus, political risks are likely to grow in areas where there are strong re-
ligious or ethnic movements, especially when they may target Western or Amer-
ican interests. Antiforeign movements are increasingly common in Europe, but
anti-American sentiments are widespread throughout the developing world.
Terrorism especially will be a continuing problem for meeting destinations in
the developing world, and particularly where there are large, conservative Mus-
lim communities.
However, the trend toward a more homogeneous world culture is gener-
ally making life simpler for meeting planners and destination managers. In the
most heavily traveled lands, it is quickly becoming easier to host international
meetings and expositions, with less risk of unfortunate incidents owing to cul-
tural conflicts. The continuing spread of the English language; the development
of a task-focused, profit-oriented global business culture; and the slow, steady
replacement of ethnic and sectarian interests by concerns for personal secu-
rity and material well-being all will help to make international meetings more
common and more manageable in the years ahead.
TOURISM EXPANDS
The hospitality industry will continue to grow by at least 5 percent per year for the
foreseeable future, just as it has done for the last decade. Perhaps a bit ironically,
this growth is likely to make the hospitality industry itself the largest single user of
meeting and exposition services, both to promote its own offerings to consumers
and to handle the industry's own increasingly large and frequent gatherings.
The downside of this trend is crowding, as many resort areas become in-
creasingly packed with tourists. It will be harder for these destinations to attract
major meetings, and the sardine effect will degrade the attendees' experience
during leisure time at the meeting. This increasingly will send meeting planners
to smaller hotels and resorts in out-of-the-way locations. It also will open new
business for destinations that until recently might have found it more difficult
to attract meetings and expositions.
However, taking advantage of these opportunities may require some diffi-
cult adjustments. Lawson Hockrnan, of the Foundation for International Meetings,
points out that managers of small gatherings often have to work on a tight bud-
get and thus are extremely reluctant to commit to paying for rooms that may not
be filled. To gain their business, destinations may have to take on the liability of
setting aside rooms for people who may never arrive. Hotels and resorts willing
to accept that risk will have a big negotiating advantage over those that are not.
WE TRAVEL FASTER
By air and by sea, passengers are getting from one place to another at higher
speeds, at lower prices, and with greater efficiency. As a result, by 2010, air
travel for both business and pleasure will reach triple the 1985 rate. Larger car
pacity aircraft, such as the Airbus Industries A380 and Boeing 787, will con-
tribute to this trend. The new Airbus plane is so large that companies will be
able to hold onboard meetings while still on their way to meetings, just as they
do on cruise ships today.
Going faster, cheaper means going farther in the same time and at the
same price. Thus, more distant destinations become more attractive for meet-
ings. This trend should bring more business for hotels and resorts in develop-
ing lands with spectacular scenery and other unique attractions.
Faster, more convenient travel options also will reduce the lead time
needed to arrange smaller corporate meetings and other short-notice gatherings.
It will be more difficult to tap into the market to host these hasty assemblies,
and hotels and resorts that can build relationships directly with companies,
rather than with meeting managers, will have a significant advantage over their
less well-connected competitors.
SPECIALIZATION IS SPREADING
For doctors, lawyers, engineers, and other professionals, the size of the body of
knowledge required to excel in a particular area precludes excellence across all
areas. The same principle applies to artisans. Witness the rise of post-and-beam
homebuilders, old-house restorers, automobile electronics technicians, and
90 Chapter 5
mechanics trained to work on only one brand of car. Information-based orga-

nizations have already adapted to this trend. Most now depend on teams of
task-focused specialists to get their work done efficiently.
This trend creates endless new niche markets to be served by small busi-
nesses. It also brings more career choices, as old specialties quickly become ob-
solete, but new ones appear even more rapidly. And each subdivision of an industry
or market creates new companies and trade and professional organizations re-
quiring meeting and exposition management services. These proliferating niche
operators will provide a source of new demand for meeting space. Attracting them
will require hard, continuous work in new business development.
BETTER PAY FOR WOMEN

Women's salaries in the United States grew from 61 percent of men's in 1960 to
74 percent in 1991. This figure soon will top 83 percent. In the future, women's
average income could exceed men's. College graduates enjoy a significant ad-
vantage in earnings over peers whose education ended with high school. Today,
some 70 percent of young American women enroll in college, compared with
only 64 percent of young men.
To the extent that experience translates as prestige and corporate value,
older women should find it easier to reach upper-management positions. They
will strengthen the nascent "old-girl" networks, which will help to raise the pay
scale of women still climbing the corporate ladder.
More new hires will be women, and they will expect both pay and oppor-
tunities equal to those of men. Pay-and-benefits packages are likely to rise as
women find more high-quality opportunities in other industries. Competition
for top executive positions, once effectively limited to men, will intensify even
as the corporate ladder loses many of its rungs.
This is nothing new for the hospitality industry, which has long provided
some of the best job opportunities available to women, and has paid them fairly
for their skills. However, hotels, resorts, and meeting and exhibition managers
alike may find it a bit harder to hire top candidates, thanks to growing compe-
tition from industries once reluctant to give women authority and compensa-
tion equal to that of male executives.
WORK ETHIC WANES

Throughout industry, tardiness is increasing, and sick-leave abuse is common.
Job security and high pay are not the motivators they once were, because so-
cial mobility is high and people seek job fulfillment. Some 48 percent of those
responding in a Louis Harris poll said they work because it "gives a feeling of
real accomplishment." Fifty-five percent of the top executives interviewed in
that survey say that erosion of the work ethic will have a major negative effect
on corporate performance in the future.
For the moment, this trend may be changing. In May 2003, the number of
unemployed in the United States hit its highest point in twenty years. (Note
that this is a raw number; as a percentage, the rate of unemployment remained
under control.) And there is nothing like a bad job market to make people more
interested in working harder to keep the paycheck they have. However, this is
likely to prove a temporary reversal in a long-term trend.
The motivated self-starters on whom this industry depends will be in-
creasingly hard to find. So will employees capable of working reliably on their
own with meeting planners far from home. Finding them, grooming them for
greater responsibility, and keeping them on staff will be among the hospitality
industry's greatest management concerns of the next twenty years.
NEW GENERATIONS DOMINATE

The 19-year Baby Boom of 1946 through 1964 was followed by an 11-year "baby
bust." Generation X thus produced the smallest pool of workers since the 1930s:
There are just 44 million Gen Xers in the United States, compared with 77 mil-
lion in their parents' generation. In Europe, the under-30 cohort represents just
22 percent of the population.
We should rename them "Generation E," for entrepreneurship, education,
English, and e-mail, assets that members of this generation share throughout
the world. Gen Xers, and especially Generation Dot-com, now in or entering
their 20s, have more in common with their peers across the globe than with
their parents' generation.
Throughout the world, Gen Xers are starting new businesses at an un-
precedented rate. The Dot-coms are proving to be even more business-oriented,
caring for little but the bottom line. Twice as many say they would prefer to
own a business rather than be a top executive. Five times more would prefer to
own a business than hold a key position in politics or government.
This attitude promises new demand from the meetings and expositions
market. Each new company founded by a member of Generations X and Dot-
com will translate into rooms occupied during industry gatherings, and many
will add to the market for gatherings of corporate executives, product rollouts,
and other single-firm meetings.
However, being completely "at home" on the Internet also could mean that
Dot-coms and the generations that follow them are more comfortable dealing
92 Chapter 5
with colleagues they have never met in the real world. They may feel less need
for in-person gatherings, and this could partially offset the expected growth in
demand for meeting space.
One more new-generation attitude is likely to have a major effect on meet-
ings: For all their hard-nosed attention to the bottom line, Generations X and
Dot-com have a lot less interest in their careers than their Baby-Boom elders.
To these younger workers, a job is just a means to an end. What really matters
to them is friends, family, and fun. They are not likely to be much interested in
attending meetings unless they can bring their families and put in some qual-
ity time in leisure activities.
SECONDS COUNT
As we have seen in previous chapters, time is rapidly becoming the world's
rarest, most precious commodity. Like many other trends, this is reducing de-
mand for large, general-purpose industry gatherings that may not repay the
days, not to mention money, invested in attending them. However, it is in-
creasing the need for small corporate retreats and other low-stress, high-
productivity gatherings. These are likely to be one of the fastest-growing
segments of the market for meeting space.
This offers opportunities for smaller destinations with unique attractions.
In meetings of any size, many clients will appreciate cost-efficient, novel op-
portunities to relax in the leisure hours of their gatherings. Destinations that can
supply them will have a significant marketing advantage over competitors
whose primary appeal is the ability to accommodate a crowd.
BUSINESSES SHRINK
Thanks to computerized information systems, a typical large business in 2010
will have fewer than half the management levels of its counterpart in 1990, and
about one-third the number of managers. That will bring at least some good for
the hospitality industry, because it means lower management expenses, though
at the cost of having fewer promotion opportunities for career-minded workers.
However, like many of these trends, it is a mixed blessing for the meetings and
expositions market.
One reason there are fewer managers is that the work they oversaw is now
being contracted out. This offers new opportunities for the firms that now han-
dle those chores. It should translate into new growth for a variety of service in-
dustries, which will need space for new meetings and their attendees.
One function that many companies are likely to farm out is the organi-
zation of MICE. This should make it easier for destinations to compete for
business at those firms. Instead of trying to sell to one hard-to-identify man-
ager who may handle meetings only for his division or department—and who
could leave for another employer the following week—hospitality executives
may be able to build a continuing relationship with a professional meeting
manager who can speak for everyone at a major client firm, or for several
smaller companies.
Yet overall, the trends suggest that the market for meeting space will grow
even more challenging in the years ahead. As Francis J. Friedman, president of
Time & Place Strategies, in New York City, points out, "Trade shows are the
only medium where the customer pays to hear sales presentations." As the busi-
ness world demands ever leaner and more efficient operations, that idea is los-
ing its appeal. And as we have seen, smaller corporate meetings face challenges
of their own. Thus questions arise: How will meeting organizers continue to
flourish in this increasingly difficult environment? And how can destinations
help them to succeed, and thus compete successfully for their future business?
An obvious starting point is to know what really matters to organizers
charged with making their meetings a success. At FI, where we have occasion-
ally run meetings of up to several hundred participants, we concentrate on four
rewards that make it worth someone's while to attend a business gathering.'
Call them the "four Cs," if you want; we think of them as "C4," an explosive
combination that makes meetings work. These are contacts, contracts, certifi-
cation, and clarification.
Contacts, of course, are the people you meet. Can you impress enough of
them so that they will call or e-mail you later? For most attendees, and especially
for exhibitors, this is the real return on their investment in the meeting. Mak-
ing first contact also is the one function of meetings that is most difficult to re-
place by e-mail and teleconferencing.
For the most successful attendees, who do impress potential new cus-
tomers, or whose potential suppliers impress them, those contacts can result in
contracts. Thus, large industry trade shows can have a measurable impact on
the bottom line.
Certification comes from those workshops held at many association meet-
ings. They provide a base of common knowledge that improves the efficiency
of any industry. This is particularly important in highly technical fields, such as
health care, where any deficiency in professional skills may cost lives.
Clarification can take many forms. It may be just a matter of asking the
right question of an expert you would not have met outside the meeting. Clar-
ification also can be more tangible: It's one thing to see a video of new equip-
ment, but quite another to touch and see and hear it working in person.
113 Chapter 5
Skip Cox, president of Exhibit Surveys, may not use exactly those terms,
but he clearly has these issues in mind when he states that successful exhibitions
or conventions adhere to just two basic principles: They deliver "highly valued in-
formation to all parties attending' and they provide "an environment that fosters
and promotes personal interaction for the effective exchange of information."
In their recent survey, Jacobs, Jenner & Kent asked participants to cite
the two most difficult challenges facing their events. More than forty problems
made the list, and many echoed Mr. Cox's concerns. The single most common
problem cited by respondents was "keeping the show relevant—aimed prop-
erly at the proper marketplace." Closely allied with this were issues such as
convincing companies to market themselves at shows independent of the or-
ganizer's efforts, anticipating the next most effective elements in a constantly
evolving effort to reposition their event, keeping attendees on the show floor, and
providing enough value so that exhibitors and attendees would find it worth-
while participating in the gathering.
To maintain relevance, Skip Cox believes at least part of the answer may
be downsizing. "The highly successful exhibitions and conventions of the fu-
ture," he advises, "will be more focused, vertical trades shows that are rich in
content, both of formal education and of exhibitors relevant to the attendees'
interests. It will be easier to deliver high value information for a narrow field,
discipline, industry segment, or area of technology." Attendees rate private cor-
porate events as being particularly useful, Cox notes, specifically because they
provide high value and specific information to meet the needs of "a very verti-
cal audience."
Large industry gatherings also can be successful by imitating small ones,
Cox adds: "Organizers will need to create well-defined vertical segments of their
events and support each segment with rich content, a good representation of ex-
hibitors relevant to each segment, and they must make it easy for attendees to
'consume' their segments of interest." An ideal mix includes large exhibitors
who have a really good grasp of their field; smaller participants with diverse,
highly specific viewpoints; and one or two top-notch speakers from outside the
field, who can set industry developments into their broader perspective. This
also is a good formula for panel discussions.
It may be an increasingly difficult ideal to meet, according to Francis
Friedman. She divides meeting exhibitors into three categories: the largest com-
panies with the biggest budgets, which make up about 10 percent of accounts;
intermediate-sized companies, which represent about 40 percent of partici-
pants; and small companies with relatively small budgets, which are fully half
of the meeting market. Ms. Friedman believes the importance of these groups
to trade shows will be evolving rapidly during the remainder of this decade.
This change may be important to destinations that host smaller meetings as
well as the large trade shows.
Trade shows have traditionally focused on the large companies. As the

most broadly knowledgeable members of their industries, large companies tend
to hold the greatest interest for show attendees. As the organizers' most prof-
itable customers, large companies merit key account selling and other targeted
approaches. However, because they have many other opportunities to reach
their own clients, large companies also are the least likely to be interested in at-
tending a trade show. Their participation will continue to decline as they re-
place trade show exhibits with private meetings and other precisely targeted
approaches to their customers. Over the remainder of this decade, Friedman
predicts, this trend will shift the focus of trade shows to intermediate-sized and
smaller companies. At the same time, it will open up more of the large-company
meeting business to approaches from destinations wishing to host the smaller
meetings that are becoming more important to these most profitable clients.
One issue cited in the JJ & K survey was of special importance to destina-
tions. This was how to block enough rooms, but not too many, when growing
numbers of attendees now book their own rooms over the Internet. Hotels, re-
sorts, and conference centers all will need to work with meeting organizers to
reduce the risk of bookings for rooms that may not be filled—one more prob-
lem cited in the survey. However, J ack Sammis, president of International Meet-
ing Network, reports that "Both association and corporate buyers of meetings
and exhibition space are turning to large 'outsourcing' companies that buy vol-
ume, negotiate the most favorable contract terms, and provide the most value
to meeting attendees." His own firm, which specializes in helping associations
arrange their meetings, has built its client base by 30 percent since September
11, he notes. It seems that destinations increasingly may find themselves work-
ing not directly with meeting sponsors but through some intermediaries.
In general, we are optimistic about the market for MICE in the next ten
years. The global economy may be troubled, but it remains fundamentally
sound. The economic union of Europe, America's stubborn refusal to slip back
into recession, and many other indicators suggest that it will be stronger in the
future. Thus, the number of meetings, conventions, and expositions to be hosted
each year will continue to grow, even as companies find it increasingly profitable
to use incentives to motivate and reward their workers.
Yet the meetings and expositions market is in for some interesting times.
Growth may be more difficult to achieve than it was in the boom of the 1980s
and 1990s. Yet even in a world of e-mail, videoconferencing, and the Net, human
beings will always need to meet with each other; in fact, face-to-face interaction—
what we think of as "high touch"—may be even more important in a world
where most contact is mediated by high-tech appliances. Expositions may be
smaller, meetings may shift to private venues, and even the largest gatherings
are likely to focus narrowly on a few specific tracks aimed at segments of their
markets; like any other industry, meetings and expositions will change with the
96 Chapter 5
times. However, they will still take place, and they will need hotels, resorts, and
conference centers to accommodate them.
There are not only challenges ahead, but opportunities and rewards—
and for savvy participants in this industry, the opportunities will be very re-
warding indeed.
KEY TRENDS FOR MEETINGS AND EXPOSITIONS

stantial recovery.
Implications for MICE: A growing GDP brings prosperity and confidence
to companies, encouraging them to spend on secondary activities such as meet-
ings and expositions.
Growth in the world-leading U.S. economy should help expand the mar-
ket for international meetings and expositions, as expanding trade begins to
fuel further growth for all trading partners.
Fear of terrorism is likely to prevent any dramatic growth in international
gatherings, for at least as long as American forces remain in Iraq.
last. Life expectancy in Australia, Japan, and Switzerland is now over 75
years for men and over 80 for women, and it is growing throughout the de-
veloped world. As a result, the retirement-age population also is growing
rapidly. It may expand even more quickly than official forecasts anticipate,
because they assume that life expectancy will grow more slowly in the fu-
ture. In fact, it is more likely that new medical technologies will lengthen
our lives still more rapidly in the near future, and bring a better quality of life
in the process.
Implications for MICE: Health services for the elderly are one of the fastest
growing fields in business throughout the industrialized world. They also are
the fastest growing market for meetings and expositions.
Growth in this field will continue through at least 2020, when the Baby
Boom generation will finally be vanishing from the global stage.
However, this is subject to change. Any dramatic breakthrough in late-lift
"wellness" could reduce demand for geriatric services and medical care and de-
prive MICE of its most promising market.
Summary: Information is the primary commodity of more and more in-
dustries. As a result, 80 percent of companies worldwide expect to have em-
ployees who work at home by 2005, up from 54 percent in 2003. By 2007, 83
percent of American management personnel will be knowledge workers, and
Europe and Japan are not far behind. Computer competence is rapidly ap-
proaching 100 percent in these countries. The Internet makes it possible for
small businesses throughout the world to compete for market share on an even
footing with industry leaders.
Implications for MICE: Executives find it easier to attend meetings and
other events, because e-mail and instant messaging make it easier to keep in
touch with their office and customers.
"Virtual meetings" online are beginning to replace quick business trips by one
or two executives. This trend is likely to accelerate as executives from Generations
X and Dot-com take over from their less net-sawy Baby Boom predecessors.
CAD/CAM and other forms of high-tech streamlining have so hastened
product development that no one can wait for the next trade show to roll out
new products. This is eroding the market for major expositions, but may gen-
erate smaller, special-purpose meetings.
Smaller destinations find it increasingly easy to reach potential customers
worldwide.
Faster travel and the chance to choose among more destinations also re-
duces the lead time required to schedule a meeting.
Destinations that can market directly to customers will have a further ad-
vantage over those who must work through third parties.
4. Growing acceptance of cultural diversity, aided by the unifying ef-
fect of mass media, is promoting the growth of a truly integrated global
society. However, this is subject to local interruptions and reversals.
Summary: Information technologies promote long-distance communica-
tion as people hook up with the same commercial databases and computer net-
works, and above all with the Internet. Business travel, migration, intermarriage,
and other forces also are mixing global cultures geographically, ethnically, socially,
117 Chapter 5
and economically. This trend is clearest in Europe, where 20 to 40 percent of

young adults say they think of themselves primarily as European, rather than as
citizens of their native country. However, in many countries there are powerful
reactions against these changes. The German neo-Nazi movement is one exam-
ple. This trend also feeds the extremist cultural and religious movements in the
Middle East and Asia.
Implications for MICE: The spread of business-oriented culture should
gradually build all aspects of this market.
As English becomes the universal language of business, it is becoming
easier to arrange and conduct meetings,
The risk of cultural conflicts is declining, easing one major concern for
planners of international gatherings.
Summary: Once current worries over the threat of terrorism recede,
American tourism will resume its traditional 5 percent annual growth. Other
countries—particularly China and India—are contributing to this demand, as
their economies grow and their citizens become more free to travel. Tourism will
benefit as Internet "virtual" tours replace printed brochures in promoting vaca-
tion destinations and provide current, detailed information on travel conditions.
Implications for MICE: The tourism industry is a growing market for MICE.
Tourists are clogging many major resort areas, forcing MICE planners to
seek out new destinations. For the largest gatherings, this can be a difficult
challenge.
6. Advances in transportation technology will make travel and ship-
ping faster, cheaper, and safer both on land and in the air.
Summary: New technologies are transforming the way we travel. A new
generation of airliners will carry up to 250 people for 9,000 miles or 555
people up to 6,400 miles. Advances in automobile technology such as road-
condition sensors, automated traffic management systems, and hybrid power
systems all will be in common use by 2010.
Implications for MICE: Faster, cheaper travel makes more distant desti-
nations more practical for incentives and relatively small corporate gatherings
as well as international meetings and expositions.
7. Specialization is spreading throughout industry and the professions.
Summary: For doctors, lawyers, technical professionals, and even many
artisans, the size of the body of knowledge required to excel in any one area
precludes excellence across all areas. This is changing the way business gets
work done, using teams of task-focused specialists and farming out work to
consultants and contractors who specialize more and more narrowly.
Implications for MICE: This proliferation of niche markets offers many

more opportunities for meetings and incentive packages.
Making these sales requires constant market development, often not just
to the company but directly to the department.
8. Women's salaries are beginning to approach equality with men's.
Summary: Women's salaries in the United States grew from 61 percent of
men's in 1960 to 76 percent in 2003. Women's salaries have been rising faster
than men's since 1975. Women's salaries are rising in Japan as well. American
women are likely to still do better in the future because some 64 percent enroll
in college, compared with only 60 percent of young men, and because nascent
"old-girl" networks will help to raise the pay scale of women still climbing the
corporate ladder.
implications for MICE: Fewer than for other industries; hospitality has al-
ways depended more heavily than most on female employees, and has paid
them relatively well in return.
However, there will be more competition from other industries for the
best new hires. This will require even better pay and benefits packages, with bet-
ter opportunities for training and promotion.
This gives the largest players in the market an advantage over smaller
firms with fewer chances to move up.
9. The work ethic is vanishing.
Summary: Tardiness is increasing, sick-leave abuse is common, and fewer
workers respond to promises of high pay and job security. For Generation X, the
post-Baby Boom generation, work is only a means to their ends: money, fun,
and leisure. Top executives say this will reduce corporate performance in the fu-
ture, but many show no greater ethical standards, as seen at Enron, WorldCom,
and other major companies.
Implications for MICE: Finding motivated, reliable workers is likely to be
much harder in the years ahead, with more competition for them from com-
peting employers.
Keeping them motivated will require constant attention and creativity
from managers and upper executives.
100 Chapter 5
Implications for MICE: The younger generations are extraordinarily entre-

preneurial. Their new companies will provide a fast-growing market for MICE.
However, their comfort with e-mail and virtual meetings may reduce their
need to meet colleagues and customers in person.
The companies started by these new entrepreneurs will include many in
the hospitality industry. This promises more intense competition in all aspects
of the field, including MICE.
Implications for MICE: The need for small, high-productivity events is
growing at the expense of larger, less intense gatherings.
Though faster travel means that destinations can hope for sales to more
distant customers, nearer meeting locations still have an advantage.
Destinations with a broad range of leisure activities on-site, giving guests
more opportunities to relax and enjoy themselves during brief leisure moments,
will have a strong competitive advantage over those that are merely "near" at-
tractions. This could shift more MICE activity to cruise ships, where all of the
leisure activities can be found within a few hundred feet.
12. A typical large business in 2010 will have fewer than half the
management levels of its counterpart in 1990, and about one-third the
number of managers.
Summary: Thanks to computers managers can effectively control up to
twenty-one subordinates, rather than the traditional six. Thus, fewer mid-level
managers are needed, flattening the corporate pyramid and leaving few op-
portunities for promotion. Downsizing, restructuring, reorganization, out-
sourcing, and cutbacks of white-collar workers will continue through 2006.
Implications for MICE: Arranging MICE is one secondary function that
many companies are sure to farm out. This should help to support the market
for meeting management.
Where companies retain this function in-house, destinations and meeting
managers should find it easier to identify the right executives to approach for
future contracts.
Summary: For at least twenty years, economies of scale have allowed the
largest companies to buy their smaller competitors or drive them out of busi-
ness. At the same time, thousands of tiny, agile companies are prospering in
Away on Business: The M ÍCE Market l OI
niche markets. We see this pattern among automakers, computer companies,

airlines, banks, and many other industries.
Implications for MICE: When companies combine, they reduce the num-
ber of possible buyers for MICE and related services. They also eliminate du-
plicate functions, reducing the number of employees available to attend industry
gatherings.
At some point, the trend toward consolidation will reach meeting manage-
ment companies and other segments of this industry, as it has so many others.
Water, Water Everywhere:
The Cruise Industry
Cruising is hot, hot, hot, and not just when the weather turns sultry. Passenger
loads have grown from a mere 500,000 in 1970 to 7.4 million in 2002, and 9.5
million in 2003. More than 80 ocean-going cruise lines with over 250 ships now
visit some 2,000 destinations, and guests can choose from over 30,000 different
cruises each year. Bookings are expanding by 8 percent annually, the fastest
growth rate in the hospitality industry.
Yet it has not all been clear sailing for the cruise sector. In 2001, some 10
million people booked passage on the world's cruise lines. The terrorist attacks
of September 11 slashed that demand. In the following weeks, no fewer than
seven ocean-going lines and one river cruise line either went out of business or
filed for bankruptcy protection. Drastic price cuts brought business back—in the
first half of 2002, ticket sales actually were up 4.3 percent over the previous
year—but the discounts decimated profit.
In early 2004, this was a continuing problem. Ticket prices remained
depressed. According to one estimate, up to 50 percent of berths and cabins
were being sold at unannounced discounts, up from just 20 percent before the
September 11 attacks. Passengers complained that service had suffered as a
result.
The industry has other troubles as well. Capacity is rising even faster
than demand; at least 42 new cruise liners are in the yards, many of them
scheduled for delivery in the next year, and nearly 20 of them are "super-ships"
of over 100,000 tons each. The epidemic of the Norwalk virus among pas-
sengers in 2002, a small but highly publicized outbreak on the Norwegian Sky
in May 2003, and the threat of SARS and avian flu all have passengers wor-
rying about their health as well as their safety. The engine room explosion
aboard Norway also raised concerns. And a Florida lawsuit that accuses Royal
f 02
Water, Water Everywhere: The Cruise industry 103
Caribbean International of bilking passengers of $150 million in phony gov-

ernment fees and port charges will stand as a black eye for the industry even
if the company is exonerated.
All this brings up obvious questions: Can even these livable times last,
or do worse problems lie just over the horizon? How long will cruise prices
remain depressed? How can cruise operators turn growing demand into
solid profits? How can they adapt to the challenges of a fast-changing
world?
In fact, the cruise market continued to improve in 2004, with an esti-
mated 10.4 million passengers for the year—an increase of 10 percent, com-
pared with 8 percent in an average year. And by mid-year, the number of
discounted berths and cabins had fallen back to its pre-9/11 level of 20 per-
cent. As for the rest. . .
We have some ideas. What follows is how the most important forces af-
fecting the cruise lines will play out.
.S. ECONOMY
Nothing is as important to the cruise industry as the American economy. No
less than 80 percent of cruise tickets are sold to Americans. According to one
recent study, only 13 percent of Americans have taken a cruise, but half dream
of doing so. Many of these potential customers may at least consider taking a
cruise when they feel economically secure. But in bad economic times, the
American cruise market shrinks, and it takes radical price cuts and other in-
ducements to fill berths.
So this comes as good news: The American economy has regained a lot of
its strength. In the first two quarters of 2004, GDP expanded at a bit more than
4 percent annually. This marks 12 quarters of continuous growth since the bot-
tom of the downturn in 2001. While the Conference Board's Index of Leading
Indicators dipped in June and July 2004, these were only slight decreases after
eleven months of nearly continuous growth. After long delay, in March 2004
the economy even began to add more than enough jobs to employ all the new
manpower that enters the workforce each month. Between March and June,
more than 1 million new jobs appeared in the United States with a few more
opening up in July and August.
We now believe that the economy has begun a new period of stable ex-
pansion that should see GDP growth in the area of 3 to 4 percent for at least the
next year. This is important news for cruise lines whose potential customers
have been finding it hard to commit themselves to a costly vacation. This is one
case where a rising tide floats all cruise ships.
104 Chapter 5
AGING POPULATION
Throughout the developed world, people are living longer and, on average,
growing older. (Demographically, one does not necessarily imply the other.)
Life expectancy in Australia, Japan, and Switzerland is now over 75 years
for men and over 80 for women. In the United States, every generation has
lived three years longer than the previous one. An 80-year-old in 1950 could
expect 6.5 more years of life; today's 80-year-olds are likely to survive 8.5
more years.
As a result, and because birthrates are declining throughout most of the
industrialized world, older people now make up more of the population than
they used to. Their numbers will continue to grow. People over 65 were only
8 percent of the population in the developed world in 1950, but 15 percent
in 2000, and will grow to 27 percent in the next half-century, according to the
Center for Strategic and International Studies. In Germany, people of re-
tirement age will climb from under 16 percent of the population in 2000 to
nearly 19 percent in 2010 and 31 percent in 2050. Japan's over-65 popula-
tion, 17 percent of the total in 2000, will rise to 22 percent in 2010 and nearly
37 percent in 2050.
This is important because older people are now the wealthiest segment of
society, and the most likely to have the time for an extended cruise. According
to the 2000 Market Profile Study conducted by the Cruise Line International As-
sociation, Baby Boomers now make up the largest market for cruises; 42 per-
cent of those polled had taken a cruise, compared with only 32 percent in the
over-60 group. However, well-to-do seniors generally take the longest and most
luxurious cruises. Unlike younger, family- and budget-minded passengers, they
tend to prefer smaller ships, giving up tennis courts and ping pong tables in re-
turn for all-out pampering. As the giant Baby Boom generation ages, the upper
end of the cruise market can only grow rapidly,
Seabourn Cruise Line has hitched its ocean-going wagons to a younger
market. Yet in the process, it has poised itself to benefit from the aging trend.
"Over the last two years, the year-round average age of our guests has
fallen from around 59 to about 55 years," says Richard Meadows, vice president
of sales and marketing. The line is attracting younger customers in part by of-
fering one-week Mediterranean cruises for mid-career Baby Boomers. "At the
same time, we balance the product for our other customers by making the one-
week cruises combinable for two, three, or even up to five weeks with a differ-
ent port content," Mr. Meadows adds. When Seabourn's 50-something
passengers reach their leisure years, they will have built considerable brand
loyalty to their accustomed hosts.
The growth of the over-65 market will moderate the habitual seasonality
of tourism, because retirees can travel off-season, and prefer to do so when it
Water, Water Everywhere: The Cruise industry 105
can save them some money. This should help to even out the cash flow of cruise
operators.
To serve these demanding customers, some cruise lines have adapted their
ships to the needs of older passengers. Others should follow their lead. Obvious
features for the elderly include safety handholds in bathrooms and showers,
larger signs with easy-to-read type, and large, levered door handles for arthritic
hands. Older cruisers also need special services such as help in moving their be-
longings and information about the physical demands of side trips. Such ameni-
ties will be increasingly important in the years ahead.
TOURISM GROWS
The number of Americans traveling to foreign countries (excluding Canada and
Mexico) grew by 5 percent per year from 1981 through 1996. It will continue
for the foreseeable future. For many vacationers, cruises are one of the most de-
sirable forms of international travel.
Those American tourists soon will be joined by the growing middle classes
of India and China. By 2010, China is expected to be the single largest source
of international tourists in the world, displacing Americans, Japanese, and Ger-
mans as the planets busiest travelers. Already, more than 85 million Chinese are
believed to be able to afford international vacations. By 2020, 100 million Chi-
nese tourists will fan out across the globe. If just 1 percent of them take a cruise
each year, they will more than double the cruise market. Long before that, cruise
lines will begin to offer cruises and on-board amenities suited to Chinese and
Indian tastes, while native Chinese and Indian cruise lines will appear to serve
their local market.
Recently, short-distance activities have added to the bottom line of flexi-
ble, market-savvy cruise operators. These include shipboard meetings, brief
"cruises to nowhere," scenic cruises during fall foliage season, and trips to
nearby destinations—for example, from the Gulf coasts of Florida and Texas to
Mexico. We expect similar cruise operations to appear in the Indian, Asian, and
Japanese markets.
One more source of change is the growing number of destinations for
cruises. In addition to new resorts and adventure experiences, many passen-
gers will be attracted by unique facilities such as the extraordinarily beauti-
ful Bibliotheque, a recreation of the fabled Library of Alexandria, whose
exterior walls are covered in passages from the Rosetta Stone. Another spec-
tacular new destination is the Al Arab Hotel, a literally ship-shape 60-story
edifice in Dubai where diners travel to the underwater, glass-ceilinged seafood
restaurant by submarine. Word has it that in 2004 there are 100 new hotels
106 Chapter 5
under construction in Dubai, one of them nearly 100 feet under water and
accessible only by elevator. Serving these profitable niche markets will re-
quire small, luxurious ships suited to shallow ports and discerning cruisers.
HIGH TECH, HIGH TOUCH

The more dependent we become on technology, the more we require the at-
tention of a friendly, courteous human being to soothe our jangled nerves. For-
tunately, that very high-tech environment increasingly brings us the human
contact we crave. The finest cruise ships now provide the best of both worlds,
using technology to provide comfort, connectivity, and entertainment at sea
and a large, well-trained staff to tend the passengers' every need.
For example, Hapag-Lloyd's opulent, German-speaking Buropa offers a
state-of-the-art "Cruise Infotainment System" that combines a capable PC and
Internet connectivity with 24-hour video and audio on-demand in all suites.
Outboard power pods pull the ship through the water with absolutely no vi-
bration or noise. The two suites for the disabled provide electronically oper-
ated beds with hydraulic lifts. High tech all the way.
Yet the vessel's most spectacular features are the appointments provided
for guests, including the attention of 1.7 highly trained crew members per pas-
senger. Cabin stewardesses serve nearly every stateroom; the 12 premium ac-
commodations have a butler. Deck stewards spritz sunbathers with cooling
Evian water. Fresh flowers abound. Penthouse guests enjoy a fully stocked bar,
handmade chocolates, and caviar on request. No wonder Berlitz Ocean Cruis-
ing & Cruise Ships 2003 gives Europa five-stars-plus, the only ship in the world
to attain that rating.
However, what may be the epitome of high touch is found on the Seabourn
line, where every member of the staff begins each cruise by studying pho-
tographs of the passengers. By the end of the second day, they can address every
guest by name. It is a courtesy that astonishes many first-time passengers and
is appreciated by all.
In the future, computer data mining will enable cruise lines to do the kind
of personalized marketing to cruise passengers that is now being pioneered in
hotels and resorts. Crew members will not only be able to recognize guests, but
will "remember" what meals and entertainment cruisers enjoyed on previous
voyages and be able to suggest appropriate activities for their current trip.
Not every vessel, nor even every line, can hope to provide guests with that
level of luxury and attention. Yet this is the balance all must work toward, a
combination of high-tech conveniences with personal attention that leaves pas-
sengers feeling pampered—and eager for their next voyage.
Water, Water Everywhere: The Cruise industry !! I
ECONOMICAL ENERGY
Cruise ships will never be cheap to run, but at least they will not be burdened
by high oil prices—though this is a difficult claim to make in September 2004,
when crude oil prices are nearing $50 per barrel for the first time in history. De-
spite its best efforts, OPEC has been hard pressed to keep petroleum from falling
below its target of $25 per barrel ever since the United States announced its
decision to invade Iraq. New oil supplies coming on line in the former Soviet
Union, China, and other parts of the world will make it even more difficult to
sustain prices at artificially high levels. So will the return of Iraqi oil to the
global marketplace, under American control. In all, oil will generally remain
between $25 and $28 per barrel for the foreseeable future. This is one factor that
will not bleed profits from cruise operators.
CLEANING UP
Several years ago, a research vessel crossed the middle of the Atlantic, taking
samples of what it found. When they reached land, the scientists told of pack-
aging materials, clumps of tar, and even human waste, floating hundreds of
miles from land. The report made headlines in newspapers and magazines
across the United States.
Gone are the days when vessels could casually dump their wastes near
land. Yet it does happen. Ten years ago, Regency cruises was fined for dump-
ing plastic bags 30 miles off Florida, something banned by U.S. law anywhere
at sea. More recently, Royal Caribbean, Norwegian Cruise Line, and Carnival all
have been fined—in one case up to $27 million—for dumping oily bilge water,
plastic trash, raw sewage, and even toxic chemicals. Crystal Cruises' Crystal
Harmony was banned from Monterey Bay after dumping sewage and bilge water
in October 2002.
Many cruise lines have gone a long way to clean up their act. Royal
Caribbean now processes all its bilge water on trips to Alaska and carries an en-
vironmental compliance officer on each trip there. Crystal Cruises switched to
more expensive, less polluting fuel several years ago and voluntarily reported
the Monterey Bay incident. Modern cruise ships are equipped with extensive
treatment plants for bilge water and sewage and with storage facilities for other
wastes. Yet there is clearly room for improvement.
Those enhancements will be mandatory. U.S. regulations now ban dis-
carding raw sewage and food wastes within three miles of shore and limit the
amount of oil in dumped bilge water to just 15 parts per million, but allow gray
water to be discharged anywhere. FI believes these rules will be tightened
drastically. Those rules will be enforced by satellite surveillance and other
108 Chapter 5
technologies. In the future, alarms will sound if wastes are dumped near land,
and discharge of raw sewage and other noxious substances will be banned
anywhere at sea. New ships may require double hulls in critical sections to pre-
vent loss of toxic materials in a collision.
TECHNOLOGY IMPROVES TRANSPORT

Outboard power pods on ships such as the new Queen Mary 2 are one such in-
novation; they propel ships efficiently, quietly, without vibration, and make even
the largest vessels far more maneuverable. Better stabilizers, satellite navigation,
computerized controls, and even the computer-aided design systems that make
it possible to build a new ship in two years instead of five all are improving the
business of cruising. And the discovery that cleaning propellers does even more
than cleaning hull bottoms to save energy is making the ships cheaper to run.
At the same time, design innovations are helping to better the cruise ex-
perience. The sterns of Seabourn's Pride, Legend, and Spirit carry a water sports
platform that extends to provide enclosed swimming and a marina for kayaks,
peddle boats, windsurfers, and even a ski boat. (Thanks to this kind of amenity,
these sister ships earned five stars from Berlitz.) On Queen Mary 2, one of the
five pools has a retractable glass roof to combine the best features of indoor and
outdoor swimming.
Many other new technologies will be less noticeable, but equally appreci-
ated by guests. Jerry Leeman, WW Food Service Segment Manager at IBM's
Retail Store Solutions division points out that technology is making it possible
to personalize customer experiences in the grocery, retail, and food service mar-
kets. Cruise passengers will expect that same level of technology-driven per-
sonal care on shipboard.
In the years ahead, these and many other novelties will continue to make
cruising more economical for operators and more pleasurable for their pas-
sengers. Expect to see floating islands that act as artificial ports, ocean-going
condominiums for hard-core cruise enthusiasts, even more efficient engines
and waste management systems, more small and modern coastal vessels opti-
mized for the run to Alaska and the New England foliage season, and all man-
ner of new amenities for guests,
CYBER-CRUISING
These days, you can take it with you, and pretty much have to. The Internet, that
is. It's a rare user of e-mail who can stand to be away from his in-box for more
than a day or two at a time, and many cruise passengers love being able to share
vacations with friends and relatives almost as they happen. Hotels unable to
offer 24/7 Internet access for guests already are losing revenues to those that can.
There will be over 1 trillion Net users in the world by 2005, including a sub-
stantial majority of cruisers.
In response to this trend, many lines are providing more convenient Net
access for their guests. Europa offers 24-hour Internet access free in every state-
room. Silversea is phasing stateroom Internet access into all its ships. Several
ships have added Internet cafes, where passengers can surf while they graze.
Five years from now, expanded Internet access will be standard fare on nearly
all cruise lines.
IBM's Jerry Leeman points out that guests will also expect to be able to
communicate through their PDA or cell phone to the onboard ship customer in-
formation system. They will want to be able to check dinner reservations and
plan activities anywhere aboard ship at any time. Cruise ships soon will require
a "virtual concierge" to supplement their human staff.
The exponential growth of the Internet has one more implication for
cruise operators, one that some cruise executives we have talked with are re-
luctant to accept.
The Internet is revolutionizing the travel industry. An estimated 93 percent
of travelers with Internet access now seek travel information online—and ac-
cording to The Unofficial Guided to Cruises 2003 the amount of travel informa-
tion available through the Internet has grown by 1,000 percent in just two years.
The Travel Industry Association of America says that 39 million travelers actu-
ally booked their trips over the Internet in 2002, up 25 percent from the previ-
ous year. Of those customers, 77 percent bought plane tickets, while 57 percent
made hotel reservations and 37 percent booked rental cars.
This has had a big impact on some companies, especially in the airline
market. Southwest Airlines reports that about 37 percent of its bookings are
now made over the Internet. British Airways expected 50 percent of its book-
ings to arrive over the Internet this year. In Europe, about 90 percent of bud-
get airline bookings now come through the Internet.
According to Forrester Research, the number of households arranging
leisure travel online will grow by at least 32 percent through 2007. At that point,
Internet bookings will be worth nearly $50 billion.
Thus far, the cruise industry has lagged well behind this trend. Some 95
percent of cruise bookings are made through travel agents, and many industry
executives expect that to continue. In announcing the recent promotion of Car-
nival president Bob Dickinson to CEO, the company used the opportunity to
stress his close relationship with and commitment to travel agents. (He does ad-
vise them to put in more time on weekends, when customer calls are five times
more common than during the business week.) Princess executive Dean Brown
declares in the newsletter Cruise Week that "Cruise lines booking direct is one
of the most distracting things that a retailer can look at." Only 5 percent of the
110 Chapter 5
company's business is booked direct, he adds, and travel agents provide at least
one-fifth of new growth. Virtually every cruise line has a Web site, but many are
little more than billboards designed to hone the corporate image.
It cannot last. Internet users are accustomed to the convenience of shop-
ping online. They expect the companies they do business with to provide the in-
formation they need on the Net, where it can be browsed at will, 24/7. And as
cyber-wary seniors begin to leave the market, they will be replaced by Net-sawy
Gen-Xers and Dot-coms who have little patience with the stately pace of offline
sales. The transition to Net-based marketing will largely bypass the luxury mar-
ket, where customers prefer to have others do the tedious work of putting the
travel package together. Two-earner families, those on a budget, and habitually
informed consumers already have begun to take much more of the cruise shop-
ping process into their own hands.
Ultimately, it may be that there are too few travel agents to meet the cruise
lines' needs. The number of agents dropped from 35,000 to 26,000 in just the
eighteen months ending in June 2002—and that was before airlines eliminated
commissions for sales on most domestic flights. Cruise lines cannot support
all the world's travel agents on their own, and it seems that no one else has
much interest in doing so.
This transition will be gradual, but it is inevitable. Five years from now,
travel agents will be much less important to the cruise lines, while the Internet
will account for a significant and growing portion of bookings. Only the extreme
luxury market will be immune to this trend, as wealthy seniors continue to pre-
fer the pleasure of being waited on by travel agents to the efficiency of online
cruise shopping. Outside that niche, the only question is which lines will be early
adopters of Internet sales and which will find themselves playing catch-up.
TIME IS PRECIOUS
Two-earner households just don't have much of it. Neither do affluent singles.
In the United States, workers spend about 10 percent more time on the job than
they did a decade ago, and the number is still rising. European executives and
nonunionized workers face the same trend.
In this high-pressure environment, consumers are increasingly desperate
for any product or service that offers a taste of luxury—and many of them can
afford to pay for it. There is no luxury tastier than a cruise.
Catering to this market will require some obvious adaptations: more short
cruises, more three-day "cruises to nowhere," more departures from ports within
driving range of their homes, still more attention to children's activities and fa-
cilities for the families of young, harried parents. (The average age of first-time
cruise passengers is now under 40.) Given that Carnival Cruise Lines carried
more than 300,000 children in 2001, while cruise ships are now being docked at
lesser ports from Norfolk to Boston, it seems these changes are well in hand.
Time has another aspect, which also presents opportunities for cruise
operators. Older passengers often are concerned with "life milestones"—
anniversaries, birthdays, and other opportunities for family gatherings. This
is a clear market for brief, relatively inexpensive cruises. It is likely to grow
as the economy improves and the retirement-age population grows.
BANG, YOU'RE DEAD!

They mean it literally, as suicide bombings and other attacks have proved from
Saudi Arabia to Bali. Terrorism is a long way from dead, despite optimistic pro-
nouncements from Washington since the invasion of Iraq. In fact, there is every
reason to believe that Al Qaeda is reconstituting itself and a new round of large-
scale attacks may not be far off.
To date, only one cruise vessel has ever been attacked by terrorists, the
AchiUe Lauro in 1985. Yet a ship full of happy, prosperous vacationers is an
ideal target for extremists. Some 94 percent of American travelers rate hotel
safety as a prime factor in deciding where to stay. It would take just one inci-
dent to make terrorism a top concern for cruise passengers as well.
This is a growing concern also because cruise ships are increasingly being
used as floating hotels. In February 2004, the Queen Mary 2 docked in Rio de
Janeiro so that cruisers could enjoy carnivale, giving would-be terrorists access
to a stationary target. And during the summer Olympics in Greece, many cruise
vessels were moored in the harbor throughout the event to supplement scarce
landside hotel space. Despite a $1.2 billion security program that includes a
new sonar system to protect the harbor against attack by submarine, this was
one of the most obvious opportunities for a terrorist spectacular we have ever
seen. That Greek authorities managed to defend these ships successfully was a
very impressive accomplishment.
For cruise lines elsewhere, many other security measures already are in
place. On-board bon voyage parties, once a normal part of cruising, have been
eliminated, as only passengers are allowed on ship. Entering port in the United
States, ships now pick up six "sea marshals" along with the pilot. Two remain
on the bridge, two watch over the engine room, and two patrol the remainder
of the vessel. In Miami, divers from the local fire department carefully exam-
ine the ship for clinging mines. And a Coast Guard cutter leads the ship into
port, watching for high-speed attackers such as the small boat that assaulted the
U.S.S. Cole in Yemen.
112 Chapter 5
In the years ahead, cruise operators will be forced to tighten security even
beyond current standards. They will have to screen not only passengers, but
everyone who has contact with the vessel—food loaders, baggage handlers, port
pilots, and their own disgruntled employees and former employees. One thing
they will not have to do is screen baggage, a job too expensive to handle at in-
dividual ships. That will be taken care of as people enter the dock, either by
government employees or by private security firms under contract to the De-
partment of Home Security or to industry associations. Already, some cruise
lines have stopped the age-old practice of putting name tags on at the airport
for fear that would-be terrorists will slip a bomb or hazardous material into a
bag before it ever reached the ship.
Security is as important for small inland cruises as it is for ocean-going lin-
ers. On the Potomac, tour boats glide past within striking distance of the
Kennedy Center, where a bomb could endanger 40,000 people. Many ships that
cruise down the Mississippi and other waterways also pass within easy reach
of populous, vulnerable targets. Tourists on these vessels undergo no security
checks at all, but that is about to change. Coast Guard regulations now require
the screening of tour boat passengers. Ships entering major ports are searched
by the Coast Guard, while Navy SEALs examine the hull for explosives, and
further security procedures now stretch leaving the ship into an ordeal that can
last for hours.
All this represents a difficult adjustment for both cruise passengers and the
companies that cany them. There is something about being treated as a po-
tential hijacker that conflicts fundamentally with the sense of luxury and pam-
pering that cruisers signed up for and cruise operators aim to provide.
We will just have to get used to it. From now on, boarding a ship is going
to look more and more like running the gauntlet at a busy airport. The alter-
native is even worse.
S A W y CONSUMERS
A networked society is a consumerist society. Shoppers today can search the In-
ternet for information about pricing, services, delivery time, and peer reviews
of all manner of goods and services. Already, the monthly Internet newsletter
CruiseReports delivers reviews of cruise ships, complete with passenger com-
ments, directly to the reader's e-mail box. Over the next few years, this trend will
sweep through the cruise industry as well. Disappoint one passenger, and thou-
sands of potential customers will hear about it.
Norwegian Cruise Line showed how not to handle problems in April 2003,
when ice in the Gulf of Finland forced Norwegian Dream to cancel stops at
Helsinki, Tallinn, and—unforgivably—St. Petersburg, the high point of the trip.
Passengers learned of the changes only when they checked in at Dover, and they
were offered compensation of only $100 to $200 each, amounts that sent irate
cruisers on stage to harangue fellow passengers in a near-revolt. As one dis-
mayed agent commented, "They've come a long way to see St. Petersburg, and
$150 ain't going to cut it." The Internet earned that tale around the world, no
doubt in the words of the angriest customers.
A world of savvy, demanding, networked consumers requires still greater
effort to give passengers the best possible cruise. It may be even more impor-
tant to soothe their frustrations when something goes wrong.
SHOCK AND AAHS

Throughout the business world, institutions are undergoing what FI calls bi-
modal distribution: The big get bigger. The small survive, and some of them do
quite well. But midsized competitors are squeezed out, because they are not
flexible enough to prosper in niche markets and cannot achieve the economies
of scale enjoyed by the Wal-Marts of their industries.
Similarly, purveyors of high-end luxury products flourish; look at any spec-
tacularly good restaurant. The fast-food chains also make it; cheap, Spartan
products fill a need for those who cannot afford better. But midpriced family
restaurants eventually go broke.
We see this trend among auto manufacturers, computer makers, farms;
banks, and very clearly in the airline industry. We are beginning to see it among
cruise lines.
Those companies that failed or took refuge in Chapter 11 after the 2001
terrorist attack represent the vulnerable middle of the industry, underfunded
and without the kind of core market it takes to survive. For the mass market,
there is Carnival Cruise Lines; in the luxury end, there are Silversea and Car-
nival's subsidiary, Seabourn.
Carnival's ships are big, from roughly 85,000 to 110,000 tons, with state-
room capacities that range from about 2,100 to nearly 3,000 passengers. The
atmosphere is relentlessly upbeat, with constant music and passenger games,
but there is none of the emphasis on luxury typical of some other lines. The
food is adequate, the cabins large enough, the glasses plastic, at least on deck
and in the Lido Buffet. This is the McDonald's of the cruise industry, and it is
spectacularly successful. Carnival's mass appeal has made it the largest cruise
line in the world.
At the other end of the spectrum, we need to look at just one ship, the
spectacular new Queen Mary 2, which sailed on its maiden voyage for Carnival's
Cunard subsidiary in January 2004. This is the largest, fastest cruise ship ever
built—150,000 tons, nearly a quarter-mile long, 100 feet taller than the Eiffel
tower, able to carry 3,090 passengers across the Atlantic at speeds up to 30
knots.
114 Chapter 5
Carnival set out to make the world's most luxurious cruising ship. The re-
sult, built at a cost of $780 million, is likely to provoke shock and "aah"s. Even
its smallest staterooms offer 194 square feet of sumptuous appointments, its
largest—two Grand Duplex apartments at the stern—can be combined with the
penthouses above to create a single apartment with an unprecedented 8,288
square feet of floor space. Even the most modest accommodations, to what-
ever extent the concept of modesty applies to any part of this vessel, is equipped
with a 20-inch television and attached computer keyboard providing digital
video, music, and audio books on demand, with 24-hour e-mail access. There
are fourteen bars, ten restaurants, five swimming pools, a gymnasium, and a spa
with twenty-four treatment rooms, and even a putting green.
In the words of one observer, "This is the ship God would have made if he
had the cash flow." Carnival does, thanks to its firm hold on both the mass mar-
ket and luxury ends of the cruise industry.
However, QM2 will not be the world's largest cruise ship for long. In fact,
Royal Caribbean's new Mariner of the Seas already carries more passengers,
3,114, and the line has a 1,114-foot long, 3,600 passenger ship named Ultra Voy-
ager scheduled for launch some time in 2006.
As this business grows more competitive, large and successful cruise lines
increasingly will follow one of these models. Some will cater to relatively un-
sophisticated first-time passengers. Others will aim for discriminating cruise en-
thusiasts who can pay to be pampered. Smaller players will specialize in niche
markets such as coastal cruises or expedition, nature, or adventure excursions.
Midsized, midrange operators will slowly disappear. That is just the way things
are in the global economy.
COMPETITIVE ADVANTAGE
At both ends of the spectrum, the battle for market share will grow ever more
challenging. That too is in the nature of worldwide competition. There are
several tools and offerings that cruise lines will use to make it in this difficult
environment.
One is specialized attractions for niche markets. Theme cruises already are
popular. There have been highly successful trips specializing in adventure
themes, astronomy, bridge, chess, computer science, education, film festivals,
gays and lesbians, murder mysteries, and nudism. We will see many more such
enticements in the future. In fact, the future itself could be a marketable theme,
with lectures covering technology, medicine, economics, social issues, and other
important, fast-changing fields.
Well-known celebrities, entertainers, and guest lecturers fall into this same
category. Whenever someone writes a bestseiling book, acts on a hit television
show, or sings a pop song, they create a niche market for cruise lines. We would
not be surprised to learn that the winners from American Idol already are
booked on Carnival or one of its mass-market competitors.
YIELD MANAGEMENT
A key marketing technique just being adopted by the cruise industry is yield
management. The basic idea is simple. Companies keep careful track of how
their products are selling. If time is growing short and something needs to be
moved out the door, it is discounted and advertised heavily until it sells.
This is basic marketing, computerized, turbocharged, and driven up-to-the-
minute sales and inventory statistics. It can work remarkably well. In one typ-
ical case, after the SARS epidemic broke out in Asia, Crystal Harmony was
abruptly repositioned to Los Angeles. Bookings were heavily discounted and
sold out in just five days.
Yield marketing cries out for the Internet, where prices can be changed
around the world at the touch of a few keys. Predictably, some of its most ef-
fective practitioners in the travel industry are online discounters such as Ex-
pedía, Travelocity, and Orbitz. However, profit-minded cruise lines will want to
bring this in~house, to route cash flow to their own balance sheets. This means
that a dramatic expansion of Web sites and the adoption of Internet-oriented
sales techniques are all but inevitable. In five to seven years, cruise operators
will be every bit as dependent on Internet sales as the airline industry.
TEN TRENDS
In his feature, Budget Travel, Arthur Frommer recently surveyed developments
in the cruise industry. He found ten trends, many of which paralleled Fore-
casting Internationals observations. Here is his list:
® Continued discounting of ticket prices, often unannounced.

® A growing variety of ships, from multi-thousand-passenger megaships
to 100-passenger vessels capable of visiting the smallest ports.
® More cruises from ports such as New York and San Francisco, which are
within convenient driving distance for many passengers.
® A renaissance in freighter cruising, which ten years ago had almost van-
ished; today more than 40 freighters carry patient vacationers to a wide
variety of ports not served by traditional cruise lines.
® New itineraries, particularly in formerly neglected areas such as Asia
and Africa.
114 Chapter 5
Carnival set out to make the worlds most luxurious cruising ship. The re-
sult, built at a cost of $780 million, is likely to provoke shock and "aah"s. Even
its smallest staterooms offer 194 square feet of sumptuous appointments, its
largest—two Grand Duplex apartments at the stern—can be combined with the
penthouses above to create a single apartment with an unprecedented 8,288
square feet of floor space. Even the most modest accommodations, to what-
ever extent the concept of modesty applies to any part of this vessel, is equipped
with a 20-inch television and attached computer keyboard providing digital
video, music, and audio books on demand, with 24-hour e-mail access. There
are fourteen bars, ten restaurants, five swimming pools, a gymnasium, and a spa
with twenty-four treatment rooms, and even a putting green.
In the words of one observer, "This is the ship God would have made if he
had the cash flow." Carnival does, thanks to its firm hold on both the mass mar-
ket and luxury ends of the cruise industry.
However, QM2 will not be the world's largest cruise ship for long. In fact,
Royal Caribbean's new Mariner of the Seas already carries more passengers,
3,114, and the line has a 1,114-foot long, 3,600 passenger ship named Ultra Voy-
ager scheduled for launch some time in 2006.
As this business grows more competitive, large and successful cruise lines
increasingly will follow one of these models. Some will cater to relatively un-
sophisticated first-time passengers. Others will aim for discriminating cruise en-
thusiasts who can pay to be pampered. Smaller players will specialize in niche
markets such as coastal cruises or expedition, nature, or adventure excursions.
Midsized, midrange operators will slowly disappear. That is just the way things
are in the global economy.
COMPETITIVE ADVANTAGE
At both ends of the spectrum, the battle for market share will grow ever more
challenging. That too is in the nature of worldwide competition. There are
several tools and offerings that cruise lines will use to make it in this difficult
environment.
One is specialized attractions for niche markets. Theme cruises already are
popular. There have been highly successful trips specializing in adventure
themes, astronomy, bridge, chess, computer science, education, film festivals,
gays and lesbians, murder mysteries, and nudism. We will see many more such
enticements in the future. In fact, the future itself could be a marketable theme,
with lectures covering technology, medicine, economics, social issues, and other
important, fast-changing fields.
Well-known celebrities, entertainers, and guest lecturers fall into this same
category. Whenever someone writes a bestselling book, acts on a hit television
show, or sings a pop song, they create a niche market for cruise lines. We would
not be surprised to learn that the winners from American Idol already are
booked on Carnival or one of its mass-market competitors.
YIELD MANAGEMENT
A key marketing technique just being adopted by the cruise industry is yield
management. The basic idea is simple. Companies keep careful track of how
their products are selling. If time is growing short and something needs to be
moved out the door, it is discounted and advertised heavily until it sells.
This is basic marketing, computerized, turbocharged, and driven up-to-the-
minute sales and inventory statistics. It can work remarkably well. In one typ-
ical case, after the SARS epidemic broke out in Asia, Crystal Harmony was
abruptly repositioned to Los Angeles. Bookings were heavily discounted and
sold out in just five days.
Yield marketing cries out for the Internet, where prices can be changed
around the world at the touch of a few keys. Predictably, some of its most ef-
fective practitioners in the travel industry are online discounters such as Ex-
pedia, Travelocity, and Orbitz. However, profit-minded cruise lines will want to
bring this in-house, to route cash flow to their own balance sheets. This means
that a dramatic expansion of Web sites and the adoption of Internet-oriented
sales techniques are all but inevitable. In five to seven years, cruise operators
will be every bit as dependent on Internet sales as the airline industry.
TEN TRENDS
In his feature, Budget Travel, Arthur Frommer recently surveyed developments
in the cruise industry. He found ten trends, many of which paralleled Fore-
casting Internationals observations. Here is his list:
® Continued discounting of ticket prices, often unannounced.

® A growing variety of ships, from multi-thousand-passenger megaships
to 100-passenger vessels capable of visiting the smallest ports.
• More cruises from ports such as New York and San Francisco, which are
within convenient driving distance for many passengers.
® A renaissance in freighter cruising, which ten years ago had almost van-
ished; today more than 40 freighters carry patient vacationers to a wide
variety of ports not served by traditional cruise lines.
® New itineraries, particularly in formerly neglected areas such as Asia
and Africa.
116 Chapter 5
s More theme cruises for fans of music, history, murder mysteries, haute
cuisine, and other specialized interests. This July, Norwegian Dawn will
even carry what is being billed as "the first gay cruise with family val-
ues," led by former talk-show hostess Rosie O'Donnell.
® Many more cruises by luxurious sailing ship, a relaxed and relatively in-
expensive alternative to traditional motor vessels.
• A wider variety of cruise lengths, with voyages stretching from three to
seven nights up to fourteen or fifteen, appealing to older travelers with
plentiful free time.
• If cruising is hot, the Antarctic may be the hottest destination of all De-
mand is so strong that vessels carrying up to 800 passengers are now
plying this trade.
• Batteries, and a lot of other things, not included. Amenities from meals
to miniature golf are being paid for separately, a trend that is sure to
continue.
THROUGH 2010
It should be a good time for efficient, market-sawy cruise lines. Carnival CEO
Bob Dickson reports that early in 2004 he had already seen a significant uptick
in bookings from the lows of the recent recession. "Obscenely low pricing will
not last," he predicts. "As demand rebuilds, pricing will go up." Forecasting In-
ternational agrees.
Some of our other forecasts here may be more controversial. Yet if some
of FI's views about the future of cruise lines appear to be radically different
from current industry practices, most are simple extensions of current trends.
They all grow directly from the market forces we see operating today.
Tomorrow's cruise lines will be even more flexible, even more in tune with
the needs of their changing, and growing, markets. As a result, we believe they
will be some of the most dynamic and profitable companies in the world.
KEY TRENDS FOR THE CRUISE LINES

stantial recovery.
Implications for Cruise Lines: People take cruises when they feel econom-
ically secure and take less expensive vacations when they do not. In the next few
years, many more people will feel they can afford to take a cruise.
This is relieving the price pressure on cruise lines, so that fewer tickets
will be discounted. This should improve profitability for the next several years.
world. As a result, the retirement-age population also is growing rapidly. It may
expand even more quickly than official forecasts anticipate, because they as-
sume that life expectancy will grow more slowly in the future. In fact, it is more
likely that new medical technologies will lengthen our lives still more rapidly
in the near future, and bring a better quality of life in the process.
Implications for Cruise Lines: Older people make up a growing segment of
the cruise market.
Because they form the wealthiest segment of industrialized societies, re-
tirement-age consumers also are the most likely to take cruise vacations, par-
ticularly for the longest and most luxurious cruises.
Younger travelers form a profitable market for family-oriented cruises.
However, one of the biggest advantages of catering to them is the opportunity
to build brand loyalty for their later lives, when they will be the most profitable
cruisers.
Retired people are free to take trips when they wish, rather than when it
suits an employer. They are beginning to even out the traditional seasonality of
travel.
Older passengers need amenities suited to their physical limitations. Ex-
amples include signs with larger type, lever door handles rather than knobs,
safety grips in bathrooms and showers, and extra help with their luggage.
Summary: Information is the primary commodity of more and more indus-
tries. As a result, 80 percent of companies worldwide expect to have employees
il S Chapter 6
who work at home by 2005, up from 54 percent in 2003. By 2007, 83 percent of

American management personnel will be knowledge workers, and Europe and
Japan are not far behind. Computer competence is rapidly approaching 100 per-
cent in these countries. The Internet makes it possible for small businesses
throughout the world to compete for market share on an even footing with in-
dustry leaders.
Implications for Cruise Lines; Internet cruise booking will become much
more important to the industry, eventually displacing travel agents in all but the
luxury market.
Cruise ships increasingly will require Internet connections in every room
for 24/7 access to the guests e-mail, either free or at a very modest price.
Data mining can provide cruise lines with an opportunity for extremely per-
sonalized marketing, much as it already does for cutting-edge hotels and resorts.
their economies grow and their citizens become more free to travel. Tourism
will benefit as Internet "virtual" tours replace printed brochures in promot-
ing vacation destinations and provide current, detailed information on travel
conditions.
Implications for Cruise Lines: The market for cruises will grow at least as
fast as the travel market in general. If the American economy again begins to
expand rapidly, rather than at the measured pace seen in early 2004, cruising
should grow even more rapidly. Many consumers view cruising as one of the
most desirable forms of vacation, even if they have never taken a cruise them-
selves. In affluent times, they will be even more inclined to indulge their wish
for luxury by signing up for a voyage.
Within ten years, the number of Chinese and Indian cruisers will justify
providing amenities, and even designing cruises, specifically for their tastes.
By 2020, we expect to see several new cruise lines based in China and India
and catering to the needs of local vacationers.
The growth of tourism will inspire the development of many new desti-
nations, giving cruise ships new ports of call to interest their passengers. Some
of those destinations will be developed with the growing Asian tourist markets
in mind.
erally enforced.
Implications for Cruise Lines: This is one more force behind the disinter-
mediation of travel. The cruise industry cannot resist this process permanently.
Net-savvy consumers will expect to find much more information online
about ship facilities, prices, options, and port attractions, so they can compare
possible cruising choices when planning a vacation.
Disappointed cruisers will voice their complaints online, where a single
negative report can influence the choices of future consumers for years.
Summary: In autumn 2004, OPEC's aim is to hold the price of oil at rel-
atively high levels, and the instability in the Middle East is making this rel-
atively easy. However, keeping prices high requires a unity of purpose that
member countries have never been able to sustain for very long. The cost of
raising a barrel of oil from the ground in this region is around one-tenth the
wholesale price. New oil supplies coming on line in the former Soviet Union,
China, and other parts of the world will make it even more difficult to sus-
tain prices at artificially high levels. Prices above $28 per barrel are simply
unsustainable.
Implications for Cruise Lines: The single greatest "disposable" expense of
running a cruise ship should remain under control, with oil prices falling back
to their normal range by 2006. This will help to keep tickets affordable and
profits acceptable.
annually. The European Parliament estimates that 70 percent of the continent's
moment—rate industrial growth more important than dealing with environ-
mental problems, many others are working to clean up the air and water, save
rainforests, and protect endangered species. Over all, the trend is clearly to-
ward a cleaner, healthier environment.
Implications for Cruise Lines: Restrictions on dumping of refuse and
waste will become much tighter in the years ahead, and will be much more
strictly enforced.
Ships will be forced to use more, and more capable, antipollution tech-
nologies. These will be a significant new expense for cruise lines.
Chapter 6

ping faster, and cheaper by land, sea, and air.
generation of airliners will carry up to 250 people for 9,000 miles or 555
people up to 6,400 miles. Advances in automobile technology such as road-
condition sensors, automated traffic management systems, and hybrid power
systems all will be in common use by 2010. Similar developments are seen in
every sector of transportation.
Implications for Cruise Lines: Outboard power pods, better stabilizers, im-
proved satellite navigation and weather, and other technologies are making
cruise ships faster, more comfortable, and more efficient.
Design innovations made possible by technology are creating new expe-
riences for cruisers. These include extensible marinas and swimming areas and
retractable glass roofs, as on the Queen Mary 2.
In the future, much more ambitious innovations will be seen; artificial island
ports and cruise ships the size of modest cities can be expected within 20 years.
Summary: In spring 2004, Net users numbered around 945 million world-
wide. This population is expected to reach 1.1 billion by 2005, 1.28 billion by
2006, and 1.46 billion by 2007. One reason for this is the rapid expansion of Net
connectivity in some developing lands. India had only 170,000 Net subscribers
in 1998; by 2004, it had 39 million. In early 2004, Chinas population of Net
users amounted to 96 million. Americans had declined from 42 percent of Net
users in 2000 to under 20 percent in 2004.
Implications for Cruise Lines: Vacationers accustomed to instant Net access
will be increasingly unwilling to leave their e-mail at home. High-speed, 24/7 Net
access in all staterooms will be standard, as it is now for business-class and
luxury hotels.
This is a major force behind the growth of consumerism among potential
cruise passengers.
The Internet will be an increasingly important tool for the millions of po-
tential cruisers in the Indian and Chinese travel markets.
Implications for Cruise Lines: Harried two-earner households are eager
for any luxury they can find—and many of them can afford to pay for it. Many
see a cruise vacation as the ultimate luxury.
What many of them cannot afford is time. Growing numbers will take
brief "cruises to nowhere," long-weekend coastal cruises, and short segments of
longer cruises, preferably leaving from regional ports near their homes.
up, not down, in the next 10 years.
Implications for Cruise Lines: Cruise ships are an ideal target for terrorists
willing to sacrifice themselves so long as they can take large numbers of peo-
ple with them. This represents a significant risk to the industry, particularly as
government facilities and land-locked attractions become harder to attack.
Government mandates are likely to require even tighter security precau-
tions on cruise ships.
A successful attack on a cruise ship could stifle the industry's growth for
several years.
The Biblical four horsemen of the Apocalypse were War, Famine, Pestilence,
and Death. Since 2001, the airline industry has faced three of them—all four, if
you count the recent absence of meals on many long-distance flights. It has not
been a good way to begin a century.
We have a reputation as optimists who can see the bright side in most sit-
uations. This is undeserved; we simply go where the data lead, without the emo-
tional and philosophical biases that make habitual pessimists of some other
forecasters. But in the case of the airline industry, there is no getting around it:
The recent past has been grim, and the future offers only modest improvements.
Before looking ahead, we need to measure just how far the airlines must
go simply to recover from recent catastrophes. The events themselves are fa-
miliar; the magnitude of their impact may not be.
ONE MORE PERFECT STORM

These days, it seems that anyone who has suffered business reverses blames
them on a "perfect storm," a disastrous combination of forces and events that
could not have been foreseen or defended against. If any industry has the right
to use this excuse for its troubles, it is the airlines. The first two horsemen of
the air-pocalypse struck without warning, and none of the three has allowed
any effective defense against them.
Death arrived first, on September 11, 2001, when Al Qaeda terrorists hi-
jacked four aircraft from United and American Airlines. As the World Trade
Towers collapsed, so did air travel. In the month after the attack, U.S. domes-
tic passenger miles dropped 20 percent from the previous October; interna-
tional passenger miles were off 37 percent. Schedule cuts at the top ten U.S. air
122
Clipped Wings: Troubled Times for the Airlines 123
carriers reduced flights by 17.5 percent from a year earlier. Before 2001 was
over, the American airline industry shed some 79,000 jobs, one in ten of the
people it had employed before September 11. Other countries saw similar de-
clines. Airlines belonging to the International Air Transport Association (IATA)
carried 1.35 billion scheduled passengers in 2001, more than 3 percent fewer
than in 2000, the first year-on-year decline since 1991.
The effects of 9/11 continued on far into 2002. American air carriers alone
lost an estimated $10 billion that year, up from $7.7 billion in 2001. Globally,
industry losses in 2001 and 2002 amounted to $25 billion, according to IATA Di-
rector General Giovanni Bisignani.
By early 2003, it had begun to seem that the worst might be over. Then
Pestilence appeared, as doctors recognized that a new and virulent disease was
spreading rapidly in much of the Far East. For a time, severe acute respiratory
syndrome, or SARS, inhibited travel even more than the threat of terrorism
had done. IATA estimates that in May 2003 SARS cut international passenger
traffic 21 percent below the level seen 12 months earlier, when post-9/11 anxi-
ety was still near its peak. The effect was worse by far among Asian carriers,
which lost nearly 51 percent of their passengers during the worst of the period.
Travel to Singapore and Hong Kong plummeted to just 10 percent of the pre-
vious year's level. Air traffic also declined more than 20 percent in North Amer-
ica during the outbreak and 5.5 percent in Europe.
No sooner was SARS under control than War arrived in the form of America s
invasion of Iraq. Worries that terrorists might attack more planes in response to
the invasion again kept many potential travelers on the ground. Transatlantic traf-
fic in April 2003 was down just over 25 percent, while American domestic flights
were off by 15 percent. At the same time, crude oil prices soared, carrying jet fuel
to $1.05 per gallon that May; it had been only $0.62 per gallon in January 2002.
The result was predictable: Soon after 9/11, Sabena went out of business,
while Swissair survived only with a government bailout. In the United States,
Midway Airlines filed for Chapter 11 bankruptcy protection; U.S. Airways en-
tered bankruptcy, restructured, and has emerged; and United Airlines filed for
bankruptcy in December 2002. Other airlines filing for bankruptcy protection
or the equivalent since the 2001 terrorist attack include Avianca, Air Canada, Na-
tional, and TWA. When asked what other airlines might go under, one travel
analyst replied, "Almost any of them."
CURRENT STATUS
All these unexpected developments have been catastrophic for the world's air-
lines. In the two years following September 11, carriers in the United States
lost every penny they made between 1995 and 2000. They have had to take on
Chapter 6
so much debt just to survive that they will need $20 billion by 2007 to restore
their balance sheets to the levels seen in 1999. The situation has been little bet-
ter elsewhere.
"Our industry has lost at least three years of growth and development/'
comments lATA's Bisignani. "This year [2003], we can expect to lose almost five
billion U.S. dollars on international services. If we include domestic traffic,
losses could approach ten billion. Effectively, every round-trip international
passenger was given twenty-five dollars by the airlines in 2003."
The situation has been hardest in the United States, which accounts for 40
percent of the world's air traffic. In 2003, only 600 million people flew on Amer-
ican carriers, compared with 634 million forecast before 9/11; that number is not
expected to reach the level seen in 2000 until at least 2006. Ten of 16 airlines
surveyed by the federal Bureau of Transportation Statistics (BTS) ran in the red
in the first quarter of the year. Before 2003 was over, the airlines were expected
to lose yet another $8 billion. In midsummer, 2,000 jets—about 13 percent of the
fleet—were parked in the Mojave Desert as carriers abandoned flights in order
to boost their load factor, the percentage of seats with passengers in them.
In June 2004, the situation looks better in some ways, worse in others.
Passengers are coming back to the airlines in substantial numbers. In January,
Ulrich Schulte-Strathus, head of the Association of European Airlines, predicted
that passenger numbers would rise by 7.5 percent in 2004, compared with a
negligible 1 percent the previous year. In February, revenue passenger miles for
U.S. airlines were up for the seventh month in a row, while passenger traffic
grew by 10 percent. Airlines have actually been retrieving some of those moth-
balled aircraft—mostly smaller planes—from the desert to handle the demand.
In the Asia-Pacific sector, passenger traffic is expected to grow no less than 14
percent in 2004, bouncing back neatly from the SARS-induced slump in 2003.
At the same time, carriers throughout the world have cut costs and im-
proved their efficiency. Some 400,000 jobs have been squeezed from the in-
dustry, including a total of 100,000 in the United States, and those lucky enough
to remain at work have had to endure widespread pay cuts. Capacity is down
as well, because the airlines have cut flights, especially from overserved routes.
To make up for this, many airlines have formed alliances in which earners
can renumber planes, market flights, book seats, and share profits on aircraft ac-
tually operated by someone else. This also allows smaller airlines to offer service
to destinations they could not otherwise reach. For example, the Sky Team al-
liance, dominated by Air France and Delta, gives partners like Aero Mexico, Al-
italia, Czech Airlines, and Korean Air access to 512 airports in 114 countries.
For U.S. air carriers, these changes have brought load factors to nearly 80
percent in April and May 2004, the best they have been in years. European air-
lines are running with load factors of 70 to 75 percent, while most Asian carri-
ers are just below 70 percent.
However, all these improvements have been more than offset by a cata-
strophic rise in the cost of fuel, due to a combination of Iraq war worries, lim-
ited refining capacity in the United States, and OPEC policies that have driven
the cost of crude oil above $40 per gallon for the first time in history. Every
penny per gallon increase in the price of jet fuel costs American air carriers
$ 180 million, according to John Heimlich, chief economist of the Air Transport
Association. There have been a lot of extra pennies. In the United States, jet
fuel averaged 90 cents per gallon in 2003, $1.10 in January 2004, and $1.30 in
March. Prior to the rise, U.S. airlines had been expected to score their first
break-even year in recent memory. By May, they were facing a loss of at least
$2 billion and perhaps as much as $3 billion—roughly the increase in their fuel
bills. Carriers in Europe and Asia were not doing any better.
Post-9/11 security improvements also have added to the cost of doing busi-
ness. Airlines in the United States had paid out over $500 billion for security up-
grades by early 2004, and Federal authorities believed the carriers' share of the
cost should have been more than $700 billion—and were seeking to bill the air-
lines for the extra cost.
And there is a growing fear that Pestilence may return to inhibit the travel
market, as it did in 2003. By June 2004, there had been only a few cases of
SARS since the last outbreak, all in China, which was acting vigorously to con-
trol the disease. However, a new strain of bird flu had killed at least 12 people
in ten Asian countries. All confirmed cases appeared to have been contracted
directly from infected birds, but virologists worry that the disease could soon
gain the ability to pass from one human patient to another. Bird flu has a much
higher mortality rate than SARS, so human-to-human transmission could pro-
duce an epidemic that would kill millions. In the process, it could kill air travel
in the affected region for years.
It is against this background that some long-standing trends and a few
new developments will play themselves out. What follows are some of the most
critical issues the airline industry must deal with in the years ahead. They add
up to very mixed prospects for the future.
MONEY MATTERS
Like other sectors of the travel and hospitality industry, airlines are exquisitely
sensitive to their economic environment. Would-be tourists with empty pock-
ets tend to stay at home, and businesses facing lean times view travel budgets
as fat ripe for the trimming.
So it comes as good news that the American economy is looking health-
ier than it has in several years. In the first two quarters of 2004, the U.S. gross
domestic product rose at an annual rate of about 4 percent. In March, new jobs
Chapter 6
finally started to appear in significant numbers for the first time in more than
two years—353,000 in March and just over 1 million in all by the end of June.
It takes just 150,000 new jobs each month to absorb the new workers coming
into the labor market, so it looks like some of the people laid off during the
downturn were finally going back to work.
According to the Conference Boards Index of Leading Economic Indica-
tors, this new strength is likely to be with us for some time. It rose by 0.3 per-
cent in May for its ninth increase in ten months and incurred only a tiny decline
in June. Burgeoning federal debt—not something we generally welcome—has
kept the U.S. dollar down on international currency markets, making American
exports more attractive to foreign buyers; this is one more reason to hope for
a brighter economic future.
Elsewhere, economic news is mixed. Growth has been sluggish to nonex-
istent in Europe since 2002. In 2003, the European Unions growth rate came
in at just 0.4 percent. Germany, Italy, and the Netherlands were in recession
during the first six months of the year, and widespread strikes put the French
growth rate in negative numbers as well.
This may be changing. France and Germany cut taxes in 2003, and there
are signs that the powerful German labor unions have lost some of their clout.
Both these developments have led economists to hope that the sluggish French
and German economies are due for better times.
Their wishes appear to be coming true. In France, the GDP had been
shrinking by 0.6 percent or more since 2002, and consumer spending has re-
mained sluggish, thanks to unemployment in the range of 9 percent. Yet the
economy turned in unexpectedly positive growth of 2.5 percent annually in
the fourth quarter of 2003 and 3.1 percent in the first quarter of 2004. By April,
the Conference Board's leading index for France had been positive or break-
even for nine consecutive months, sagging only slightly in May. In 2004, the
French GDP is expected to grow by 2 to 3 percent.
The German economy—the largest in Europe—also has been in decline for
several quarters, but appeared to bottom out in September 2003. In the second
half of the year, GDP growth averaged 0.9 percent. It is not clear how long or
strong the recovery will be. The Conference Board's leading index for Germany
actually declined in January and February 2004, thanks in part to a substantial
drop in residential construction. However, the most recent forecasts still call for
a growth rate of 1.6 percent in 2004 and 1.75 percent in 2005.
Elsewhere in Europe, economies are stable to improving. In Britain,
growth is steady at around 1.9 percent per year, with 3 percent expansion fore-
cast for 2004 and 2005. In Italy, a stagnant GDP is expected to rise by 1.8 per-
cent in 2004. In all, the European economy as a whole grew by 0.4 percent in
2003, and slightly better performance can be expected in 2004.
In the years ahead, one more economic factor will work to the airlines'
benefit. This is the expansion of the European Union, which gained ten new
members in April 2004. Opening these economies to free trade will give the
wealthy countries of western Europe new markets and a source of relatively
cheap skilled labor, while companies in eastern Europe will get access to pros-
perous western consumers. This should bring new growth in travel between
the two halves of the continent and open some profitable new routes to Euro-
pean airlines. The average distance between the EU capital in Brussels and the
capitals of the ten new member countries is 1,400 km.
In all, the next few years hold considerable promise for European air car-
riers. If they cannot look forward to boom times, they can at least hope that the
economic turbulence of 2001 and 2002 is finally behind them.
The three giant economies of Asia deserve special note. Japan was in reces-
sion, or near it, for more than a decade, but that seems to have changed. GDP
growth, which had struggled to reach 1 percent through most of 2003, shot all the
way up to 7.3 percent in the fourth quarter and 6.1 percent in the first quarter of
2004. Exports surged as well, but most of the growth appeared to be in the do-
mestic market, a solid indication that the future should be brighter than the past.
The Conference Board's leading index for Japan had been up for ten straight
months by February 2004, but it leveled off in March and declined slightly in May.
GDP growth seems to be slowing as well. In June, it still is not clear how Japan's
economy will perform in the remainder of the year, much less in 2005. However,
it now seems there is little danger that Japan will slip back into recession.
The Chinese economy had no need to recover from a slump. The Chinese
economy grew by 9.1 percent in 2003, 9.9 percent in the fourth quarter of the
year, and an astounding 10.7 percent in the first quarter of 2004. By spring
2004, the economy was showing signs of being seriously overheated, and Chi-
nese officials had raised interest rates twice in an effort to keep things under
control. The country was running a trade deficit with most of the world—the
United States being a prominent exception—because it was forced to import raw
materials in order to keep its factories running fast enough to keep up with de-
mand. Chinese economic planners hope to bring that back to 7 percent, with-
out triggering a sharper slowdown. Thus, a dip to 9.6 percent growth in the
second quarter of 2004 actually came as good news: It seems that the Chinese
economy may be slowing gently to a growth rate it can sustain, rather than col-
lapsing into a recession as some economists had feared. Together with the coun-
try's enormous population, broad expanse, and growing ties with the rest of the
world, this astonishing economic success will make China one of the biggest
growth areas for both internal and external air travel for years to come.
The third Asian powerhouse is India, home to one-sixth of the world's peo-
ple. In 2001, FI spent nearly a year studying India for a major corporate client.
128 Chapter 5
At that time, we concluded that the Indian economy would grow at an average
rate of 6.5 percent per year at least through 2005, and probably through 2010.
This was 2 percent higher than consensus estimates, and thus far it is proving
to be too conservative. The Indian economy expanded by 8 percent in 2003,
and economists predict a growth rate as high as 7.3 percent in 2004. India's
middle class is growing by an estimated 30 percent per year. Over the decade
ending in 2007, the middle class is expected to triple in size, while the wealth-
iest class will expand by a factor of six. Demand for air travel in this region can
only grow in proportion.
TOMORROW'S PASSENGERS
India and China are poster children for our second trend. The world's popu-
lation is well on the way to doubling in forty years. Among the industrial-
ized countries, America is growing by far the fastest, thanks to high birthrates
among Hispanic immigrants and religious conservatives. However, the
fastest population growth is in the developing and undeveloped countries.
In Niger and the Palestinian Territories, populations will more than double
between 2000 and 2050. In Yemen, Angola, and Congo, they will expand by
over 160 percent.
Yet for the airline industry, the most important growth regions will be
China, India, and the Muslim lands. According to the U.N., China is on track
to grow by some 260 million people between 1995 and 2025, bringing its pop-
ulation to nearly 1.5 billion; the total could be much greater if the birthrate
turns out to be even slightly higher than the extremely conservative as-
sumptions used to form the estimate. India still has a high birthrate; its pop-
ulation is expected to pass 1.3 billion in 2021, up nearly one-third in twenty
years. By 2050, there could be more than 2 billion people living in India.
Growth rates in the Muslim lands vary widely. In Pakistan, it is about 2.6
percent per year, enough to bring its population from 130 million in 2000 to
220 million in 2020. Indonesia is growing at only half that rate. At the cur-
rent rate of growth, by 2050 Pakistan could be the third most populous coun-
try in the world.
This matters to the airlines, because population growth represents new
passengers. It matters even more because the Indian subcontinent is the prime
source of guest workers for the Middle East, and most of them travel by air. In
addition, more than 1 million people annually fly to Saudi Arabia for the Haj,
the once-in-a-lifetime visit to Mecca required of all Muslim faithful. These mar-
kets will grow rapidly in the years ahead.
It matters still more because population growth is fastest in the cities of
the developing world. Between 2000 and 2030, the global population will grow
by ari estimated 2.2 billion. Of this, 2.1 billion people will be added to the
world's cities, primarily in places like India, China, and Indonesia. In 1950,
there were just eight megacities, with populations over 5 million, in the world.
(Newer definitions put the minimum population for a megacity at 10 million.)
By 2015, there will be 59 megacities, 48 of them in less developed countries.
Of these, 23 will have populations over 10 million, all but four in the devel-
oping lands. These vast concentrations of people—places like Delhi, Mumbai,
Sao Paolo, and Dhaka—are likely to be among the fastest growing aviation
markets in the world.
HIGH ALTITUDE, HIGH TECH

Not that long ago, when someone spoke of new airline technology, many
people automatically thought of traveling on the Concorde and the faster,
cheaper, miraculously sleeker new supersonic transports that would follow.
By 2010, diplomats and the busiest executives would even bounce around the
world on suborbital rocket planes, hopping from New York to New Delhi in
just two hours.
Those dreams have evaporated in the heat of market reality. Now that the
Concorde has been retired from service, it looks like commercial supersonic
flight is an idea whose time has gone. Today's version of advanced aircraft tech-
nology is a lot less exciting, but a lot more practical.
Some of the most promising developments deal with the environment,
which remains a much more important issue in most of the world than it has
been in the United States of late. Researchers are working hard to improve fuel
economy, reduce air pollution, and cut the noise associated with jet operations.
Air travel now produces about 12 percent of global C0 emissions. That
2
should drop significantly in the coming decade. Yet by 2010, researchers

hope to cut aircraft C0 emissions by another 20 percent and NO emissions
2 x
by 60 percent.
More efficient burning means that fuel economy should rise as well.
Today's jets burn an average of about 3.5 liters of fuel per 100 passenger-
kilometers. This makes them 70 percent more fuel efficient than the airliners
of forty years ago, but that is only the beginning. Airbus says that per-seat fuel
consumption of its A380, scheduled to enter service in 2006, will be around 13
percent lower than a Boeing 747, with total expenses per-seat mile 15 percent
lower. Boeing's 787, planned for 2008, is intended to cut fuel use by 15 to 20 per-
cent, thanks to the use of highly efficient engines and much lightweight com-
posite in its airframe.
Noise is another important environmental issue for the aviation industry,
particularly in Europe, where 7 percent of the population lives within the sound
130 Chapter 5
"footprint" of a commercial airport and standards are much tighter than in the
United States. Today's jet aircraft are typically 20 dB—75 percent quieter than
the jets of 1960. That is just the beginning. Researchers hope to bring aircraft
noise down another 6 dB by 2010 and perhaps 10 dB by 2020.
However, these are incremental advances. Some of the most sweeping
changes are likely to appear not in the aircraft themselves, but in the sys-
tems that guide them from one place to another. These days, the global po-
sitioning system (GPS) keeps hikers from getting lost in the wilderness and
guides drivers of luxury cars to the nearest gas station. It also enables pilots
to fix their positions within a few feet of latitude, longitude, and altitude.
Far more is possible.
In North America, most commercial aircraft make their way over long dis-
tances via designated air lanes, like drivers following a freeway. Straight-line
flights from one point to another are relatively uncommon. This is in contrast
to the situation in Europe, where most flights take the direct route and few of
them are longer than 90 minutes.
In large part, the American system grew out of technological limitations
that no longer apply. Before GPS, air traffic controllers just found it easier to
keep track of planes that moved along easily predicted paths. It has worked
fairly well for the liub-and-spokes traffic system, which routes tens or hundreds
of flights per day through a few major airports.
However, there are serious disadvantages to this practice. The standard
airways have limited traffic capacity, and many of them are getting crowded.
And it takes more time and fuel to slip into the system and follow the airways
to your destination than it would to fly in a straight line.
GPS makes the airways pretty much obsolete. The combination of satel-
lite navigation and air traffic computers can fix any number of airplanes within
a few feet of their actual positions, making sure that two aircraft never try to
occupy the same space. This makes it practical to fly point-to-point, even over
the longest routes to the busiest airports.
It also becomes possible to pack more airplanes together safely into less
altitude, and the FAA now plans to cut the vertical separation required between
airplanes from 2,000 feet to only 1,000. Thus twice as many airliners will be
able to take advantage of the most efficient flight levels, saving both fuel and
travel time.
Nav Canada, which provides air traffic control north of the border as the
FAA does within the United States, believes that satellite navigation will allow
unlimited free flight in its region by 2010. At that point, planes will fly directly
to their destinations by the quickest, most convenient route, taking advantage
of favorable winds. This will save still more fuel and open space for many more
aircraft in the system. It could also further a reshaping of the airline industry
that began more than twenty years ago.
BIG AND SMALL
We have written of bimodal distribution before. Giant players flourish due to

economies of scale, and boutique operators prosper by delivering the kind of tai-
lored service that mass marketers cannot. Midsized companies, lacking either
advantage, disappear. This process has been especially hard on air carriers,
which are vanishing at record rates. Globally, the number of airlines is expected
to drop from around 500 in 2002 to only 60 in 2010.
However, in this industry the mechanism of attrition is a bit different. This
is important, because it will continue to shape air travel in the next two decades
as it has done for the last twenty years.
There are no small, high-service airlines analogous to the boutiques seen
in other industries. Instead, carriers compete almost exclusively on price. And
it is seldom the largest participants that compete most effectively. Discount car-
riers generally run tighter operations, pay their employees less, often buy used
planes in good condition rather than investing in new equipment, turn them
around faster between flights, and pack their passengers tighter. These effi-
ciencies give the discounters lower costs per passenger mile and better profits
despite offering cheaper prices than their larger competitors.
As a result, discount operators are flourishing even as full-fare carriers
fight to survive. Low-fare lines held just 4 percent of the American market
in 1991. By early 2004, they accounted for 25 percent. In 2003, even business
travelers were buying air tickets that averaged 51 percent cheaper than stan-
dard business rates. Thus, Southwest Airlines, the pioneer of cut-rate avia-
tion, managed to make $45.5 million in the first quarter of 2003, a time
when United had an operating loss of $608 million and American hemor-
rhaged no less than $735 million. Air Tran built up its capacity by 28 percent
over the year ending in June 2003 and will take delivery of 35 new aircraft
over the next three years. Jet Blue has expanded from 21 aircraft in De-
cember 2001 to 41 in April 2003, and expects to operate 83 aircraft by the
end of 2005.
All this is reshaping consumers' travel habits. In Europe, vacationers used
to book package tours, organized and sold by major tour operators. Not any-
more. In 2003, more than 20 percent of visitors arriving in Mallorca, for ex-
ample, arrived by discount airline and booked their hotel rooms on the Internet.
And because they paid less for air fare, many upgraded to more expensive hotel
accommodations.
Early in 2004, several discount airlines in the United States even were
moving into the international market, long a private preserve of the full-service,
full-price earners. Several already are serving the Caribbean and Latin Amer-
ica, while others plan to offer discount service to Europe and Asia by the end
of the year.
132 Chapter 5
Discount airlines also have achieved steady growth in Europe, where some
500 routes are now served by 20 discount airlines. According to one estimate,
low-fare carriers now handle 40 percent of passenger traffic within Britain and
between Britain and the continent. By 2010, low-fare and no-frills airlines such
as Ryanair and easy Jet are expected to capture at least 25 percent of the mar-
ket throughout the European Union,
Despite the jammed seating and food choices that top out at a small bag
of pretzels, low-cost carriers are winning passengers for more reasons than
cheap travel. The Airline Quality Ratings, compiled by professors at Wichita
State University and the Wichita State Aviation Institute, rate fourteen airlines
that carry at least 1 percent of American domestic passengers. Criteria mea-
sured in the survey include on-time performance, staff courtesy, baggage han-
dling, and the number of customer complaints. The 2003 survey ranked fourteen
airlines. JetBlue came in first, with low-fare carriers taking three of the top four
places.
In the United States, the discounters have one more advantage as well.
United, US Airways, and the other giants exist to serve as many cities as possi-
ble. They do this by collecting passengers from smaller cities and consolidating
them at about thirty major hub airports for long-distance travel. Running a
hub-and-spokes system is not cheap, and it drives costs up for the major carri-
ers by an estimated 15 percent. Discount airlines specialize in flying between
cities that offer enough traffic to fill their planes and avoid the expense of hub
operations.
Executives at the giant airlines argue that the hub-and-spokes model is
the only way air travel can work in the United States. Of the 30,000 city-pair
markets where air service is available, only 5 percent have enough traffic to
support nonstop, point-to-point flights. For example, Syracuse, New York, of-
fers 43 departures each day. Flights run nonstop to 11 hub cities and provide
one-stop access to more than 175 destinations. Flying point-to-point, if it takes
75 passengers to justify running an airplane for them, Syracuse could support
only one flight per day to each of seven destinations.
Discount airlines can offer cheap fares in part because they serve only
markets that can fill planes for point-to-point travel. And the top 5 percent of
city-pairs that give the discount airlines their living account for 73 percent of
all passengers flying in the United States.
However, this picture is changing. The major airlines have not just been cut-
ting prices—by up to 77 percent on some routes!—to compete with the leaner,
meaner discounters. They have been eliminating service and starting their own
low-fare operations. Non-hub airports have lost 19 percent of their air service
since 1998; short-haul flights by the "Big Six" airlines have declined 43 percent
since late 2001, and about two-dozen cities have lost all service by the major air-
lines. Fully half of the aircraft flown by the traditional airlines early in 2004 are
smaller regional jets with no first-class seats. Most of the "Big Six" carriers have
reduced flights to some of their hubs and pulled out of some smaller commu-
nities. None of them flies to Africa any more, nor to the Middle East (other than
Israel), Eastern Europe, Indochina, Scandinavia, nor any of the states of the for-
mer Soviet Union, save for a single flight to Moscow. It is getting harder and
harder to tell the difference between the major airlines and the discounters, save
that their seats cost up to 30 percent more, even on the same routes.
At the same time, local populations are growing. Demand for air travel
grows with them, so many more markets should be able to fill planes each day.
And with satellite navigation, it becomes a lot easier for the air traffic control
system to handle that kind of flight schedule. Point-to-point air travel may be
destined to make the hub system obsolete, except for the longest routes. That
would open a lot more U.S. markets to discount service. This is not good news
for the major airlines.
Some aviation experts are convinced, others not. Boeing is betting the
store on direct-route air travel. Airbus clearly is just as convinced that the hub-
and-spokes system is here to stay. We can see this in the new models the two
companies are bringing to market.
The Boeing 787 is a midsized, long-range carrier. Though details are yet
to be fixed, it is expected to come in somewhere around 225 passengers, and the
company says it will definitely be capable of 8,000 miles in a single hop. This
plane clearly aims to provide nonstop service between midsized cities that today
would be linked by a hub. Boeing is so sure that point-to-point travel will take
over the market that it has committed to the project with only a couple of mod-
est orders from Nippon Airways and Japan Air Lines. It will be the first time the
company has built a new plane without major support from a domestic airline.
In contrast, the Airbus A380 will be a double-decker giant with seating for
555 passengers, plus a lounge and walking-around room of a kind not seen
since airlines dumped the 747 piano bar to make room for more seats, It makes
sense only in a hub-and-spokes system, where it can serve as the long-haul car-
rier for passengers with a variety of origins and destinations.
The two firms have put hard numbers to their visions of the future. Boe-
ing believes that about 24,000 new airliners will be sold in the world over the
next twenty years, not counting the smallest planes suited only to regional ser-
vice. Of those, it says that 68 percent will be midsized single-aisle aircraft like
its 787; only 3 percent will be mass movers larger than the current 747. Airbus
puts the market closer to 15,000 new jets, plus 3,000 planes being refurbished
to like-new standards. It believes that 52 percent of sales will be in the 787 cat-
egory and 11 percent will be vast hub-to-hub airplanes like its A380, which thus
far is the only model destined for its intended class.
At FI, it seems to us that both companies may be half-right, in principal
if not in their exact numbers. It will be a long time before the hub-and-spokes
134 Chapter 5
system disappears completely. Too many small cities cannot support direct ser-
vice, and even some medium-sized communities must combine their passenger
loads to support international flights. Yet both technology and population
growth clearly point toward more point-to-point service, at the expense of the
hub-and-spokes carriers.
Nearly all of the American full-fare airlines have tacitly accepted the point-
to-point model by setting up their own discount operations. The European air-
lines will make this transition soon, though it will not be easy for them. In late
2003, Cranfield (U.KL) University's Air Transport Group warned that excess seat-
ing capacity already could drive some of Europe's low-cost air carriers out of
business. At this point, we expect both Boeing and Airbus to find markets for
their new models—but there are likely to be a lot more 787s than A380s in the
air twenty years from now.
THE BOTTOM LINE

The post-9/11 downturn in air travel will have a lasting impact on the airline in-
dustry. Boeing estimates that 5 percent fewer passenger-miles will be flown in
2020 than would have been the case in the absence of 9/11. That puts the mar-
ket roughly four years behind the growth curve that analysts once expected.
This fits well with FAA projections. Three years ago, the agency forecast that pas-
senger volumes in the United States would reach 1 billion in 2010 and 1.1 bil-
lion three years later. It now says that growth will recover soon to the 5.1 percent
annually seen prior to 9/11. Yet American carriers will not fly 1 billion in a year
until 2014.
This all adds up to an environment much like the one that existed before
September 11. Undercapitalized, inefficient carriers will struggle to survive—
and that second category will include some of the biggest names in air travel.
Full-fare carriers will continue to offer wider seating, in-flight Internet service,
and even a few bunks for weary passengers on long flights, all in an effort to jus-
tify premium prices. They will find it a hard sell, as even business travelers put
up with the discomforts of flying coach in order to save money on all but the
longest routes. The number of major hub-and-spokes airlines in the United
States will decline from seven to five, then four, and eventually perhaps to only
three. The same trends will be seen in Europe, and to a lesser extent, Asia. Yet
in each region the most efficient, best capitalized competitors will reap ample
rewards.
But behind these forecasts there are a few assumptions, and they should
be made clear because they could prove wrong. In predicting a recovery, we as-
sume that the cost of jet fuel will come down before it drives many of the major
airlines out of business. This is likely, if only because OPEC has always found
it impossible to inflate the price of crude oil for very long. We will be surprised
if there is not a significant break in time for the American presidential elec-
tions in November 2004.
We assume also that there will be no major outbreak of bird flu, nor an epi-
demic of SARS that lasts for more than a few months. Bird flu in particular
has the potential to halt most international air travel for a year or more. We as-
sume that it will not only because there is, as yet, no evidence that the virus
has learned to leap from one human patient to another.
The third assumption may be the weakest link in our forecast; it could go
not merely wrong, but horribly wrong. We assume that there will be no repeti-
tion of the September 11 terrorist hijackings. Another spectacle in which air-
liners full of terrified passengers slam into buildings with thousands of
occupants, or die in some equally spectacular way, could put the global airline
industry into a depression from which it would not emerge for years. And, in
May 2004, there have been disquieting rumors for months that Al Qaeda has an
encore performance already in the works.
KEY TRENDS FOR THE AIRLINES

stantial recovery.
Implications for the Airlines: Business travel will slowly recover from its low
in the recent recession, bringing new demand for seats, particularly on long-
distance flights. (However, this does not necessarily suggest that executives who
have grown accustomed to discount fares will soon be willing to pay for busi-
ness-class seats, even if those seats are available.)
Leisure travel will recover as well, and probably more quickly than busi-
ness travel. These passengers increasingly will prefer low-fare carriers.
Chapter 6
The Asia-Pacific markets, particularly India and China, will grow much
more quickly than demand in North America and Europe.
by 217 percent. In contrast, the developed nations will fall from 23 percent of
the total world population in 1950 and about 14 percent in 2000 to only 10 per-
cent in 2050. In 10 years or so, the workforce in Japan and much of Europe will
be shrinking by 1 percent per year.
Implications for the Airlines: Demand for air travel will grow at least as
quickly as the world's population.
Summary: In autumn 2004, OPECs aim is to hold the price of oil at rela-
Implications for the Airlines: For so long as jet fuel remains overpriced,
the full-service airlines have no hope of becoming profitable. This problem
should ease when oil prices return to their normal range, most likely by 2006.
Full-service airlines eventually will be forced to enact a ticked surcharge
to cover the cost of fuel. However, doing so will drive still more of their pas-
sengers to the discount carriers.
annually. The European Parliament estimates that 70 percent of the continent's
moment—rate industrial growth more important than dealing with environ-
mental problems, many others are working to clean up the air and water, save
rainforests, and protect endangered species. Overall, the trend is clearly toward
a cleaner, healthier environment.
Implications for the Airlines: Pollution controls will continue to be a grow-

ing burden for the airlines. However, the need to eliminate pollution eventually
will help to make the air carriers more efficient and profitable.
ping faster and cheaper by land, sea, and air.
generation of airliners will carry up to 250 people for 9,000 miles or 555 peo-
ple up to 6,400 miles. Advances in automobile technology such as road-condition
sensors, automated traffic management systems, and hybrid power systems all
will be in common use by 2010. Similar developments are seen in every sector
of transportation.
Implications for the Airlines: New technology should cut fuel use by as
much as 10 percent per passenger mile over the next ten years.
New safety technologies, such as fuel tanks filled with inert gas, should
eliminate some potential accidents in the future, saving more than 1,000 lives
in the next ten years.
By eliminating the need for America's hub-and-spokes air travel network,
satellite navigation will dramatically reduce the cost of air travel in the United
States over the next ten years. It also will improve the profitability of the major
airlines—or at least of those that survive until the transition has been made.
Implications for the Airlines: No matter what else goes right, there will be
a sword over the industry's neck for at least the next ten years.
New security precautions will continue to drain profits from the airlines,
particularly in the United States.
It is essential that the airlines set up to screen all checked baggage before
it goes onto an airplane, just as they do carry-on luggage.
Summary: For at least 20 years, economies of scale have allowed the largest
companies to buy their smaller competitors or drive them out of business. At
the same time, thousands of tiny, agile companies are prospering in niche
138 Chapter 5
markets. We see this pattern among automakers, computer companies, airlines,

banks, and many other industries.
Implications for the Airlines: High-priced, full-service airlines have only
just begun to cope with competition from the discount carriers. No-frills airlines
will continue to gain market share at the expense of the full-fare lines.
Boeing's 787 is likely to find more of a market than the Airbus A380.
Competition among the discount airlines will be even more intense than
between the discounters and the full-fare carriers.
Chapter 8
In Japan, hungry customers pack into Tokyo's Friendly Cajún Café. In Europe,
gourmet restaurants are doing much less business than usual, but American
hamburger chains are blamed for soaring rates of obesity on the continent. And
in the United States, those same fast-food restaurants are adding low-carb,
high-nutrition menu items for health-conscious consumers who will no longer
eat french fries. Around the world, the restaurant business is changing.
Inevitably, many changes are driven by economics. The details vary from
country to country, but throughout the developed world we are seeing a com-
mon theme of nascent recovery after some difficult years. Restaurants are ex-
pected to benefit from this welcome development.
In the United States, the threat of a "double-dip" recession seems to have
passed. After two difficult years, the economy finally expanded by 3.1 percent
in 2003 and in May 2004 seems on track for about 4 percent growth this year.
Retail sales, factory orders, and the Index of Leading Indicators all have been
rising consistently, often more strongly than economists anticipated. Even job
growth, which consistently underperformed forecasts by a wide margin
throughout the early stages of the recovery, began to rebound strongly in March
and April 2004; by June, more than 1 million new jobs had been added to the
economy. All this augurs well for the nation's restaurants.
Europe also is beginning to recover from the economic sluggishness of
recent years. Growth on the continent ran at just 0.9 percent in 2002 and 0.4 per-
cent in 2003. In substantial part, this was due to the weakness of the dollar on
international currency markets, which discouraged American tourism and cut
demand for relatively expensive European exports. Now retail sales, sentiment
indicators, and even manufacturing have begun to pick up. France turned in 2.5
percent growth in the fourth quarter of 2003, its first positive showing in two
years, and 3.1 percent in the first quarter of 2005. The Conference Board's index
139
Chapter 6
of leading indicators for the country is pointing solidly up. In Germany, both
consumer and industrial demand are rising, and the economy is expected to
grow by 1.6 percent in 2004 and 1.75 percent in 2005. Britain managed to avoid
a recession during the recent downturn, despite a severe drought in London's
critical financial sector, and the GDP is expected to grow by about 3 percent an-
nually in 2004 and 2005. Unemployment remains high in parts of Europe—
around 9 percent in France and 10 percent in Germany—but things are clearly
looking up.
China had a remarkable economic boom in 2003, with GDP growth aver-
aging 9.1 percent for the year and 9.9 percent in the fourth quarter. In the first
thee months of 2004, the economy grew by an unsustainable 10.7 percent, a
rate so hot that Chinese economic officials were trying to slow its growth so as
to avoid an outbreak of inflation. In the second quarter, growth declined to
"only" 9.6 percent, and economists were breathing a sigh of relief, as it ap-
peared that China might be settling back to a growth rate that it can sustain.
Even Japan is growing solidly for the first time in a dozen years. The econ-
omy expanded by a satisfying 7 percent in late 2003, this after more than four
years in which the growth rate averaged just 0.3 percent. By April 2004, the
Conference Board's index of leading indicators for Japan had been up no less
than twelve months in a row.
All this spells good times for the world's restaurants, which prosper when
people feel they can afford to splurge. Restaurant sales in the United States
are expected to grow by 4.4 percent this year, to a record $440.1 billion. Ad-
justed for inflation, the growth rate will be about 2 percent, up from 1.3 per-
cent in 2003.
In Japan, restaurant sales are growing rapidly as the economy improves.
Some 65 percent of consumers eat out at least once a week, and an estimated
75 million restaurant meals are served daily.
In China, both full-service and quick-service restaurants have been en-
joying a boom, as affluent, but busy customers flock to eat out. McDonalds,
KFC, Pizza Hut, and local quick-service operators such as the Hulian Super-
market Chain, Xiao Fai Yang, and Beijing Quanqude all have been growing
rapidly. Chinese quick-service sales are expected to grow by 5.5 percent per year
for the foreseeable future. Much of this expansion is being driven by government
policy, which encourages the Chinese people to spend their money rather than
saving it in order to generate further growth.
As the dollar regains some of its strength in currency markets, American
tourists should return to Europe and Japan, and head back to more upscale
accommodations. Restaurants in tourist destinations, where sales have been
off by up to 50 percent from previous years, should find it much less of a
struggle just to survive. This will be even better news in London, where a wave
Tasty Trends for the Restaurant Industry 14*
of bankruptcies decimated the restaurant business during the financial sec-

tor's lean times.
Returning prosperity in the United States should promote the current
growth among restaurants a cut above the traditional casual-dining segment.
This trend may be felt in Europe as well, once the current appeal of American-
style fast food begins to wane.
However, low-end earners and those under heavy time pressure will opt for
quick-service restaurants. Their numbers are likely to grow as automation con-
tinues to reduce the need for human labor and outsourcing exports well-paid
American jobs to poorly paid foreign lands.
Of course, economic conditions are just one of many factors that in-
fluence the world's restaurants. At FI, we see many trends that will help to
shape this industry in the years ahead. Some are limited to the United
States; others are felt worldwide, or soon will be. Most are very broad waves
that are sweeping societies at large; a few are specific to restaurants. In no
particular order, here are twelve of the most important trends for the restau-
rant industry:
DINERS CHANGE, RESTAURANTS ADAPT

Throughout the developed world, people on average are growing older. In the
United States, those over 65 made up 15 percent of the population in 2000; by
2050, 27 percent of Americans will be in their traditional retirement years.
Japan's over-65 population will skyrocket from 17 percent in 2000 to 22 per-
cent in 2010 and more than 36 percent in 2050. Germany, France, Britain, Italy,
and many other countries also are aging, on average.
They are growing more diverse as well, thanks to a wave of migration that
is bringing millions of people from the eastern hemisphere to the western hemi-
sphere, and from south of the equator to the northern lands. In the United
States, the Hispanic, Asian, and Middle Eastern populations all are expanding
rapidly. In 2000, Latinos accounted for about one-eighth of the U.S. popula-
tion. By 2050, they will be nearly one-fourth. And the number of Asians is al-
most doubling from 11.2 million in 2000 to 19.6 million in 2020. Similar
changes are being seen in Europe, where hundreds of thousands of immigrants
arrive each year from Eastern Europe, North Africa, the Middle East, and the
Indian subcontinent.
Baby boomers still dominate restaurant clientele. They visit full-service
restaurants with per-person checks in the $10-to-$20 range more than any other
age group. They will continue to power the casual-dining market for many years
to come. In addition, several fast-food vendors in the United States are trying
Chapter 6
to create a new middle ground known as "fast casual" in an attempt to expand

beyond the saturated fast-food market. This innovation aims to take advantage
of boomers and their children who grew up on fast food but cannot yet make
the leap to the higher-ticket casual dining.
A more diverse population spells growing demand for ethnic cuisines for-
merly outside the mainstream. In Europe, a generation of immigrants from
North Africa, the Middle East, Pakistan, India, and Bangladesh have been open-
ing restaurants that offer their native cuisines for nearly 20 years. This new fare
has proved popular with indigenous Europeans.
New immigrants and their first-generation children prefer the foods they
grew up with. This is helping to drive the American boom in Asian, Latin, and
Caribbean restaurants. In early 2004, the fastest growing segment is Mexican
restaurants, thanks to a growing Hispanic population, with a growing income.
(So-called "Nuevo Latino," the latest craze, combines Latin and Caribbean in-
fluences.) This trend is particularly strong in California, Florida, and other
areas with large Hispanic communities. American Hispanics have an estimated
$452 billion.
All this fits well with buying habits in the United States, where baby
boomers and their descendants have long sought out novelty and variety. They
are looking not just for food, but for new and exciting experiences. This ex-
tends to new cuisine, exotic surroundings, and almost anything that is just plain
"different." What these restaurant customers seek is not so much nutrition and
convenience, but the experience of dining out. The trend is to dining as enter-
tainment. Witness the rise in America of Thai food, with its emphasis on chili
oil, coconut paste, fish sauce, lemon grass, and other relatively exotic flavors.
The popularity of Cajun food in Japan and pizza and ice cream in China are sim-
ilar trends.
The drive toward flavor and experience is behind the American fad for
tapas—the Spanish equivalent of dim sum—and "grazing," which offer more
different flavors in a single meal. These changes increasingly are finding their
way into quick-service restaurants. Arby's Roast Turkey Ranch and Bacon sand-
wich features Asian-style tamarind sauce, while McDonald's has been exper-
imenting with Latin-flavored items. If these innovations are successful, they
will soon be exported to outlet Europe and Asia. Though these specific fads may
pass, the notion of packing more intensity and experience onto one table is
with us to stay.
In the years ahead, we can expect to see more American restaurants fea-
turing foods from out-of-the-way parts of Asia, the Caribbean, Latin America,
and North Africa, with a modest boom in Indian fare; more European restau-
rants offering cuisine from many of these same regions; and still more restau-
rants in Japan specializing in American regional fare.
Even more intense flavors lie ahead as well. Aging baby boomers will need
them to maintain their feeling of novelty and excitement as their taste buds
lose their sensitivity.
As the boomers grow older, other changes are in store. Already, retirees
struggling with fixed incomes are competing with young people for restaurant
jobs. This should help to minimize tightness in the labor market owing to the
relatively small size of the current generations and may provide a more stable,
reliable pool of workers in a traditionally volatile industry. Farther ahead, any
restaurants are likely to find that a major part of their business consists of de-
livering take-out meals to local retirement communities.
TOURISTS EAT, TOO

The worlds boom in tourism has only been slowed, not stopped, by concerns
such as the threat of terrorism and the unfavorable exchange rates for the dol-
lar in 2003 and early 2004. Once those worries have passed, the number of
Americans traveling abroad will begin to grow again at its accustomed 5 per-
cent per year. It will expand for the foreseeable future.
The opening of European borders has caused a boom in continental
tourism, especially among the younger generations, who routinely speak several
languages. Young people from Italy, France, England, and Germany today are
nearly as likely to spend vacations, and even long weekends, in each other's
countries as in their own.
For restaurants in tourist destinations, this is good news, and not only be-
cause visitors from prosperous foreign lands will again be dining out. Because
growing numbers of travelers are taking their vacations off-season, they should
help to even out the cyclically of cash flow for restaurants, just as they have
been doing for other hospitality businesses.
This is particularly significant for higher-end full-service restaurants,
which report that up to 30 percent of their sales—and more than half in some
major European tourist destinations—are to vacationers and business travelers.
DINING FOR HEALTH AS WELL AS PLEASURE

Early in 2004, the federal Centers for Disease Control and Prevention warned
that fully two-thirds of Americans are overweight. Obesity, the agency added,
is fast closing in on heart disease (itself weight-related) as the nation's leading
cause of death.
This is a global problem; in fact, the epidemic has been nicknamed "globe-
si ty." According to the International Obesity Task Force, 1.7 billion people
Chapter 6
around the world need to lose weight, and 312 million are obese—at least 30
pounds over their maximum recommended weight. About 36 percent of chil-
dren in Italy, 30 percent in Spain, and 22 percent in Britain are now overweight
or obese. Only the poorest nations of Africa are immune to this trend. As a re-
sult, the incidence of diseases such as type 2 diabetes, hypertension, coronary
heart disease, osteoarthritis, and several types of cancer is skyrocketing through-
out the world. So are death rates.
Figures like these—no pun intended—are bringing new power to the health
movement that began in the United States more than 20 years ago. In the in-
dustrialized West, growing numbers of consumers are changing the way they
eat and care for themselves, not only at home but when dining out. This trend
is being felt in restaurants throughout the United States and is beginning to
appear overseas.
Smoking also is in decline. Only 21 percent of Americans smoked ciga-
rettes as of January 2000, down from 30 percent in 1983. Early in 2004, Ire-
land even banned smoking in its pubs; this was the first sign that smoking may
be going out of favor in Europe as well as the United States. The number of
smokers is rising rapidly in much of Asia, but we expect this trend to be re-
versed as the true cost of this habit makes itself clear in rising rates of cancer,
heart disease, emphysema, and other ills.
Restaurants in the United States are working hard to adapt to the health
concerns of their guests. Even before the low-carb fad took off, 71 percent of
Americans reported that they were trying to include more fruit and vegetables
in their diets, rather than meats and baked goods. Now the low-carb Atkins and
South Beach diets are the hottest things in the fat-fighting market. TGI Fridays
reports that 19 percent of its frequent casual-dining customers are following the
Atkins plan. Beef producers report that not even the discovery of mad cow dis-
ease in December 2003 could slow meat sales within the United States; carb-
conscious dieters kept beef prices near record highs.
Menus are being adapted to fit this trend, with high-protein meals dis-
placing some choices that are stronger in carbohydrates and fats. TGI Friday's
and Ruby Tuesday both have introduced series of low-carb items to their
menus. Pit Stop Pasta, in Escondido, California, has even come out with a low-
carb "pizza in a bucket," delivering all the toppings but none of the crust. (FI
does not expect this to be a big hit with customers.) In the United States, at
least, we will see similar menu changes with every diet fad that manages to re-
main popular for more than a few months. Europe probably is ten years be-
hind in this trend.
Restaurants not actually changing their menus are counting carbs and
promoting Atkins-friendly choices. Many say this has helped them to keep cus-
tomers who might otherwise have been lost. We expect it to become standard
practice in many casual-dining establishments.
Salad entrees are rapidly becoming more popular, particularly in the ca-
sual dining restaurants, while both casual-dining and fine-dining restaurants re-
port a market increase in sales of seafood. These trends are likely to continue
for several more years.
Mediterranean cuisine also is gaining popularity in the United States, even
as its appeal wanes in Europe, thanks largely to medical studies that have
praised it as heart-healthy food.
Health-minded consumers are demanding more nutrition information,
even in restaurants. Calorie and content details are likely to begin appearing on
American menus to supplement heart-healthy symbols.
This trend has proved hard on quick-service chains, which are struggling
to overcome a long-standing reputation for heart-unhealthy fare. A 2001 Har-
ris Poll showed that about one-third of Americans ate at fast-food restaurants
less often than a year before, citing health reasons. As a result, many chains
are adding salads, low-carb dishes, and other diet choices to their menus. How-
ever, hamburgers remain the dominant item on fast-food menus and are likely
to remain so for many years to come.
Supersizing is out, smaller portions in—for the moment. This has all the
earmarks of a short-lived fad.
Consumers also are shunning desserts, with sales down some 2 percent in
2003 alone. This is in part a money-saving measure in a tight economy, but
weight-watching is clearly important. Restaurants increasingly are responding
by offering smaller, lighter, cheaper desserts, reducing selection, and focusing
on other parts of the meal.
CONSUMERISM COMPOUNDS
The Internet has brought shoppers vast new sources of information about prod-
uct quality, pricing, delivery time, and store services. At the same time, advocacy
groups and regulations have been promoting better content labels, nutrition
data, and other consumer-oriented requirements. This continuing growth of
consumerism is inevitably making itself felt in the world's restaurants.
Savvy consumers demand high quality at the best possible price, and in
good economic times quality is more important. In this, consumers in the
United States and Europe are following the lead of their peers in Japan, where
only the freshest and highest quality foods are salable. Their concern for qual-
ity is pushing the entire restaurant industry to improve its performance in this
critical area.
This gives restaurant chains one more advantage over their single-site
competitors. The ability to market a brand will remain a powerful tool in at-
tracting quality-conscious consumers. However, the sterile uniformity of the
146 Chapter 5
most homogenized restaurant chains is out. Consumers increasingly are shop-

ping for quality food delivered in an ambience of warmth and comfort.
Chef-owned restaurants will find it increasingly difficult to establish a
foothold, save in the largest cities, where one persons reputation can attract
customers in sufficient numbers to sustain a business.
Consistent quality is important for another reason as well: Consumers in-
creasingly get their information from the Internet. A single dissatisfied cus-
tomer in Dubuque can damage a chain's reputation all over the country.
This trend will become more important in Europe as the Brussels bu-
reaucrats of the European Union spin off ever more consumerist regulations and
more upscale American restaurant chains expand their continental operations.
HIGH TECH, HIGH TOUCH

As technology permeates our daily lives, and further reduces us to small, highly
pressured cogs in the global economy, our need for comfort and personal at-
tention is growing rapidly. Restaurants increasingly are providing a haven where
we can sit back, relax, and feel a little bit pampered. This is one powerful force
behind the growth of the new upscale restaurant chains that are quickly build-
ing a niche between casual dining operations and the luxury restaurants.
Technology is bringing even more obvious changes outside the diner's view.
Automated equipment, more sophisticated order and inventory systems, and
other improvements in information technology will continue to cut operating
costs for both quick-service and full-service restaurants. For example, auto-
mated food service prep machines are being integrated into the process of ful-
filling customer orders. French fryers can be connected to point-of-sale
hardware and automatically lower fries into the oil as orders are placed. Auto-
matic drink dispensers fill orders with no human intervention. Anything that is
repetitive and requires consistency will be replaced over time with robots.
Corporate-level accounting, personnel records, and similar functions all
can be shipped to reliable offshore data services with a significant impact on the
bottom line.
However, technology is raising some other costs. After a brief respite in the
1990s, the price of health care is again rising at double-digit rates, thanks in sub-
stantial part to the high cost of new medical technologies. As new diagnostic and
treatment methods reach clinical use, they will continue to drive up the cost of
employee medical benefits. This trend is likely to continue so long as smoking
and obesity remain common. In Europe, these costs will be felt as higher taxes
rather than as direct expenses.
At the same time, restaurants are finding that technology makes it pay to
retain employees, even if salary costs are slightly higher. Overall, it costs less to
keep a skilled employee than to provide training and benefits for a new hire. In
the long run, retaining practiced workers lowers costs and increases guest sat-
isfaction. This trend is growing faster in the full-service restaurants than in
quick-service extablishments.
XS AND DOTS
Though the Baby Boomers still dominate Western culture, their children and
grandchildren are a growing force in society. They are influencing the restau-
rant business in a number of ways.
Members of the post-boomer generations have more in common with their
peers throughout the world than with their parents. They share values, fashion
sense, and a host of other factors that mark them as something new and dif-
ferent. They are materialistic; individualistic, yet cooperative in groups; tech-
sawy; and given to extremely short attention spans.
They also are relatively rare. Generation X, roughly the 30-plus cohort;
the Dot-coms, now in their 20s; and their younger siblings, yet to be authori-
tatively nicknamed, are far smaller than the 40-plus age group. Though there
are more entry-level workers today than there were just five years ago, there still
are fewer than employers need. In the United States, more than half of restau-
rant operators say they are finding it increasingly hard to hire enough workers,
and particularly hourly workers. The shortage is tightest among cooks, but this
problem is felt in all positions.
The worker shortage affects quick-service restaurants more severely than
full-service locations. One-third of American quick-service operators report that
recruiting and retaining employees is a major challenge, compared with only
14 percent of full-service operators with average check sizes over $8. This prob-
lem can only grow more difficult in the near future.
Generation X should be renamed "Generation E," for entrepreneurial.
Throughout the world, they are starting new businesses at an unprecedented rate.
The Dot-coms are proving to be even more business-oriented, caring for
little but the bottom line. Twice as many say they would prefer to own a busi-
ness rather than be a top executive. Five times more would prefer to own a
business rather than hold a key position in politics or government.
If this sounds like good news for business, it's not. The bottom line these
generations care about is their own, not their employers. They have grown up
to expect affluence, and even wealth; just how they will achieve it is not clear,
given that many in the United States are undereducated even for most working-
class jobs. But the Xs and Dot-coms also watched their parents remain loyal to
their employers, only to be downsized out of work. The lesson was not lost on
them. They will quit and move across the country at even the hint of a job that
148 Chapter 5
offers better pay or opportunities for training. The data are not readily available,
but we strongly suspect that this is as true in the other developed countries as
it is in the United States.
The generations now entering the job market are likely to be even less re-
liable than their older peers. Turnover rates have declined slightly among both
hourly and salaried workers in the current tight job market. They are likely to
rise sharply now that the economy is finally beginning to create enough new jobs
to go around.
If this sounds like the work ethic is in trouble, you are catching on. For
younger employees, work is only a means to their ends: money, fun, and leisure.
In this, Americans are just catching up with a trend that swept Europe when
government pensions and labor laws guaranteed workers there free time and
much greater security. Tardiness is increasing, sick-leave abuse is common, and
job security and high pay just aren't the motivators they once were. Fifty-five
percent of the top executives interviewed recently say that erosion of the work
ethic will have a major negative effect on corporate performance in the future.
To meet their need for reliable workers, restaurants will have to adopt all
the standard recruiting techniques: raise starting salaries, provide better ben-
efits, and expand training programs.
For today's entry-level workers, training for future jobs is a key issue;
they simply do not believe in traditional careers and long-term employment,
even if the restaurant industry were in a position to offer enough satisfying,
well-paid positions to go around. So an essential factor in retaining young
workers is to position restaurant jobs and training very clearly as stepping-
stones to more desirable positions in other industries later in the recruit's
working life.
Better training programs also will be needed to ensure a high quality of ser-
vice from generations not basically inclined to pay attention to detail.
In this context, displaced baby-boom workers and post-retirement job
seekers become even more important as a source of reliable employees.
One more effect of this change will be to drive restaurants to implement
robots and artificial intelligence to run and maintain a smooth flow of pro-
duction in the restaurant. Many of the skills required to maintain smooth op-
eration will be conducted remotely at a central or regional location. Intelligent
machines, in-store real-time video, and network connectivity will allow one
manager to control several locations.
CLOCK-WATCHING
Computers, electronic communications, the Internet, and other technologies
all are making national and international economies much more competitive.
Labor productivity has been skyrocketing in recent years, partly because of
these new technologies, but also because companies are driving their employ-
ees to do more faster. American workers accomplished nearly 30 percent more
work per hour at the end of 2003 than they did in 1992. They also spent about
10 percent more time on the job than they did a decade ago. European execu-
tives and nonunionized workers face the same trend.
In this high-pressure environment, dining out is becoming ever more im-
portant, both as a convenience to harried workers and as an opportunity to
relax and enjoy life after the stresses of work. In a study by the National Restau-
rant Association, 79 percent of American diners said that eating out was a bet-
ter use of their leisure time than cooking and cleaning up. Those workers will
continue to expand the market for casual and higher-end dining.
"The multi-unit operators will continue research to ensure that their menu
price points will drive the time-conscious harried workers to their restaurants,"
comments Paul Wise, dean emeritus and former head of the hospitality pro-
gram at the University of Delaware. "The frequency of returning customers
is a growing important element of success in an increasingly competitive
environment."
The need to save time is one driver for the spread of American-style fam-
ily restaurants in Japan. By 2006, their numbers will have nearly doubled in
ten years.
However, the greatest beneficiaries will be quick-service restaurants that
can provide tasty, nutritious fast food in a pleasant environment.
One growing market is the "grab-and-go" breakfast. Though 77 percent
of breakfasts are still eaten in the home, that number is likely to decline as
working lives become ever more demanding. Many potential customers will
opt for a donut or energy bar and coffee in the car. Others will stop at their pre-
ferred quick-service restaurant for something more substantial.
GOVERNMENT WATCHDOGS
Since the U. S. Congress passed regulatory reform laws in 1996, more than
14,000 new regulations have been enacted. Not one proposed regulation was re-
jected during this period. The Federal Register, where proposed and enacted
regulations are published, was nearly 50 percent larger in 1998 than it had been
just ten years earlier—50,000 pages in all.
In Brussels, officials of the European Union are churning out new regu-
lations at an even faster pace, creating more uniform consumer and workplace
regulations throughout the continent.
Predictably, this growing burden of legal requirements is falling at least
as heavily on the restaurant industry as it does on other businesses. In addi-
tion to all the general work-related rules, laws proposed in the United States
350 Chapter 5
and Europe would provide nutritional data to consumers in real time, even in
restaurants where menus are based upon local fresh produce and meats.
To keep up with the competition, corporate computer networks will be re-
quired to access data that may be required to run a restaurant in the future.
They will automatically check on changes in corporate and industry standards,
government regulations for food safety, and other information critical to busi-
ness planning.
Beyond that, there really is not much to be said about the spread of gov-
ernment regulations. Restaurant operators will have to spend a growing frac-
tion of their time coping with them, just as their peers in other industries do.
It's just one more cost of doing business.
SECURITY THAT ISN'T SOCIAL

The September 11 attacks on New York and Washington have inspired a wave
of laws and regulations intended to keep would-be terrorists out of the coun-
try, or at least unable to harm others. This transformation has added a whole
new level of legal and regulatory demands on all businesses.
A bioterrorist attack on the food industry could be the most important
terrorist risk in the developed world. Directly and indirectly, the food industry
generates 13 percent of the U.S. GDP and employs one in eight Americans; in
some European countries, the numbers are slightly higher. This makes food a
target to gladden the heart of any terrorist.
Restaurants are the most accessible bull's-eyes in the industry, with the
highest concentrations of relaxed, vulnerable civilians. Restaurant attacks would
have enormous shock value. To date, most have been straightforward bombings
of establishments where Americans and other westerners congregate. Such at-
tacks have occurred in Germany, Bali, Morocco, and many other lands. They will
happen again. They are possible almost anywhere in the world, because most
borders present relatively few obstacles for the would-be terrorist. This is es-
pecially a concern for the European Union, because anyone who has entered one
EU country can travel freely throughout the continent.
However, food contamination may be an even greater threat. It has hap-
pened before. As early as 1984, followers of Baghwan Shree Rajneesh contam-
inated eleven salad bars with salmonella in a plot to take political control of
Wasco County, Oregon, by preventing nonmembers from voting in a local elec-
tion. The group reportedly possessed cultures of typhoid fever as well; the sal-
monella was just a proof-of-concept experiment. Nonetheless, it sickened more
than 700 people.
It could have been far worse. To take just one possible scenario, imagine
what would have happened if the person who mailed anthrax bacteria to
American politicians and journalists in 2001 had instead taken a lunch-time

job at a restaurant near Wall Street or in London's financial district, or even
had signed on at his local McDonalds. The results might not be as immedi-
ate and dramatic as a bomb tossed through the front door, but they could
prove just as devastating.
Restaurant operators should consider hiring security experts to look for
vulnerabilities in their locations and operations. Consistent with the comfort
and pleasure of their customers, they may want to take precautions to make
themselves harder targets for would-be terrorists.
Because food contamination is an obvious tactic for terrorists, restaurants
will be under growing pressure to know exactly whom they are hiring and to
maintain detailed records about their employees.
One new and important overhead item is insurance coverage against ter-
rorist incidents. In the United States, case law now holds that professional hosts
such as restaurants and meeting planners are liable for injuries to their guests
caused by a terrorist attack on their site.
THE RICH GET RICHER

We have written in other chapters about bimodal distribution, the tendency of
large, successful companies to keep growing and small ones to flourish in niche
markets, while midsized competitors are bought up or driven out of business.
We have seen this pattern among automakers and computer companies, banks
and hotels. We see it among restaurants as well. The consolidation seen among
chains in this sector can only continue. Expect a continuing stream of mergers,
acquisitions, and deal-making in the restaurant industry in the years ahead.
The growing popularity of restaurant chains positioned nearer the middle
of the price and service range appears to be something of an exception to this
trend in the United States. We expect it to spread to Europe before this decade
is over. Restaurants in the fast-casual market—such as Baja Fresh and
Panera—offer a wider range of menu options and more inviting décor than
quick-service chains, but much less service than casual-dining establishments.
Similarly, places like the Bonefish Grill, Cheesecake Factory, and its even higher-
end spinoff, the Grand Lux Café offer a more upscale experience than the
casual-dining chains but less service and ambience than luxury restaurants.
Market segmentation clearly allows more diversity among restaurant chains
than is found in most other industries. When combined with a unique identity
and a reputation for quality economies of scale can make for a winning com-
bination in almost any part of the market.
However, the growing proliferation of restaurant names—whether
chains or single-location, neighborhood restaurants—is likely to cut into
profits in the years ahead. According to the National Restaurant Association,
152 Chapter 5
nearly two-thirds of fine-dining restaurants and half of casual-dining and

family-dining chains say that it is becoming more difficult to maintain cus-
tomer loyalty than it used to be.
This is one more place where technology will come to the rescue. By col-
lecting information about individual customers, restaurants will be able to cus-
tomize their future dining experiences. As guests become accustomed to
entering a grocery store, downloading their grocery list, and receiving specials
coupons designed for their individual preferences, tKey will start to expect this
same experience when they enter their favorite restaurant chain. They will want
to know which items have appeared on the menu since their last visit, and which
contain peanuts or other ingredients that they dislike or that might trigger their
allergies. The menu will be personalized to their individual tastes. In the im-
mediate future, this will apply largely to full-service restaurants. However, the
trend toward individually customized menus will extend to quick-service loca-
tions as well.
IN ALL . . .
These trends spell interesting times for the world's restaurant operators—and
according to popular tradition, the wish that someone live in interesting times
is an old Chinese curse, not a blessing. Yet at FI we are optimistic about the fu-
ture of the restaurant industry.
There are some difficult challenges ahead, particularly with regard to
staffing and overhead. Yet the restaurant industry has both a decades-long
record of success and all the assets it requires to build a bright future. In pros-
perous, growing, and increasingly stressful nations, it supplies two of the basic
necessities of life: food and comfort. And if 90 percent of independent restau-
rants go out of business in their first year, well-run chains and the best inde-
pendent operators have always looked forward to a long and productive future.
So it is today.
The restaurant industry's unique market—every man, woman, and child
in every country—is huge and receptive, and its challenges are manageable.
For the world s restaurant operators, a bright and prosperous future appears to
be all but assured.
KEY TRENDS FOR RESTAURANTS

Summary: After a brief but painful recession, the U. S. economy has been
stantial recovery.
Implications for Restaurants; Restaurant sales will grow at least as quickly
as economies in general, and probably a bit faster. This should bring good times
for restaurant operators throughout the industrialized world.
Upscale restaurants will benefit from the growing prosperity of their cus-
tomers, as patrons who might have dined slightly down-market feel able to
spend a bit more for a meal.
However, quick-service chains also will benefit as hard-pressed workers
with only a few minutes to spare choose to "grab and go," rather than spend
time preparing their own meals.
world. As a result, the retirement-age population also is growing rapidly. It may
expand even more quickly than official forecasts anticipate, because they as-
sume that life expectancy will grow more slowly in the future. In fact, it is more
likely that new medical technologies will lengthen our lives still more rapidly
in the near future, and bring a better quality of life in the process.
Implications for Restaurants: Older diners will make up a growing portion
of restaurant clientele.
Older workers also will be available to make up the slack left by the small
size of younger generations.
Older diners will seek out stronger flavors to make up for the declining sen-
sitivity of their taste buds.
their economies grow and their citizens become more free to travel. Tourism
will benefit as Internet "virtual" tours replace printed brochures in promoting
Chapter 6
vacation destinations and provide current, detailed information on travel

conditions.
Implications for Restaurants: Tourists increasingly are taking vacations
out-of-season, softening the seasonality of income that has long been typical
of restaurants in tourist destinations.
Surviving restaurants in European tourist destinations should soon re-
cover the business they lost during 2002 and 2003, when terrorist worries, the
war in Iraq, and the low value of the dollar all discouraged international travel
by Americans.
Summary: A networked society facilitates a consurnerist society. Shoppers
erally enforced.
Implications for Restaurants: Restaurants will have to cope with a grow-
ing burden of consumer-oriented regulations.
Restaurant chains with a reputation for quality will have an enormous ad-
vantage in advertising to knowledgeable consumers.
Single-location restaurants will be at a growing competitive disadvantage,
save in major cities where the reputation of a top chef can cany them.
Any problems with quality are likely to be immortalized on consumer-
oriented Internet sites, where they will discourage potential customers long
after they have been corrected.
Implications for Restaurants: Our growing dependence on sterile, hard-
edged technology is one of the most powerful forces behind our need for mod-
est luxuries, like restaurant meals.
Restaurants will depend more and more on automation to make up for
shortages of workers and to ensure more uniform quality of meals and service.
Summary: Tardiness is increasing, sick-leave abuse is common, and fewer
workers respond to promises of high pay and job security. For Generation X, the
post-Baby Boom generation, work is only a means to their ends: money, fun,
and leisure. Top executives say this will reduce corporate performance in the fu-
ture, but many show no greater ethical standards, as seen at Enron, WorldCom,
and other major companies.
Implications for Restaurants: Productivity is likely to suffer as Baby-Boom
executives are replaced by their Generation X and Dot-com successors.
7. Generations X and dot-com will have major effects in the future.
Implications for Restaurants: Higher salaries, better benefits, and oppor-
tunities for training all will be increasingly important in motivating and re-
taining younger workers.
Younger workers will require a more "hands-off" management style than
previous generations have been willing to accept.
Post-retirement workers will be needed, both to make up for the short-
fall in the younger generations and to ensure that some employees, at least, will
be motivated and reliable.
Implications for Restaurants: Dining out is becoming ever more desirable,
both as an escape from our increasingly pressured working lives and as a bet-
ter use of time than cooking and cleaning up after meals.
Harried workers with only a few minutes to spare will continue to pa-
tronize quick-service restaurants. However, they will favor outlets with the tasti-
est food and most pleasant, relaxing environments.
Fast-casual restaurant chains will continue to prosper as cheap, conve-
nient, more comfortable alternatives to quick-service meals.
tember 11, the most dangerous terrorist groups are no longer motivated by
Chapter 6
specific political goals, but by generalized, virulent hatred based on religion and
Implications for Restaurants: Today, virtually every establishment has "in-
ternational" exposure, because borders are relatively porous, even in the post-
9/11 environment. This is particularly true in the European Union, where
anyone who enters one member country has unimpeded access to all the rest.
Restaurants are a prime target for terrorist attack, because they host large
numbers of relaxed, unsuspecting victims, and because people watching news
reports—the real targets of the attack—can easily picture themselves happily en-
joying a meal when the attack occurred.
Contamination of food with toxins or pathogens is a serious risk, and one
that is difficult to protect against.
Restaurants and chains unable to maintain their own security depart-
ments will need consultants to identify risks, design security programs, and
screen possible new hires.
Summary: For at least twenty years, economies of scale have allowed the
largest companies to buy their smaller competitors or drive them out of busi-
ness. At the same time, thousands of tiny, agile companies are prospering in
niche markets. We see this pattern among automakers, computer companies,
airlines, banks, and many other industries.
Implications for Restaurants: Mid-priced, family-oriented restaurants will
continue to face difficult times as large, value-oriented chains outcompete them
at one end of the scale and high-quality, high-luxury establishments capture
their customers on the other.
The fast-casual segment will continue to grow at a comfortable rate for at
least several years.
As chains proliferate and target a relatively fixed population of diners, it
will be increasingly difficult to maintain customer loyalty.
Picture your next vacation as it might be in 2075. In early July, you and your
family ride the space elevator to a port terminal 62,000 miles over the equator.
There you join nearly 2,000 other budget-conscious tourists on an interstellar
cruiser the size of an ocean liner. After a stately embarkation, you sail out
through interplanetary space, past the giant storms of Jupiter, close enough to
Saturn to walk on its rings, and on into the inky blackness beyond. Just four lux-
urious days later, you arrive at alpha Centauri, the star closest to our own sun,
tour a small but spectacular system of planets, and get out at...
Er, well, probably at a theme park in Orlando, where the whole journey
took place in a few hours of virtual reality. Alas, the smart money in physics is
still betting that Einstein was right about never going faster than the speed of
light. We will never travel to the stars unless we learn to hibernate and spend
centuries en route. E = mc ; Its not just a good idea, its the law.
2
Nonetheless, many other changes will come to the hospitality industry

over the next few decades. None will be as dramatic as star travel, but some
may be nearly as important to the participants.
What follows is a timeline of probabilities. Unlike the brief science fiction
scenario above, the developments below are rooted in todays realities. A ma-
jority deal with new technologies, for obvious reasons: Technology changes a
lot faster than social factors, and it often is the driver that eventually forces so-
cietal change. Our dates are "guesstimates"; they could be a few years off in ei-
ther direction. However, we at Forecasting International will be surprised if
many of these predictions fail to materialize.
And when we are wrong, it is likely to be because even bigger changes
made them obsolete. When forecasters peer out into the further distances—
say, beyond the next ten years—our mistakes are usually failures of the imagi-
nation. The far future is always stranger than we can anticipate.
157
158 Chapter 5
2010
Invisible idiot. That is how one early language-translation program, con-
verting from English to Russian and back again, interpreted the phrase, "Out
of sight, out of mind/' The software available online today does not do much
better, as anyone who has tried to read foreign-language e-mail can attest. But
within a few years, well-equipped tourists will be carrying pocket computers ca-
pable of translating idiomatic speech from any of half a dozen major languages
into any of the others, in real time. Just talk into the box, and that Parisian
waiter will know exactly what you want. Whether he likes your accent well
enough to bring it is another matter.
Who Are You? In the age of terrorism, governments want to know for
sure. During this period, probably by 2012, passports and visas will be replaced
by biométrie identity cards that carry records of your fingerprints, retinal blood
vessels, and other permanent, unique proof that you are really you.
Watch the Birdie. Or not. If you can see it, the tiny digital camera built into
your sunglasses will capture it for your friends back home. Expect basic VGA
resolution by 2008, higher-quality snaps a couple of years later.
Condo Cruising. The first cruise ship with apartments owned by the pas-
sengers (price tags from about $900,000) is already sailing from one luxury des-
tination to another, with stops at the Olympics and other major tourist events
planned. How quickly other ships follow its lead depends on the global econ-
omy, but FI expects that half a dozen of these ultimate RVs will take to the water
by 2012.
Superclothes. For adventurous vacationers headed to deserts, moun-
tains, and other hostile areas—one of the hottest areas in tourism, sometimes
literally—industrial-strength couturiers are developing "active" attire that
cools or warms the wearer, as needed, and collects and stores solar energy to
keep your GPS going without heavy batteries. Look for them at trendy out-
fitters around 2010.
Going, Going, Almost Gone. Travel agents, that is. They already are an en-
dangered species, their numbers down from 35,000 in the United States at the
end of 2000 to only 26,000 by mid-2002. That is the latest number we have seen,
but if there are more than 20,000 agents left today, we would be amazed. Only
the cruise industry still relies on travel agents for their bookings, a throwback
to the days when cruises were reserved for the wealthy elite. Though some
prominent executives are reluctant to accept the obvious, their patronage is not
The Past Is Prologue 3 63
enough to support even those agents who have survived this long. Neither can
their distaste for online booking and other agentless forms of customer service
long offset the economies and efficiencies of direct sales. By 2015, tourists could
visit travel agencies as they would tour the back country of New Guinea, to see
a vanishing way of life.
Altered Airports. Those self-service ticket kiosks appearing in major air-
ports will proliferate rapidly and spread to train stations, sports arenas, concert
venues, and other transportation hubs and destinations. As a result, airport per-
sonnel rosters will shrink by 20 percent no later than 2010. At the same time,
radio ID tags will guarantee that luggage arrives where its owners do. And to
compensate for the loss of ticket agents, who now act as a first screen for pos-
sible terrorists, airport security departments will grow by 10 percent.
See the World—From Above. The X~Prize competition is offering $10 mil-
lion to the first private team that sends three people on a suborbital junket into
space and manages to repeat the feat within two weeks. At least three entrants
have made atmospheric test flights, and one is almost certain to make near-
space flight practical within the next five years. After that, it will take less than
a decade to build the first large-scale space tourism industry. Seats will sell for
a lot less than the $20 million paid by Dennis Tito and Mark Shuttleworth to visit
the International Space Station. The hardest part is likely to be getting insur-
ance for the flights.
Generations of Entrepreneurs. Throughout the world, people age 40 and
under are starting businesses at a record rate. Among the younger dot-coms,
twice as many say they would prefer to own a business rather than be a top ex-
ecutive, and five times more would prefer to own a business rather than hold
a key position in politics or government. Many of the companies they start will
be in the hospitality industry. Expect a huge wave of new resorts, restaurants,
tour operators, and other travel services in the next two decades.
End of Immigration. Travel, and almost every land will open its arms to
you. Threaten to stay, and you'll be as welcome as a two-cent tip. Throughout
the industrialized world, native citizens complain that guest workers and other
immigrants are taking jobs, soaking up public resources, and refusing to inte-
grate into the local culture. And though many of those jobs are positions that
no one else would willingly accept, there is enough truth in the other com-
plaints to make this movement a powerful political force. Add post-9/11 secu-
rity concerns, and it's all but inevitable. Under tomorrow's immigration policies,
"your tired, your poor, your huddled masses yearning to breathe free" can
darned well stay home.
160 Chapter 5
2020
Faster Than a Speeding Bullet Train. The world's fastest trains today oper-
ate at a paltry 200 mph or so, though magnetic lévitation trains running on
closed courses have topped 300 mph. By 2020, the first 500-mph maglev trains
will finally carry tourists around Japan, from Los Angeles to Las Vegas, and
along other flat, high-density routes. The technology should be available by
2010 or so, but economic and political problems will stall its use for years.
Build It, and They Will Come. A host of tourist attractions have proved it
in recent years. These include the sixty-story Burj Al Arab Hotel in Dubai, with
a seafood restaurant submerged in the Red Sea; the fabulous new Bibliotheque
in Alexandria; the ice hotels rebuilt each winter in Greenland and Swedish La-
pland; and the spectacularly popular London Eye. By 2020, we expect to see at
least sixty new destinations built. Most will have some unique appeal, but six
of the world's major cities will erect their own versions of the London Eye.
China already is developing thirteen tourist destinations outside the few—such
as Beijing and the Great Wall—that Westerners are familiar with.
How do You Spell Kaopectate in Russian? Point your camera at a sign or
label, and it will tell you what is written there. IBM already is working on the
technology to translate text written in Cyrillic, Arabic, Hebrew, and Chinese
characters into Western languages. Suddenly, we won't have to speak the local
language to identify the drugstore and find what we need. By 2010, automatic
translators for written material, probably built into cameras and other digital
hardware, will be standard cargo for well-equipped tourists.
Vacation Offer you Can't Refuse. It's a way of life in Europe. Cities empty
in the summer as workers head off for a month of R & R that is guaranteed by
law. The day will come when American workers also enjoy shorter work weeks
and mandatory vacations, despite the objections of politically influential em-
ployers. The reason: the jobs lost from manufacturing in recent years are just
the beginning. Automation and global competition will continue to squeeze
jobs from the American economy until, in the long run, it becomes impossible
to create useful work for all who need it. The only answer will be to cut the
work week, add time off, and open new jobs to fill in for vacationing workers.
The result will be a burst of growth in tourism like nothing the industry has
ever seen.
Note that this is the most "iffy" forecast in this report. A combination of
dramatically reduced birthrates, limited immigration, much better public ed-
ucation, rapid economic growth, and other changes might conceivably fore-
stall a job crisis indefinitely. Yet what we are experiencing is high immigration,
unexpectedly high birthrates, generally ineffectual public education, and the

threat that exploding government deficits could weaken our economy for years.
And it seems likely that the day will come when few noncreative tasks still re-
quire human hands. At some point in the future, much-expanded leisure seems
all but inevitable. The late 2020s are our best guess at when this will occur, but
no more than a guess.
Advertising in 3D. Today, holographic videos are cutting-edge technology.

Twenty years from now, they will be consumer products. For tour operators, ho-
tels, and other segments of the hospitality industry, 3D videos—delivered ei-
ther by mail or over the Internet—will be the ultimate advertising medium,
showing potential visitors exactly what they will experience at their destina-
tions. Of course, in a few years they will be supplanted by virtual reality systems
that recreate the vacation experience even more vividly.
UN Uber AHes. Americas go-it-alone foreign policy is an aberration that

cannot last. A global economy calls for global institutions, and that means power
will inevitably flow toward the United Nations, the International Court of Jus-
tice, and the few other bodies with worldwide jurisdiction. To provide broader
representation in those bodies, India and one of the Scandinavian countries
will finally be admitted to the U.N. Security Council. This will gradually provide
much more uniform laws, regulations, and standards for the hospitality in-
dustry and other multinational businesses.
Jt's a Gas, Gas, Gas. Technologically, hydrogen-powered cars are just over
the horizon. Economically and societally, they will not make the grade until
some environmentally minded government mandates a change to hydrogen
power. Once that happens, industry will ramp up hydrogen production and put
fueling stations in every community. Then bigger things will happen. By 2025,
ecotourists visiting the Arctic, Antarctic, and other pristine destinations will
arrive by hydrogen-powered jets that emit only water as their exhaust and avoid
contaminating sensitive environments.
Eco-Backlash. Yet having hundreds of tourists trampling the Arctic tundra

and other fragile environments will not sit well with committed environmen-
talists, even if the vacationers do travel by eco-friendly aircraft. Global protests
against this perceived despoiling of our common heritage will quickly give rise
to stringent limits on the number of tourists who can visit what little true
wilderness remains in the world.
62 Chapter 5
2030
Beanstalk to the Stars. The science fiction scenario that began this chap-
ter contained one bit of future reality: the space elevator. First envisioned some
forty years ago, the elevator will climb an enormous cable, like Jack up the
beanstalk, to a terminal where passengers and cargo can board spacecraft for
the trip further out. Until recently, this was just a fantasy; there were no mate-
rials strong enough to build the cable. Today, so-called carbon nanotubes up to
twenty times stronger than steel are approaching mass production, and engi-
neers say a space elevator could be completed within fifteen years. Unfortu-
nately, economic and political factors probably will double that lead time.
According to current estimates, the first space elevator could be built for about
$10 billion. The cost for a trip to space would be $200 per pound or less, com-
pared with $40,000 per pound for the Space Shuttle. At that price, the space el-
evator will make space tourism routine.
2040
Room Service? Today, there is only one hotel under the sea, the two-
bedroom Jules Underwater Resort in Key Largo, Florida, and just two restaurants.
Four decades ahead, underwater hotels and restaurants will be almost com-
mon. Most will appear in shallow water, where sunlight penetrates to illuminate
abundant life; the most spectacular will be located on Australia s Great Barrier
Reef. However, at least one small, spartan, and incredibly expensive hotel will
provide accommodations more than five miles down, where guests can see
forests of giant tube worms, "volcanoes" of hot, mineral-rich water, and lumi-
nescent fish swimming past the tiny, foot-thick portholes.
Think It, and They May Not Come After AH. Scientists have dreamed for
years of building computers that understand our thoughts and send data di-
rectly into our brains. But that means a kind of artificial telepathy. Think into
your computer in San Francisco, and someone in Bangalore will "hear" the
thought over the Internet. And that offers the ultimate virtual reality. If one per-
son swims in the sea, walks on the moon, or runs a three-minute mile, the rest
of us can share the experience from the comfort of our own living rooms. It
brings up the obvious question, why leave home at all? One answer is snob ap-
peal. Virtual reality will be good enough for many, but the rich will display their
wealth by taking the time, and spending the money, to go in person.
You Too Can Be the Man in the Moon. Or at least on it. The first permanent
moon base is likely to appear in the 2030s. A decade later, it will be capable of
accommodating up to 350 people, including 50 tourists. Thanks to a growing
array of space elevators circling Earth's equator, a lunar jaunt will even be rel-
atively affordable. As demand grows, a space elevator on the moon will bring
the price within reach of solidly middle-class families.
2050
One World After All. Five decades ahead, the dollar and euro will be sup-
planted by a single world monetary unit, ending exchange problems forever.
Biometric identity cards will be issued soon after birth, and the data stored in
banks accessible by any government. This will make it nearly impossible for
terrorists and other criminals to move around undetected, but routine tracking
of our daily movements will further erode what little is left of the old-fashioned
concept of privacy.
Universal English. Those automatic translators will be useful for only forty
years or so. English already is the de facto language of business, as French once
was the language of diplomacy. By 2050, 90 percent of the people in the world
will speak English, at least as a second language. In major tourist destinations,
the number will be even higher.
2060
Jobs Aplenty. Today, an estimated 14 percent of the world's people work
in the hospitality industry. Tomorrow, it will be 25 percent. In part, we will owe
this dramatic growth to the explosion of leisure time when shorter work weeks
and forced vacations spread from Europe to the rest of the world. But this also
is in the nature of the industry. Sixty years from now, personal service could be
the only job category that still requires human workers.
Meet and Greet. With a global Internet, lifelike virtual reality, and even
computerized telepathy available to all, who needs in-person meetings? Nearly
everyone, as it turns out. Full-contact telecommunications will do for routine
conversations, but to meet new business associates, conduct difficult negotia-
tions, or just build relationships over a round of golf, people will need to "press
the flesh" for many decades to come. The meetings and expositions segment will
continue to struggle with economic, social, and technological issues as far into
the future as the eye can see. But there will be more corporate and industry-wide
meetings in 2060 than in 2006.
164 Chapter 5
2075
Water, Water Everywhere. At least in the low places of the world. At the
rate things are going, global warming will raise the seas by two to three feet in
the next 75 years. That will mean hard times for lands like Bangladesh and the
Louisiana lowlands, which are barely above sea level even now and are sinking
even as the water rises. It will also modify our travel habits, as temperatures and
rainfall patterns change. Expect what is left of Florida to turn into baking jun-
gle, while crops bloom in parts of Canada and Siberia that today hold little
more than ice.
Atoms in Space. Nuclear power is banned from space by international
treaty. Nonetheless, by 2075 long-range space tugs powered by nuclear reac-
tors will be ferrying cargo and very patient tourists out to Mars, the asteroid belt,
and even beyond. Travel time: about 3 months each way for Mars, more than a
year for Jupiter.
Oldies but Goodies. Some of the hottest destinations tomorrow would
probably be familiar to today's travel agents. As we have seen, fast, over-
whelming technological change will bring a host of new options for tourism.
However, it also will strengthen our taste for old, familiar things and our need
to reconnect with the past. Crowds will still surround the Taj Mahal, the Great
Wall of China, and the pyramids; visit the Grand Canyon and Old Faithful; tour
the fjords, the Yangtze River dam, and the Amazon; and throng the halls of the
Hermitage and the Acropolis.
Old Friends As Well. Whatever other changes buffet the hospitality in-
dustry, it will still need the same fundamental services that all industries need:
somewhere to gather to make contacts and win contracts, someone to provide
job-related education, common standards, and certification. These are the
province of industry associations, which can bring competitors together on
common ground. In 2075, hospitality associations, many of them well known
today, will be helping their members to manage one of the largest industries in
the world.
For some four decades, Forecasting International has conducted an ongoing
study of the forces changing our world. Over the last decade, our expectations
have proved to be gratifyingly accurate. We believed that the economy of the de-
veloped world would be much more vibrant than most commentators imag-
ined possible, and so it has been. We also foresaw many of the political and
social problems brought about by the changing population. In all, no fewer
than 95 percent of our projections have proved correct.
This new edition updates our 2001 report on the implications of 52 major
trends now shaping the future. Whatever your concern, some of these trends will
have a very direct impact upon it. Others will help to form the general envi-
ronment in which we live and work. They all merit attention from anyone who
must prepare for what lies ahead.
GENERAL LONG-TERM ECONOMIC

AND SOCIETAL TRENDS
1. The economy of the developed world will continue to grow for at least
the next five years. Any interruptions will be relatively short-lived.
• The U.S. economy has been expanding continuously since the fourth
quarter of 2001. In 2003, it grew by 3.1 percent, by 3.9 percent annually
in the first three months of 2004, and by 2.8 percent in the second quar-
ter. Growth in 2004 is expected to be near 4 percent, a level that econo-
mists believe can be sustained.
« Factory orders were up 4.3 percent in March 2004, well above expecta-
tions. Shipments rose 3.8 percent in March, the largest one-month
165
S66 Appendix A
increase on record. Orders shrank in April and May—by —1.1 percent

and -0.3 percent, respectively—but preliminary figures showed solid
growth again in June. In all, this is strong evidence that the economic
expansion will continue.
® Real estate has proved to be extraordinarily resilient in the United States,
thanks to the lowest mortgage rates in some forty years. In all, 1.848
million new homes were started in 2003, the most since 1978. Though
housing starts appeared to be weakening on fears that interest rates
could be about to rise, they were still predicting the construction of
more than 1.9 million new homes in 2004. Starts actually ran at a rate
of 2.011 million per year in March 2004 and maintained a rate of more
than 1.8 million in June and nearly 1.98 million in July, despite a rise in
mortgage rates. Record-breaking housing sales included many middle-
income buyers, as well as large numbers from minority groups who tra-
ditionally have not participated strongly in this market.
® In spring 2004, new jobs finally started to appear in significant numbers—
308,000 in March, 280,000 in April, and 248,000 the following month.
Job creation dipped in June, but has remained positive through
August. Sustained job growth would confirm the renewed health of the
American economy.
® Inflation, however, is beginning to cause concern. Both the Consumer
Price Index and the Producer Price Index were up 0.5 percent in March
2004, 0.7 percent in April, 0.6 percent in May, and 0.3 percent in June,
or 6.3 percent per year. Virtually all of this and later increases have come
from the energy and food sectors. Oil prices were expected to come
down again in time for the U.S. elections in November.
® The Conference Board's Index of Leading Indicators, which foretells fu-
ture economic growth, rose 0.1 percent in April 2004, its eighth increase
in nine months. It finally dipped 0.2 percent in June and a bit more in
July, its first losses since March 2003.
® Relaxation of borders within the European Union has brought new mo-
bility to the labor force. This is making for a more efficient business en-
vironment on the continent. Expansion of the EU by ten more members
in late April 2004 can only improve economic performance there in the
years ahead.
• After prolonged recession, the French and German economies appeared
to be stable or growing slightly in the first quarter of 2004, while the
British economy never did fall into recession. In all, it appears that the
European economy as a whole grew by 0.4 percent in 2003 and slightly
more in 2004.
* According to the most recent figures, Japan's long-suffering economy is
growing for the first time in years—by no less than 7 percent annually
52 Trends Now Shaping the Future 2 \ 3
in the fourth quarter of 2003 and 6.1 percent in early 2004. Exports
surged by 17.9 percent annualized, yet foreign demand added only 1.6
percentage points to fourth-quarter growth. The remainder came from
domestic consumption and corporate capital spending. By August, the
Conference Board's leading index for the country had been up almost
continuously for 16 month's running. This would make Japan a much
healthier trading partner for the West.
® China's economy grew by a spectacular 9.1 percent in 2003 and was ac-
celerating toward years end. Word that growth had slowed to "only" 9.2
percent in the second quarter of 2004, after reaching 10.7 percent in the
first, actually came as good news; onlookers viewed it as evidence that
China will achieve a "soft landing" and stabilize at sustainable growth
rates, rather than falling into recession. Chinese exports grew by 50 per-
cent in the five years ending in 2002 and are still growing by 20 percent
annually. In the United States, cheap Chinese imports have reduced the
price of consumer goods by several percent. At the same time, the cheap
dollar helped American exports to China grow by nearly 27 percent in
2003, to $28.4 billion.
® New growth among all these trading partners should create a "benevo-
lent cycle," in which the health of each partner helps to ensure the con-
tinued health of the rest for at least the next several years.
® Many nations of the former Soviet Union are bringing order to their
economies, proving themselves viable markets for goods from western
Europe. Recently, even Russia appears to be stabilizing its economy,
long the weakest link in its region. The discovery of oil in Kazakhstan
and new interest in the other "stans" as potential partners in the war on
terrorism should further this process.
• Worldwide, improved manufacturing technology will continue to boost
productivity and reduce the unit cost of goods. At the same time, work-
ers who remain on the job longer will offset slow growth in the labor
force, while the globalization of business will keep pressure on salaries
in the developed countries. Thus, both prices and wages should remain
under control.
Implications: The recent economic downturn is unlikely to return. The

current round of new growth will spread throughout the developed world. It
should continue for the remainder of this decade.
Economic unification is promoting all manner of trade within Europe. In
the long run, the newly capitalist lands of the former Soviet Union should be
among the fastest growing new markets. In the longer term, India will expand
faster than any other market in the world.
S66 Appendix A
Labor markets will remain tight, particularly in skilled fields. This calls for
new creativity in recruiting, benefits, and perks, especially profit sharing. This
hypercompetitive business environment demands new emphasis on rewarding
speed, creativity, and innovation within the workforce.
The growing concentration of wealth among the elderly, who as a group
already are comparatively well off, creates an equal deprivation among the
young and the poorer old. This implies a loss of purchasing power among
much of the population; in time, it could partially offset the forces promoting
economic growth.
® Early versions of this report said that the world s population would dou-
ble by 2050. Since then, population growth has proceeded almost ex-
actly "on schedule."
® The greatest fertility is found in those countries least able to support
their existing populations. Countries with the largest population in-
creases between 2000 and 2050 include Palestinian Territory (217 per-
cent), Niger (205 percent), Yemen (168 percent), Angola (162 percent),
the Democratic Republic of Congo (161 percent), and Uganda (133
percent).
® Even these estimates may be much too low. According to the Center for
Strategic and International Studies (CSIS), most official projections un-
derestimate both fertility and future gains in longevity.
® In contrast to the developing world, many industrialized countries will
see fertility rates below the replacement level and hence significant de-
clines in populations, excluding the effects of immigration. This means
that the population of the developed nations will fall from 23 percent of
the total world population in 1950 and about 14 percent in 2000 to only
10 percent in 2050.
® In ten years or so, the workforce in Japan and much of Europe will be
shrinking by 1 percent per year. By the 2030s, it will contract by 1.5 per-
cent annually.
Implications: Rapid population growth will reinforce American domina-
tion of the global economy, as the European Union falls to third place behind
the United States and China.
To meet human nutritional needs over the next forty years, global agri-
culture will have to supply as much food as has been produced during all of
human history.
Unless fertility in the developed lands climbs dramatically, either would-be
retirees will have to remain on the job, or the industrialized nations will have
to encourage even more immigration from the developing world. The third al-
ternative is a sharp economic contraction and loss of living standards.
Barring enactment of strict immigration controls, rapid migration will con-
tinue from the southern hemisphere to the north, and especially from former
colonies to Europe. A growing percentage of job applicants in the United States
and Europe will be recent immigrants from developing countries.
Culture clashes between natives and immigrants are likely to destabilize so-
cieties throughout the developed world. Germany, Britain, and other lands tra-
ditionally welcoming to refugees and other migrants already are experiencing
strong backlashes against asylum-seekers
• Each generation lives longer and remains healthier than the last. Since
the beginning of the twentieth century, every generation in the United
States has lived three years longer than the previous one. An 80-year-old
in 1950 could expect 6.5 more years of life; todays 80-year-olds are likely
to survive 8.5 more years.
® Life expectancy in Australia, Japan, and Switzerland is now over 75
years for males and over 80 for females.
® A major reason is the development of new pharmaceuticals and medical
technologies, which are making it possible to prevent or cure diseases
that would have been fatal to earlier generations. In many developed
countries, credit also goes to government health programs, which have
made these treatments available to many or all residents. In the devel-
oping lands, a primary cause is the availability of generic drugs, which
cut the cost of care and make health affordable even for the poor.
® These figures are much too conservative because they assume that life
expectancy will grow more slowly in the future, argues the Center for
Strategic and International Studies (CSIS).
• Medical advances that slow the fundamental process of aging now seem
to be within reach. They could well help today's middle-aged baby
boomers to live far longer than even CSIS anticipates today.
• Any practical extension of the human life span will prolong health as
well and will reduce the incidence of late-life disorders such as cancer,
heart disease, arthritis, and possibly Alzheimer's disease.
Implications: Global demand for products and services aimed at the el-
derly can only grow quickly in the coming decades.
Developed countries may face social instability as a result of competition for
resources between retirement-age boomers and their working-age children and
grandchildren. In the United States and other developed countries, public
S66 Appendix A
spending on retirement benefits could grow to one-fourth of GDP by 2050, even

as the number of workers available to support each retiree declines sharply, ac-
cording to (CSIS).
Barring dramatic advances in geriatric medicine, the cost of health care is
destined to skyrocket throughout the developed lands. This could create the
long-expected crisis in health-care financing and delivery.
However, dramatic advances in geriatric medicine are all but inevitable. Pay-
ing the high cost of new drugs and technologies will reduce the cost of caring
for patients who would have suffered from disorders eliminated or ameliorated
by new therapies. In the end, cost increases and reductions should just about
balance out, leaving the average American health-care bill nearly unchanged.
4. The elderly population is growing dramatically throughout the world.
• People over age 65 made up only 8 percent of the population in the de-
veloped world in 1950, but 15 percent in 2000, and will grow to 27 per-
cent of the population in the next half-century, according to CSIS.
® Throughout the developed world, population growth is fastest among the
elderly. In Europe, the United States, and Japan, the aged also form the
wealthiest segment of society.
® The worlds elderly population, age 60 and older, will reach 1 billion by
2020, 13.3 percent of the projected world total population. Three-fourths
will be in developing countries, principally China, India, Brazil, In-
donesia, and Pakistan.
® In Germany, the retirement-age population will climb from under 16
percent of the population in 2000 to nearly 19 percent in 2010 and 31
percent in 2050.
® By 2050, one in three Italians will be over age 65, nearly double the pro-
portion today.
® Japans over~65 population made up 17 percent of the total in 2000 and
is projected to rise to 22 percent in 2010 and nearly 37 percent in 2050.
Implications: Not counting immigration, the ratio of working-age people

to retirees needing their support will drop dramatically in the United States,
Germany, Italy, Russia, and Japan by 2050. This represents a burden on na-
tional economies that will be difficult to sustain under current medical and so-
cial security systems.
The United States in particular will need more doctors specializing in dis-
eases of the elderly —at least double the 9,000 now available. Yet by 2030
the number of certified American geriatric specialists is expected to decline
dramatically.
The nursing shortage is another problem that is severe today and will grow
much worse as the senior population expands. In all, the United States will be
short 515,000 nurses by 2020, just as senior baby boomers begin to flood the
health-care system. State health-care agencies will be forced to take the lead in
recruiting new workers to this critical field.
® Information is the primary commodity of more and more industries.
* By 2007, 83 percent of American management personnel will be knowl-
edge workers. Europe and Japan are not far behind.
® The number of telecommuters in the United States grew 63.2 percent be-
tween 1999 and 2003. The number of telecommuters working for the
federal government more than doubled—to only 106,000—between 2001
and 2003. By 2005, 80 percent of companies worldwide expect to have
employees who work at home, up from 54 percent in 2003.
® The Internet makes it possible for small businesses throughout the world
to compete for market share on an even footing with industry leaders.
® In the United States, the "digital divide" seems to be disappearing. In
early 2000, a poll found that where half of white households owned com-
puters, so did fully 43 percent of African American households, and their
numbers were growing rapidly. Hispanic households continued to lag be-
hind, but their rate of computer ownership was expanding as well.
® By 2005, the average PC workstation will include a computer, a fax, a pic-
ture phone, and a duplicator—possibly in one unit—for less than $2,500
(in 1995 dollars). By 2006 or so, these systems will include a flat screen
of 20 by 30 inches and real-time voice translation, so that conversations
originating in one of seven or eight common languages can be heard in
any of the others.
® Computer competence will approach 100 percent in U.S. urban areas by
2005. Cities in Europe and Japan will achieve universal computer "lit-
eracy" shortly thereafter.
Implications: Knowledge workers are generally better paid than less-
skilled workers, and their proliferation is raising overall prosperity.
Even entry-level workers and those in formerly unskilled positions require
a growing level of education. For a good career in almost any field, computer
competence is mandatory. This is one major trend raising the level of educa-
tion required for a productive role in today's workforce. For many workers,
the opportunity for training is becoming one of the most desirable benefits
any job can offer.
S66 Appendix A
New technologies create new industries, jobs, and career paths, which can
bring new income to developing countries. An example is the transfer of func-
tions such as technical support in the computer industry to Asian divisions and
service firms.
For some developing countries, computer skills are making it faster and
easier to create wealth than a traditional manufacturing economy ever could.
India, for example, is rapidly growing a middle class, largely on the strength
of its computer and telecom industries. Many other lands will follow its
example.
6. Mass migration is redistributing the world's population.
• Immigration is quickly changing the ethnic composition of the Ameri-
can population. In 2000, Latinos made up 12.6 percent of the U.S. pop-
ulation, up from only 6 percent in 1980. By 2010, they will account for
15.5 percent of all Americans, and 24.5 percent—103 million people—
by 2050. There were some 11.2 million Asians in the United States in
2000. Their numbers will reach an estimated 19.6 million by 2020 and
33 million—8 percent of the population—by 2050.
® This trend is accelerated by the relatively high fertility of the Latino pop-
ulation. As of 2002, women in the United States produced about two
children during their lives, just enough to maintain the population.
Among Hispanics, the average was more than 2.7 births per woman.
Among Mexican immigrants, it was nearly 2.9.
• Immigration to Western Europe from Eastern Europe, North Africa,
the Middle East, and the Indian subcontinent continues.
• More than 400,000 legal immigrants from Central Europe now live and
work in Western Europe. Between 3 million and 4 million more mi-
grants are expected to join them in the next twenty-five years.
® In China, 98 million people have moved from rural areas to cities in re-
cent years, without ever leaving the country.
® There are about 80 million international migrant workers in the world,
according to the United Nations. About half settle in Europe; the rest are
divided evenly between North America and Asia.
implications: Impoverished migrants will place a growing strain on Social
Security systems in the industrialized countries of Europe and North America.
Similar problems will afflict the urban infrastructures of China and India.
Remittances from migrants to their native countries are helping to relieve
poverty in many developing countries. These payments are expected to exceed
$100 billion in 2004.
Significant backlashes against foreign migrants, such as the skinhead move-
ment in Europe, will be seen more frequently in the years ahead.
Backlashes will be seen even in the most peaceful lands. For example, in
Scandinavia, resentment against foreign workers is strong, in part because they
can return to their native lands after three years of employment and collect a
pension equal to the minimum wage for the rest of their lives.
7. Growing acceptance of cultural diversity, aided by the unifying effect
of mass media, is promoting the growth of a truly integrated global so-
ciety. However, this is subject to local interruptions and reversals.
• Migration is mixing disparate peoples and forcing them to find ways to
coexist peacefully and productively.
® Information technologies promote long-distance communication as peo-
ple hook up with the same commercial databases and computer net-
works, and above all with the Internet.
« Television is even more homogenizing, as it encourages the spread of
standard accents and language patterns, particularly in the United
States.
® Within the United States and Europe, regional differences, attitudes, in-
comes, and lifestyles are blurring as business carries people from one
area to another.
« Intermarriage also continues to mix cultures geographically, ethnically,
socially, and economically.
® Minorities are beginning to exert more influence over national agendas
as the growing number of African Americans, Hispanics, and Asians in
the United States is mirrored by the expanding population of refugees
and former "guest workers" throughout Europe.
• In the United Kingdom, 21 percent of young adults answering a recent
poll viewed themselves as primarily European, rather than British. Some
31 percent of French Gen Xers, 36 percent of Germans, and 42 percent
of Italians also said they thought of themselves as primarily European.
• However, in many countries there are powerful reactions against these
changes. The growth of the German neo-Nazi movement is one obvi-
ous example.
implications: Over the next half-century, growing cultural exchanges at

the personal level will help to reduce some of the conflict that plagued the twen-
tieth century. However, this is likely to produce a violent backlash in societies
where xenophobia is common. Some of the most fervent "culturist" movements
will continue to spring from religious fundamentalism. Would-be dictators and
strongmen will use these movements to promote their own interests, ensuring
that ethnic, sectarian, and regional violence will remain common. Terrorism
especially will be a continuing problem.
S66 Appendix A
Companies will hire ever more minority workers and will be expected to
adapt to their values and needs. Much of the burden of accommodating
foreign-born residents will continue to fall on employers, who must make room
for their languages and cultures in the workplace.
However, the greatest responsibility will continue to fall on two public insti-
tutions, schools and libraries. Primary concerns for schools include providing
all students with a solid grounding in English, our only common language, and
finding ways to recruit and reward the best teachers and weed out the least ef-
fective. Public libraries act as sites for after-hours learning, reference facilities,
sources of Net access for those who do not have it at home and bad-weather
shelters for the homeless. They, too, require greater support.
8. The global economy is growing more integrated.
® Rather than paying salaries and benefits for activities that do not con-
tribute directly to the bottom line, companies are farming out secondary
function to suppliers, service firms, and consultants, which increasingly
are located in other countries.
• They also are "outsourcing" management and service jobs to low-wage
countries. An estimated 3.3 million American jobs are expected to mi-
grate to India and China by 2015. Jobs from Western Europe are mi-
grating to Eastern Europe, the former Soviet Union, and the English-
and French-speaking former colonies of Africa. Even India has begun to
ship jobs to even lower-cost countries in Africa.
® In the European Union, relaxation of border and capital controls and the
adoption of a common currency and uniform product standards are
making it still easier for companies to distribute products and support
functions throughout the continent.
® Standardization of product standards throughout Europe is even more
beneficial.
® NAFTA has had a similar, though much less sweeping, effect in the
Americas.
® The Internet and cable-TV home shopping channels have brought re-
tailers and manufacturers closer to distant customers, who had been
out of reach. This is reshaping distribution patterns in many retail
industries.
® New procurement regulations and standards promise to open the gov-
ernment market to suppliers who previously found the bidding process
too difficult, costly, or just confusing.
Implications: The growth of commerce on the Internet makes it possible
to shop globally for raw materials and supplies, thus reducing the cost of doing
business. In niche markets, the Internet also makes it possible for small com-
panies to compete with giants worldwide with relatively little investment.
Demand for personnel in distant countries will increase the need for
foreign-language training, employee incentives suited to other cultures, aid to
executives going overseas, and the many other aspects of doing business in
other countries. As eastern Europe integrates more fully with the European
Union, a major investment in personnel development will be needed over the
next few years.
Western companies may have to accept that proprietary information will be
shared, not just with their immediate partners in Asian joint ventures, but with
other members of the partners' trading conglomerates. In high technology
and aerospace, that may expose companies to extra scrutiny, due to national-
security concerns.
9. Militant Islam is spreading and gaining power.

• It has been clear for years that the Muslim lands face major problems
with religious extremists dedicated to advancing their political, social,
and doctrinal views by any means necessary. Those problems often have
spilled over into the rest of the world. They will do so again.
® In a 1994 terrorism study for the Department of Defense and other gov-
ernment clients, Forecasting International predicted that by 2020 a
strong majority of the world's twenty-five or so most important Muslim
lands could be in the hands of extremist religious governments. At the
time, only Iran was ruled by such a regime; Afghanistan's Taliban move-
ment gained power two years later, and Sudan has since followed.
• Most of the Muslim lands are overcrowded and short of resources. Many
are poor, save for the oil-rich states of the Middle East. Virtually all have
large populations of young men, often unemployed, who are frequently
attracted to violent extremist movements.
® The United States massively fortified the Muslim extremist infrastruc-
ture by supplying it with money, arms, and above all training during its
proxy war with the Soviet Union in Afghanistan.
• American support for Israel has also made the United States a target
for the hatred of Muslim extremists. If the deteriorating situation in
Palestine leads to more active conflict, or if Israel renounces any at-
tempt to make peace with its neighbors, American interests will be tar-
geted by a new wave of terrorism.
® The invasion of Iraq has done more than any other single action to re-
inforce extremist hatred of the United States. It also has provided a
training ground for a new generation of terrorists.
S66 Appendix A
Implications: Virtually all of the Muslim lands face an uncertain, and

very possibly bleak, future of political instability and growing violence. The
exceptions are the oil states, where money can still buy relative peace, at least
for now.
Saudi Arabia is likely to be taken over by a fundamentalist regime on the
death of King Fahd.
The necessary overthrow of the Taliban in Afghanistan, and the ouster of
Saddam Hussein in Iraq, have inflamed extremist passions throughout the Mus-
lim world. This may make future fundamentalist revolutions more likely, rather
than less so.
The West, and particularly the United States, is likely to face more and more
violent, acts of terrorism for at least the next twenty years.
Both Europe and the United States ultimately may face home-grown Mus-
lim extremist movements. Thanks largely to waves of immigration since the
1980s, Islam is the fastest growing religion in both regions. There are credible
reports that extremist clerics in Europe are successfully recruiting young Mus-
lims to the cause of jihad against their adopted homes.
Western interests also will be vulnerable in many countries outside the
Muslim core. The strong international ties formed among Islamic militants
during the anti-Soviet war in Afghanistan have produced an extremist in-
frastructure that can support terrorist activities almost anywhere in the
world.
This development must be taken even more seriously, because for the first
time a Muslim country, Pakistan, has nuclear weapons, which Muslim extrem-
ists view as an "Islamic bomb," available to promote their cause. As the world
has learned, some high-ranking Pakistanis have been willing to donate nuclear
technology to other Muslims. From here on out, the possibility of nuclear ter-
rorism is a realistic threat.
TRENDS IN VALUES, CONCERNS, AND LIFESTYLES

® Industrialization raises educational levels, changes attitudes toward
authority, reduces fertility, alters gender roles, and encourages
broader political participation. This process is just beginning
throughout the developing world. Witness the increases in literacy,
decreases in fertility, and broad voter turnout seen in India over the
last five years.
» Developed societies will increasingly take their cue from Generations X
and Dot-com, rather than the baby boomers who have dominated its
thinking for most of four decades. This will tend to homogenize basic
attitudes throughout the world, because Gen Xers and especially Dot-
coms around the globe have more in common with each other than with
their parents.
© In the future, both self-reliance and cooperation will be valued—
self-reliance because we will no longer be able to fall back on Social
Security, pensions, and other benefits; cooperation because group action
often is the best way to optimize the use of scarce resources, such as re-
tirement savings.
® Post-September 11 worry over terrorist attacks have led Americans to
accept almost without comment security measures that their vaunted
love of privacy once would have made intolerable. This continues a long-
established tendency in the United States to prefer a greater sense of
safety at the cost of increased government surveillance and interven-
tion in their lives.
• Once national security issues lose their immediacy, family issues will
again dominate American society, at least through 2008: long-term
health care, day care, early childhood education, antidrug campaigns,
and the environment.
• Narrow, extremist views of either the left or the right will slowly lose
their popularity. Moderate Republicans and conservative Democrats will
lead their respective parties. This trend has been reinforced by the ex-
perience of recent presidential elections in which third-party candidates
siphoned votes from less-extreme main-party candidates. Many voters,
feeling that a vote for an alternative candidate is tantamount to a vote
for the major opposition, are likely to accept less doctrinal purity in
their party's representatives.
Implications: The highly polarized political environment that has in-

creasingly plagued the United States in the 1980s and 1990s will slowly mod-
erate as results-oriented Generations X and Dot-com begin to dominate the
national dialogue.
Current accounting reforms are just the leading edge of a wave of stock-
holder protection laws and regulations that can be expected within the next
five years.
The demand for greater accountability and transparency in business will be
crucial, not only in the United States business community, but also for coun-
tries that wish to attract international investors.
Reaction against changing values is one of the prime motives of cultural ex-
tremism, particularly in the Muslim world and in parts of India.
S66 Appendix A
11. Young people place increasing importance on economic success,

which they have come to expect.
• Throughout the 1990s—effectively, their entire adult lives—Generations
X and Dot-com knew only good economic times, and the recent eco-
nomic downturn seemed to them a confusing aberration, rather than a
predictable part of the business cycle. Most expect to see hardship on a
national level, but they both want and expect prosperity for themselves.
® Growing numbers of people now become entrepreneurs. Generations
X and Dot-com are the most entrepreneurial generations in history.
® In the United States especially, most young people have high aspira-
tions, but many lack the means to achieve them. Only one in three high-
school graduates goes on to receive a college degree. Many of the rest
wish to go, but cannot afford the high cost of further schooling.
® Without higher education, expectations may never be met: The real in-
come of high school graduates has declined steadily for more than 50
years. In addition, more young people report no earnings—up from 7
percent of all 20- to 24-year-old men in 1973 to a relatively constant 12
percent since 1984.
Implications: This will prove to be a global trend, as members of Gen-

erations X and Dot-com tend to share values throughout the world. Gen X and
Dot-com entrepreneurs are largely responsible for the current economic
growth in India and China, where they are becoming a major force in the
Communist party. In India, the younger generations dress and think like their
American counterparts, not their parents. In China, the democratic fervor
that spawned Tienanmin Square has been replaced by capitalist entrepre-
neurialism.
If younger-generation workers find their ambitions thwarted, they will cre-
ate growing pressure for economic reform and deregulation. If reforms do not
come fast enough in the developing world, disappointed expectations will raise
the number of young people who emigrate to the developed lands.
Disappointment also will drive underemployed young men in the developing
world into fringe political and religious movements. This could cause a new
wave of terrorism and instability, with profound effects on the cultures and
economies of the United States and other target countries.
® People today have more disposable income, especially in two-earner
families.
® The number of Americans traveling to foreign countries (excluding

Canada and Mexico) increased at 5 percent per year from 1981 through
1996. Once current worries over the threat of terrorism recede, that
growth will resume and will continue for the foreseeable future.
® In the United States, 2004 forecasts call for a rise in travel and tourism
revenues to about $568 billion, nearing the $570.5 billion seen four
years ago.
® Globally, the World Travel & Tourism Council (WTTC) predicts that all
components of the travel market will turn out to have grown in 2004.
Spending on travel and tourism, they estimate, will be up by 5.9 per-
cent over 2003, to $5.5 trillion.
® The industry will create 3.3 million jobs worldwide.
® Over the next ten years, travel and tourism are expected to grow by
an average of 4.5 percent annually. By 2014, that will amount to a
market of more than $9.5 trillion, adding nearly $7 trillion to the
world's GDP.
• Direct employment will not grow quite as quickly, but it will be up 1.7
percent annually, to nearly 87.5 million jobs, while indirect employment
will account for some 260 million jobs around the world.
® Chinese spending for international travel will reach $100 billion by 2008.
By 2020, according to the World Trade Organization, an army of 100
million Chinese will fan out across the globe, replacing Americans,
Japanese, and Germans as the world's most numerous travelers.
® China soon will be the world's most popular destination as well, with 130
million arrivals in 2020.
® By 2020, 50 million Indians are expected to tour overseas.
® Tourism will benefit as Internet "virtual" tours replace printed brochures
in promoting vacation destinations. Web sites cover not only popular
attractions, but also provide current, detailed information on accom-
modations, climate, culture, currency, language, immunization, and
passport requirements.
® Multiple, shorter vacations spread throughout the year will continue to
replace the traditional two-week vacation.
® More retirees will travel off-season, spreading travel evenly through-
out the year and eliminating the cyclical peaks and valleys typical of
the industry.
Implications: The hospitality industry will grow at a rate of at least 5 per-

cent per year for the foreseeable future, and perhaps a bit more. Tourism of-
fers growing opportunities for out-of-the-way destinations that have not yet
S66 Appendix A
cashed in on the boom. This will make it an important industry for still more
developing countries.
The number of people whose jobs depend on tourism will approach 14 per-
cent of the global workforce.
Cruise ships such as the giant, 2,600-passenger Queen Mary 2 will continue
to grow larger.
13. The physical-culture and personal-health movements will remain
strong, but far from universal.
® Emphasis on preventive medicine continues to grow. In recent years,
most insurance carriers in the United States have expanded coverage
or reduced premiums for policyholders with healthy lifestyles. By 2007,
90 percent of insurers will offer such benefits.
• A 2001 Harris Poll showed that about one-third of Americans ate at fast-
food restaurants less often than a year before, citing health reasons.
® In another 2001 poll, 75 percent of Canadians reported having changed
their diets in the previous year in order to improve or maintain their
health. Some 20 percent had reduced fat consumption, 18 percent had
cut back on sweets, and 11 percent had trimmed red meat.
® The low-carb weight-loss fad trumps other health concerns. Though
Japan and Korea closed their doors to American beef after one case of
mad cow disease was discovered in December 2003, demand in the
United States never faltered. Carb-crazed dieters kept beef prices near
record highs well into 2004.
® This trend has not yet had a similar impact on Europe, and people in
many countries of the developing world still worry more about eating
enough than eating well.
® U.S. consumers are purchasing less distilled liquor. Exception: Younger
generations have revived the once passe taste for mixed drinks, but
have proved to be uncommonly responsible drinkers. Most limit them-
selves to one or two drinks with a meal, and designated drivers are stan-
dard practice.
® Smoking also is in general decline in the United States. Only 21 percent
of Americans smoked cigarettes as of January 2000, down from 30 per-
cent in 1983. Financial disincentives such as higher taxes on cigarettes
should produce further declines of 10 percent.
® It appears that the antismoking movement is finally making its way to
Europe. Ireland banned smoking from its pubs in April 2004.
implications: Better health in later life will make us still more conscious
of our appearance and physical condition. Thus, health clubs will continue to
boom, and some will specialize in the needs of older fitness buffs. Diet, fitness,
stress control, and wellness programs will prosper.
Like tobacco companies, producers of snack foods, liquor, and other med-
ically dubious products will increasingly target markets in developing coun-
tries, where this trend has yet to be felt.
The cost of health care for U.S. baby boomers and their children could be
much lower in later life than is now believed. However, Asia faces an epidemic
of cancer, heart disease, emphysema, and other chronic and fatal illnesses re-
lated to health habits.
As the nutrition and wellness movements spread, they will further improve
the health of the elderly. The market for cosmetic surgery and Botox treat-
ments—which may be more about appearing than being healthy—will continue
to expand quickly.
® A networked society facilitates a consumerist society. Shoppers in-
creasingly have access to information about pricing, services, delivery
time, and customer reviews on the Internet. Marketers, of course, can
also check the competition's offerings. This may gradually halt the de-
cline of prices and shift competition increasingly to improvements in ser-
vice and salesmanship.
* Consumer advocacy agencies and organizations will continue to prolif-
erate, promoting better information—unit pricing, improved content
labels, warning notices, nutrition data, and the like—on packaging, TV,
and the Internet.
« Discount stores such as Home Depot and Wal-Mart, factory outlets, and
food clubs will continue to grow in the United States, a trend that has
just begun to spread to Europe and Japan.
Implications: In the next twenty years, Europe and Japan can expect to un-
dergo the same revolution in marketing that has replaced America's neighbor-
hood stores with cost-cutting warehouse operations and "category killers." This
will inspire social unrest in countries where farmers and owners of small shops
have strong cultural or political positions.
This trend also will spread to China, though it will run several years behind
developments in Europe and Japan.
As prices fall to commodity levels and online stores can list virtually every
product and brand in their industry without significant overhead, service
is the only field left in which marketers on and off the Net can compete
effectively.
S66 Appendix A
Branded items with good reputations are even more important for develop-
ing repeat business.
15. The women's equality movement is beginning to lose its significance,
thanks largely to past successes.
® Generations X and Dot-com are virtually gender-blind in the workplace,
compared with older generations. This is true even in societies such as
India and Japan, which have long been male-dominated, though not yet
in conservative Muslim lands.
® Fully 57 percent of American college students are women. Among mi-
norities, the number is even higher: 60 percent of Hispanic and two-
thirds of African American college students are women.
® Women's increasing entrepreneurialism will allow the formation of en-
trenched "old girl" networks comparable to the men's relationships that
once dominated business.
® An infrastructure is evolving that allows women to make more decisions
and to exercise political power, especially where both spouses work. One
indication of growing dependence on the wife: Life insurance companies
are selling more policies to women than to men.
® More women are entering the professions, politics, and the judiciary.
As we have seen in Iraq, they also are finding roles as combat soldiers.
Implications: Whatever careers remain relatively closed to women will
open wide in the years ahead.
Demand for child care and other family-oriented services will continue to
grow, particularly in the United States, where national services have yet to de-
velop. Over the next twenty years, this may force American companies to
compete on a more even footing with their counterparts in Europe, whose
taxes pay for national daycare programs and other social services the United
States lacks.
In the long run, the need to work with female executives from the developed
countries will begin to erode the restrictions placed on women's careers in some
developing regions.
16. Family structures are becoming more diverse.
® In periods of economic difficulty, children and grandchildren move back
in with parents and grandparents to save on living expenses. In the
United States, one-third of Gen Xers have returned home at some point
in their early lives.
® Growing numbers of grandparents are raising their grandchildren, be-
cause drugs and AIDS have left the middle generation either unable or
unavailable to care for their children. This trend is strongest in Africa,

where AIDS has orphaned some 12 million children, half between the
ages of 10 and 14. In Botswana, Lesotho, Swaziland, and Zimbabwe,
more than one in five children will be orphaned by 2010 according to
UNICEF. Of these, about 80 percent will have lost at least one parent to
AIDS. In the seven African countries most affected by AIDS, life ex-
pectancy at birth has now dropped below age 40.
® Among the poor, grandparents also provide live-in daycare for the chil-
dren of single mothers trying to gain an education or build a career.
« Vermont's first-in-the-country law granting partners in same-sex rela-
tionships most of the legal rights formerly reserved to married couples
took effect in 2000. As of mid-2002, California legislators were consid-
ering a civil-union law. And in 2004, the Massachusetts Supreme Court
ruled that the state's ban on gay marriage was unconstitutional. Ger-
many, the Netherlands, and parts of Canada all have such laws, and sim-
ilar proposals have wide support in Britain.
® Yet the nuclear family also is rebounding, as baby boom and Gen X par-
ents focus on their children and grandparents retain more independence
and mobility.
Implications: Tax and welfare policies need adjustment to cope with fam-
ilies in which heads of households are retired or unable to work.
Policies also need to be adjusted for those who receive Social Security and
are forced to work to support an extended family.
In the United States, the debates over homosexuality and the "decline of the
family"—temporarily displaced from attention by the antiterrorist campaign—
will regain their status as hot-button issues for at least two more election cycles.
Concern for other "family values" will return as well, but this time the debate
will be shaped by the real-world needs of diverse families rather than the agen-
das of religious conservatives.
ENERGY TRENDS
17. Despite all the calls to develop alternative sources of energy, oil con-
sumption is still rising rapidly.
® The world used only 57 million barrels of oil per day in 1973, when the
first major price shock hit. By 2004, it was using nearly 82 million bar-
rels daily, according to the International Energy Agency. Consumption
is expected to reach 110 million barrels daily by 2020.
S66 Appendix A
® However, oil's share of world energy consumption has begun to de-

cline: It is expected to drop from 40 percent in 1999 to about 37 per-
cent in 2020.
• The United States consumed 19.7 million barrels of oil daily in 2000, of
which 10.4 million barrels came from net imports—up from 6.3 million
barrels in net imports in 1973. In 2004, about 55 percent of the petro-
leum used in the United States still is imported. Domestic oil production
is expected to disappear by about 2055, even if reserves are tapped in the
Arctic National Wildlife Refuge.
® In the first quarter of 2004, China consumed about 6.14 million barrels
of oil, up 18 percent over the same period in 2003. In February 2004, it
imported 3,182 million barrels per day, mostly from the Middle East.
Implications: Low oil prices in the mid- to late-1990s slowed development

of fields outside the Middle East. It costs $10,000 to increase oil production by
one barrel per day in most of the world, but only $5,500 for the OPEC lands.
It would take a prolonged surge in oil prices, to levels like those seen in 2000,
to provide an incentive to develop new fields, such as the Arctic National Wildlife
Refuge. (Such sites could benefit from new drilling techniques that make it pos-
sible to extract oil with less damage to the environment.)
18. Contrary to popular belief, the world is not about to run out of oil.
® As a result of intensive exploration, the world's proven oil reserves
climbed from about 660 billion barrels in 1980 to more than 1 tril-
lion barrels in 1990. Despite consumption, they have hovered over 1
trillion barrels ever since. Natural gas reserves stand at about 5.15
trillion cubic feet.
® OPEC officials claim that the eleven member countries can provide for
the world's energy needs for roughly the next eighty years. OPEC cur-
rently supplies about 40 percent of the world's oil and holds 60 percent
of the oil available internationally. It will continue to supply most of the
oil used by the developed world. According to the U.S. Department of
Energy, OPEC oil production will nearly double to about 57 million bar-
rels of oil per day by 2020.
® OPEC will continue to supply most of the worlds oil, with Russia the
second-largest producer. According to the U.S. Department of Energy,
OPEC oil production will grow by some 24 million barrels of oil per day
by 2020, to about 55 million barrels per day. This is nearly two-thirds of
the world's total projected increase in production.
® Oil production outside the OPEC nations has not yet peaked. By 2010,
China, Russia, and Kazakhstan will be major suppliers, if the necessary
pipelines can be completed and political uncertainties in Russia and

Kazakhstan do not block investment by Western oil companies. Rus-
sia alone is expected to become the world's second-largest oil producer
by >2010.
® Exploitation of oil in Venezuela has barely begun. Reserves there may
be even larger than those in Saudi Arabia, according to some esti-
mates. However, it is more expensive to refine and use, because it con-
tains much higher levels of sulfur than the Middle Eastern oil
currently in production.
« India also is believed to own substantial reserves of oil in deposits be-
neath the Indian Ocean.
® Recent reports that the world's oil reserves may be up to 20 percent
smaller than previously believed are not credible, in part because they
originate with an odd coalition of the American Petroleum Institute
and alternative energy proponents—two groups with a vested interest
in keeping oil prices high. In any event, 80 percent of OPEC's esti-
mated supply would still be oil enough to supply the world for the
next 64 years.
implications: If the price of oil rises significantly beyond current levels,
new methods of recovering oil from old wells will become cost-effective. Tech-
nologies already developed could add nearly 50 percent to the world's recover-
able oil supply.
However, proposed construction of ethanol plants to supplement oil supplies
would be a wasted effort. Until oil prices rise significantly more than they are
likely to in the near future, ethanol simply is not cost-effective. This has been
amply demonstrated by the history of Brazil's ambitious program to replace oil
with ethanol, which has proved an abject failure.
Other alternative energy sources face similar problems with economic via-
bility. Barring substantial incentives, this will inhibit efforts to stem global
warming for the foreseeable future.
There is reason to wonder whether OPEC oil will be available to the United
States. Saudi Arabia is likely to be taken over by a fundamentalist Islamic gov-
ernment similar to that of Iran; if, upon the death of King Fahd, Osama bin
Laden or one of his deputies seizes power, the new regime could be reluctant
to provide oil to the United States.
19. Oil prices are stable at; $25 to $28 per barrel; they rise above that
range only in times of trouble.
® Prices above $45 per barrel seen in 2004 result from uncertainty in Iraq,
the Yukos conflict in Russia, and other short-term problems.
S66 Appendix A
• Despite claims that OPEC would prefer to keep crude affordable, the
organizations current aim is to hold the price of oil no lower than $30
per barrel. Yet doing so requires a unity of purpose that member coun-
tries have never been able to sustain for very long.
© The vulnerability of oil prices was reinforced in the months after Sep-
tember 11, when they fell to just $19.88 despite severe worries about
possible instability in the Middle East.
• New oil supplies coming on line in the former Soviet Union, China, and
other parts of the world will make it even more difficult to sustain prices
at artificially high levels.
® The twenty most industrialized countries all have at least three-month
supplies of oil in tankers and underground storage. Most have an-
other three months' worth in "strategic reserves." In times of high oil
prices, customer nations can afford to stop buying until the costs come
down.
implications: High oil prices cannot be sustained. They are likely to fall
below $30 per barrel by 2006 as non-OPEC oil sources come on line and Amer-
ican refineries expand their capacity.
In response to high (by American standards) gas prices, the U.S. government
will probably boost domestic oil production and refining to increase the re-
serve of gasoline and heating oil. This stockpile would be ready for immediate
use in case of future price hikes, as in the winter 2000 release from, strategic re-
serves. This will make it easier to negotiate with OPEC.
The United States almost certainly will drill for oil in the Arctic National
Wildlife Reserve. To minimize environmental damage, drilling will take place
only in the winter, when the tundra is rock hard, slant drilling will be used to
minimize the number of wells required, and the oil will be shipped through a
double-walled pipeline.
One upward pressure on the price of American gasoline: the Environmental
Protection Agency's "Tier 2" regulations, which aim to reduce dramatically emis-
sions of sulfur and nitrogen oxides and particulates, are scheduled to take ef-
fect between 2004 and 2006. Production of super-low sulfur fuels mandated
under the plan is expected to add about 4 cents per gallon to the cost of gas
and 6 cents per gallon to the price of diesel fuel.
The one development that could change this scenario is the establishment
of a Muslim extremist government in Saudi Arabia following the death of
King Fahd, leading to a ban on oil sales to the United States and its allies. A
religious takeover of Saudi Arabia is highly likely. An oil boycott against the
U.S. seems less so, as the new rulers will need the income as urgently as the
Saud monarchy did.
20. Growing competition from other energy sources also will help to limit
the price of oil.
® Solar, geothermal, wind, and wave energy will ease power problems
where these resources are most readily available, though they will sup-
ply only a very small fraction of the world's energy in the foreseeable
future.
® Global energy production from renewable sources such as geothermal
wells, wind turbines, and solar generators grew from 151.64 billion kWh
in 1990 to 274.04 billion kWh in 2002.
® During the same period, nuclear electric output grew from 648.89 bil-
lion kWh to 860.29 kWh, while hydroelectric power generation declined
from 606.46 billion kWh to 595.06 billion kWh, having peaked at 727.62
billion kWh in 1996.
® Worldwide wind-power generating capacity grew by 6,500 megawatts in
2001 alone, the fastest rate of growth yet recorded and 50 percent more
than the previous year. Photovoltaic solar energy production has been
growing at a steady 25 percent per year since 1980.
® Natural gas burns cleanly, and there is enough of it available to supply
the world's total energy demand for the next 200 years. Consumption of
natural gas is growing by 3.3 percent annually, compared with 1.8 per-
cent for oil.
® According to the Energy Information Agency at the U.S. Department of
Energy, shifting 20 percent of America's energy supply to renewable re-
sources by 2020 would have almost no impact on the total cost of power.
At present, less than 5 percent of the energy used in the United States
comes from renewable resources.
• A new technique called muon-catalyzed fusion reportedly could pro-
duce commercially useful quantities of energy by 2020.
Implications: Though oil will remain the world's most important energy
resource for years to come, two or three decades forward it should be less of a
choke point in the global economy.
Declining reliance on oil eventually could help to reduce air and water pol-
lution, at least in the developed world. By 2060, a costly but pollution-free hy-
drogen economy may at last become practical.
In the interim, nuclear power will supply a growing portion of the world's
energy needs. Nuclear plants will supply 16 percent of the energy in Russia
and Eastern Europe by 2010. In early 2004, China had only nine operating
nuclear power plants. It plans to build 30 more by 2020, bringing nuclear
energy consumption from 16 billion kWh in 2000 to 66 billion kWh in 2010
S66 Appendix A
and 142 billion kWh in 2020, By 2020, Russia will consume 129 billion kWh
of nuclear energy per year, while Canada will use 118 billion kWh.
ENVIRONMENTAL TRENDS
environmental issues such as air pollution as the consequences of
neglect, indifference, and ignorance become ever more apparent.
© Soot and other particulates are coming under greater scrutiny as threats
more dangerous to human health than sulfur dioxide and other gaseous
pollutants. In the United States alone, medical researchers estimate that
some 64,000 people each year die from cardiopulmonary disease as a re-
sult of breathing particulates. In sub-Saharan Africa, the toll is between
300,000 and 500,000 deaths per year, and in Asia, between 500,000 and
1 million people annually die of particulate exposure.
® A 2004 report for the U.S. Environmental Protection Administration es-
timated that pollution by American power plants causes 23,600 needless
deaths per year.
• In all, the World Health Organization estimates that 3 million people
die each year from the effects of air pollution, about 5 percent of the
total deaths annually.
• The European Parliament estimates that 70 percent of the continent's
drinking water contains dangerous concentrations of nitrate pollu-
tion. In the United States, there is growing concern that pollutants
such as perchlorate, the gasoline additive MTBE, and even the chlo-
rine used to kill water-borne pathogens may represent significant
health concerns.
• Though some debate remains about the cause, the fact of global warm-
ing has become undeniable. At Palmer Station on Anvers Island, Antarc-
tica, for example, the average annual temperature has risen by 3 to 4
degrees since the 1940s, and by an amazing 7 to 9 degrees in June—
early winter in that hemisphere. Recent analyses say there is a 90 per-
cent chance that the planet's average annual temperature will rise
between 3 and 9 degrees over the next century.
® Governments are taking more active measures to protect the environ-
ment. For instance, after years of ineffective gestures, Costa Rica has
incorporated about 25 percent of its land into protected areas, such as
national parks. Cambodia has protected a million-acre forest. Gabon, in
Africa, has set aside 10 percent of its land for parks. And Liberia is pro-
tecting 155,000 acres of forest in an effort to safeguard endangered west-
ern chimpanzees.
0 An estimated 80 percent of logging in the Amazon basin is illegal. In

1999, Brazil raised the maximum line for illegal logging to more than
$27 million and changed legal procedures so that the fines can actually
be imposed.
® In an effort to promote cleaner energy technologies and to slow global
warming, mOsSt European nations now tax carbon emissions or fossil
fuels. In Germany, a carbon tax raises the cost of gasoline by nearly 11
cents per gallon.
• In India, government policies consistently rate industrial development
more important than the environment. Yet in an effort to reduce air pol-
lution, India's Supreme Court has limited sales of new cars in New Delhi
to 18,000 per year, less than one-fourth of the average previously sold.
• Nonetheless, none of India's 23 million-plus cities meets WHO air qual-
ity standards. Indoor smoke from cooking fires kills an estimated
500,000 people in India each year, mostly women and children.
• Pollution-related respiratory diseases kill about 1.4 million people yearly
in China and Southeast Asia.
• Anticipating a three-foot rise in sea levels, the Netherlands is spending
$1 billion to build new dikes.
implications: If air pollution were halted instantly, it would take an esti-
mated 200 years for carbon dioxide and other greenhouse gasses to return to
preindustrial levels.
Environmental policies will provoke a political bacldash wherever they con-
flict with entrenched interests, as they have long done in the American West.
However, the cost of not protecting the environment is too obvious to be ig-
nored. Throughout most of the world, polluters and private beneficiaries of
public assets will increasingly confront restrictive regulations designed to serve
the interests of the community at large.
22. Water shortages will be a continuing problem for much of the world.
• One-third of the population of Africa and most of the major cities in
the developing world will face water shortages, according to the
United Nations.
• The northern half of China, home to perhaps half a billion people, al-
ready is short of water. The water table under Beijing has fallen nearly
200 feet since 1965. It declined by 8 feet in 1999 alone.
® Water usage is causing other problems as well. For example, irrigation
water evaporates, leaving minerals in the soil. By 2020, 30 percent of
the world's arable land will be salty; by 2050, 50 percent. Salinization al-
ready is cutting crop yields in India, Pakistan, Egypt, Mexico, Australia,
and parts of the United States.
S66 Appendix A
® Pollution further reduces the supply of safe drinking water. In India, an

estimated 300 million people lack access to safe drinking water, due to
widespread pollution of rivers and groundwater.
® Water quality is a growing problem even in the developed lands. In the
United States, cities such as Atlanta, where the delivery system is a cen-
tury old and poorly maintained, suffer frequent water-main breaks, which
suck dirt, debris, bacteria, and pollutants into the water supply There are
an estimated 237,600 such breaks each year in the United States.
® Many ecologists believe that global warming will make drought much
more frequent—even the norm—west of the Mississippi.
® Contaminated water is implicated in 80 percent of the world's health
problems. An estimated 40,000 people around the world die each day of
diseases directly caused by contaminated water—that's more than 14
million per year.
Implications: By 2040, at least 3.5 billion people will run short of water,
almost ten times as many as in 1995. By 2050, fully two-thirds of the world's
population could be living in regions with chronic, widespread shortages of
water.
Water wars, predicted for more than a decade, are an imminent threat in
places like the Kashmir: Much of Pakistan's supply comes from areas of Kash-
mir now controlled by India. Such problems as periodic famine and desertifi-
cation also can be expected to grow more frequent and severe in coming
decades.
Other present and future water conflicts involve Turkey, Syria, and Iraq over
the Tigris and Euphrates; Israel, Jordan, Syria, and Palestine over water from
the Jordan River and the aquifers under the Golan Heights; India and
Bangladesh, over the Ganges and Brahmaputra; China, Indochina, and Thai-
land, over the Mekong; Kyrghyzstan, Tajikistan, and Uzbekistan over the Oxus
and Jaxartes rivers; and Ethiopia, Sudan, and at least six East African coun-
tries, including Egypt, which share the Nile.
Impurities in water will become an even greater problem as the population
ages and becomes more susceptible to infectious diseases.
In the United States, repair of decayed water systems is likely to be a
major priority for older cities such as New York, Boston, and Atlanta. Cost
estimates for necessary replacement and repair of water mains range up to
$1 trillion.
Water providers in the United States will face more new regulations in the
next five years than have been adopted since the Safe Drinking Water Act was
signed in 1974.
23. Recycling has delayed the "garbage glut" that threatened to overflow
the world's landfills, but the threat has not passed simply because it
has not yet arrived.
® Americans now produce about 4.4 pounds of trash per person per day,
twice as much as they threw away a generation ago.
® In June 2002, New York City abandoned its 14-year-old recycling effort
for glass, plastic, and beverage cartons, which city authorities held was
not cost-effective. This cut recycling from about 21 percent of waste to
an estimated 10 percent and sent an extra 1,200 tons of litter to landfills
each day. By contrast, Seattle recycles about half of its solid waste.
• Seventy percent of U.S. landfills will be full by 2025, according to the EPA.
® In London and the surrounding region, landfills will run out of room by
2012. For household trash, landfill space will be exhausted by 2007.
® In some other regions, simply collecting the trash is a major problem.
Brazil produces an estimated 240,000 tons of garbage daily, but only 70
percent reaches landfills. The rest accumulates in city streets, where it
helps to spread disease.
® Recycling and waste-to-energy plants are a viable alternative to simply
dumping garbage. The United States has more than 2,200 landfills. Eu-
rope, where recycling and energy conversion are much more common,
gets by with 175.
Implications: Expect a wave of new regulations, recycling, waste-to-
energy projects, and waste management programs in an effort to stem the tide
of trash. It will, of course, begin in California.
Existing regulations will be tightened and disposal prices raised in Pennsyl-
vania, South Carolina, Louisiana, and other places that accept much of the
trash from major garbage producers such as New York.
24. Industrial development trumps environmental concerns in many
parts of the world.
® In 1999, Samachar, an Internet newspaper from India, asked its readers
what significant problems face their country. Despite rampant defor-
estation, widespread air and water pollution, loss of biodiversity, and
many other such problems, environmental degradation came in next to
last among ten issues, cited by only 1 percent of the respondents,
® "A deep and abiding distrust of environmental imperatives has been cul-
tivated in large segments of South Africa's population," due to years of
apartheid-era restrictions that were often justified as environmental
measures, according to a study of environmental business opportunities
by Industry Canada.
S66 Appendix A
® Some 70 percent of the energy used in China comes from coal-burning

power plants, few of which are equipped with pollution controls. Sci-
entists estimate that by 2025 China will emit more carbon dioxide and
sulfur dioxide than the United States, Japan, and Canada combined.
• Acid rain like that afflicting the United States and Canada will appear
wherever designers of new power plants and factories neglect emission
controls. A 1995 study of 77 Chinese cities found that 81 percent suf-
fered from acid rain. In India, an area the size of the United States is
covered by a haze of sulfates and other chemicals associated with acid
rain. Look for this problem to appear in most other industrializing
countries as well.
Implications: Broad regions of the planet will be subject to pollution, de-

forestation, and other environmental ills in the coming decades.
Diseases related to air and water pollution will spread dramatically in the
years ahead. Already, chronic obstructive pulmonary disease is five times more
common in China than in the United States. As citizens of the developing coun-
tries grow to expect modern health care, this will create a growing burden on
their economies.
This is just a taste of future problems, and perhaps not the most trouble-
some. Even the U.S. government now admits that global warming is a result of
human activities that produce greenhouse gases. It now seems that China and
India soon will produce even more of them than the major industrialized na-
tions. Helping the developing lands to raise their standards of living without
causing wholesale pollution will require much more aid and diplomacy than the
developed world has ever been willing to devote to this cause.
25. Though species extinction may not be so rapid as once believed, loss
of biodiversity will be a growing worry for decades to come.
® Just twenty-five so-called "hot spots" covering 11 percent of the world's
surface have lost 70 percent of their original vegetation. What is left,
about 2 percent of the planet s surface, is home to 44 percent of all plant
species and 35 percent of all vertebrates other than fish. The hot spots
also are home to 1.2 billion people, or one-fifth of the world's population.
® An estimated 50,000 species disappear each year, up to 1,000 times the
natural rate of extinction, according to the United Nations Environ-
mental Program.
® Eleven percent of birds, 25 percent of mammals, and 20 percent to 30
percent of all plants are estimated to be nearing extinction.
® By 2100, as many as half of all species could disappear.
® Throughout the world, amphibian populations are in decline, for rea-

sons that, after more than a decade of intensive research, remain
poorly understood.
® Coral reefs throughout the world are dying rapidly, again for reasons
that are not entirely clear.
® The chief cause for species loss, according to University of Colorado sci-
entists, is the destruction of natural habitats by logging, agriculture,
and urbanization. Some 30 million acres of rainforest are destroyed
each year.
• Though commercial fishing is not known to have exterminated any
species—largely because the last few members of a species are too
costly to catch—it is turning out to be another important cause of
species depletion. Stocks of cod, tuna, swordfish, marlin, and sharks
are down 90 percent since modern industrialized fishing got its start
forty years ago.
implications: Species loss has a powerful negative impact on human well-

being. Half of all drugs used in medicine are derived from natural sources, in-
cluding 55 of the top 100 drugs prescribed in the United States. About 40 percent
of ail pharmaceuticals are derived from the sap of vascular plants. So far, only
2 percent of the 300,000 known sap-containing plants have been assayed for
potential drugs.
In Indonesia, home to one-eighth of the world's coral reefs, more than 70
percent of the reefs are dead or dying. The Indonesian economy loses an esti-
mated $500,000 to $800,000 annually per square mile of dead or damaged reef.
Researchers from the United Kingdom's National Environmental Research
Council Centre for Population Biology report that diverse ecosystems absorb
more carbon dioxide than those with fewer species. Loss of biodiversity thus is
a potential cause of global warming.
26. Continuing urbanization will aggravate most environmental and
social problems.
® In 2000, some 2.8 billion people were urbanites, about 47 percent of the
total world population. By 2030, 60 percent of the global population
will live in cities.
® Between 2000 and 2030, the global population will grow by an estimated
2.2 billion. Of this, 2.1 billion people will be added to the world's cities.
® In the past, urbanization has proceeded fastest in the countries now
industrialized. In the more developed countries, 76 percent of the
population lives in cities; in the developing lands, only 40 percent
S66 Appendix A
are urbanites. Today, cities are growing fastest in the developing

world.
® The big are getting bigger. In 1950, there were just eight megacities,
with populations over 5 million, in the world. By 2015, there will be 59
megacities, 48 of them in less developed countries. Of these, 23 will
have populations over 10 million, all but four in the developing lands.
• Natural increase now accounts for more than half of population increase
in the cities; at most, little more than one-third of urban growth results
from migration.
® In many areas of the developing world, natural increase is producing
population densities formerly seen only in the largest cities.
® Up to 1 billion city dwellers lack adequate shelter, clean water, toilets,
or electricity. The United Nations estimates that these problems cause
10 million needless deaths annually.
® According to the Worldwatch Institute, fuels burned in cities account for
75 percent of global carbon emissions from human activity.
® NASA scientists point out that urbanization also tends to put buildings
and blacktop on the most fertile land, eliminating significant quantities
of carbon-absorbing plants.
® Urbanization also deprives surrounding areas of water: Instead of sink-
ing into the ground, rain is collected, piped to the city, used, treated as
gray water, and then discarded into the ocean. In some regions, such as
near Atlanta, water levels in local aquifers are declining rapidly because
the water that once replenished them now is lost.
® The United States is the one major counterexample to this trend. This
automobile-reliant society built one of the best highway systems in the
world and has relatively little mass transit, so more Americans live in the
suburbs than in the cities.
implications: Cities' contribution to global warming can only increase in

the years ahead.
As the world's supply of potable water declines, people are concentrating in
those areas where it is hardest to obtain and is used least efficiently.
Deaths due to shortages of shelter, water, and sanitation can only grow. Epi-
demics will become still more common as overcrowding spreads HIV and other
communicable diseases more rapidly.
Since the growth is now due more to natural increase than to migration, pro-
grams designed to encourage rural populations to remain in the countryside
may be misplaced. Education and family planning seem more likely to rein in
the growth of cities.
TECHNOLOGY TRENDS

® In all fields, the previous state of the art is being replaced by new high-
tech developments at an ever faster rate.
® Computers are fast becoming part of our environment, rather than just
tools we use for specific tasks. With wireless modems, portable com-
puters give us access to networked data wherever we go.
® Mundane commercial and service jobs, environmentally dangerous jobs,
and assembly and repair of inaccessible equipment such as undersea
cables and space-station components in orbit increasingly will be done
by robots, as NASA proposes to do in refueling the Hubble Space Tele-
scope. Personal robots will appear in the home by 2010.
• Global sales of packaged software are growing at a rate of more than 15
percent per year.
® Wireless links such as satellite-based telephone systems and Internet
connections will simplify relocation of personnel, minimize delays in
completing new installations, and let terminals travel with the user in-
stead of forcing the user to seek out the terminal.
• By 2010, artificial intelligence, data mining, and virtual reality will help
most companies and government agencies to assimilate data and solve
problems beyond the range of today's computers. AI's uses include ro-
botics, machine vision, voice recognition, speech synthesis, electronic
data processing, health and human services, administration, and air-
line pilot assistance.
® Superconductors operating at commercially viable temperatures will be
in commercial use soon after 2015. Products eventually will include su-
percomputers the size of a three-pound coffee can, electric motors 75
percent smaller and lighter than those in use today, practical
hydrogen-fusion power plants, electrical storage facilities with no heat
loss, and noninvasive analyzers that can chart the interaction of indi-
vidual brain cells.
Implications: New technologies should continue to improve the efficiency
of many industries, helping to keep costs under control. However, this increased
productivity retarded U.S. job creation from 2002 through early 2004. Other
developed countries are likely to feel the same effect in the future.
New technologies often require a higher level of education and training to use
them effectively. They also provide dozens of new opportunities to create busi-
nesses and jobs.
S66 Appendix A
Automation will continue to cut the cost of many services and products, mak-
ing it possible to reduce prices while still improving profits. This will be criti-
cal to business survival as the Internet continues to push the price of many
products to the commodity level.
New technology also will make it easier for industry to minimize and cap-
ture its effluent. This will be a crucial ability in the environmentally con-
scious future.
28. Research and development plays a growing role in the economy.

® Throughout the 1990s, R & D outlays rose steadily, at rates ranging be-
tween 2.4 percent and 2.7 percent of U.S. GDP, and future increases will
pace the growth of GDP.
® R & D outlays in Japan have risen almost continuously, to nearly 3 per-
cent of GDP.
• China has taken third place in the worlds R & D spending, with a bud-
get totaling about $60 billion in 2001, the most recent year for which the
figure is available. The United States spent $282 billion on research that
year, while Japan spent $104 billion. Germany, in fourth place, spent
$54 billion.
® In the European Union overall, they amount to 1.99 percent of the EU
GDP. R & D spending in individual countries ranges from 4.27 percent
of GDP in Sweden to just 1.8 percent in Britain, where it has declined
steadily for more than ten years.
• In Russia, R & D budgets fell from about 2 percent of GDP in 1990 to
under 1 percent in 1997; they are believed to have recovered to about 1.1
percent by 2003.
® In the United States, federal funding for basic research has almost dis-
appeared, as Washington focuses on military research and engineering.
Despite official claims that R&D spending would rise sharply in the FY
2004 budget, most research programs have suffered cuts. Even at the De-
partment of Defense science and technology research is down 8 percent
from the previous year.
® Corporate R & D in the United States also has shifted in the post-9/11
period, with less emphasis on pharmaceuticals and computer-related
fields and more focus on biotechnology, nanotechnology, and security
technologies.
® Western corporations are beginning to outsource R & D to foreign
contractors, just as they do other functions. Russian laboratories,
which are technologically sophisticated but have been hard-pressed
to survive budget cuts for more than a decade, are taking on much of
this work.
® Jobs created by high-tech exports are more than replacing those lost to
competition under the North American Free Trade Agreement and sim-
ilar agreements, providing a net gain in employment in the United
States. Some 2.9 million American jobs are now supported by exports
to NAFTA countries, more than double the number of jobs believed to
have been lost from low-tech manufacturing industries. Canada and
Mexico report proportionally greater gains.
implications: The demand for scientists, engineers, and technicians will
continue to grow, particularly in fields where research promises an immediate
business payoff.
Low-wage countries such as China will continue to take low-wage jobs from
advanced industrialized countries such as the United States, but those jobs will
be replaced by higher-paid jobs in technology and service industries.
Countries like India, China, and Russia may continue to suffer a "brain drain"
as those with high-tech skills emigrate to high-demand, high-wage destinations.
However, there is evidence that growing numbers of technology students and
professionals are spending time in the West to learn cutting-edge skills, and
then returning to their native lands to work, start companies, and teach. This
trend may promote the growth of some developing countries while reducing
the competitive advantages of the developed world.
By inhibiting stem-cell research, the United States has made itself a less
attractive place for cutting-edge biomedical scientists. The United Kingdom
is capitalizing on this to become the world's leader in stem-cell research.
In the process, it is reversing the "brain drain" that once deprived it of top
scientists.
Washington's neglect of basic science is being felt in the declining fraction
of patents, Nobel prizes, and other awards going to American scientists. As
other countries become more skilled in critical high-tech fields, the United
States is fast losing its edge. If this trend is not reversed, it will begin to un-
dermine the American economy and shift both economic and political power
to other lands.
29. Advances in transportation technology will make travel and shipping
faster, cheaper, and safer by land, sea, and air.
• By 2010, New York, Tokyo, and Frankfurt will emerge as transfer points
for passengers of high-speed, large-capacity supersonic planes.
® Airline crashes will decline, and will involve fewer fatalities, thanks to
such technical advances as safer seat design and flash-resistant fuels.
® Following European practice, the U.S. airline industry will begin to re-
place the spokes of its existing hub-and-spokes system with high-speed
trains for journeys of 100 to 150 miles.
S66 Appendix A
• There are more than 500 million cars in the world, and the number is
growing quickly.
• The average life of a car in the United States is approaching 22
years.
• Advances in automobile technology such as road-condition sensors, con-
tinuously variable transmissions, automated traffic management sys-
tems, night-vision systems, and smart seats that tailor airbag inflation
to the passenger's weight will all be in common use by 2010.
® The first commercial hybrid gas-electric cars are available already. New
models will begin to win market share from traditional gas guzzlers be-
tween 2005 and 2010.
® To reduce the number and severity of traffic accidents, trucks on the
most heavily used highways will be exiled to car-free lanes, and the sep-
aration will be enforced.
1 mplications: One of the fastest growing transport industries is trucking,

in part because computers encourage "just-in-time" inventory management.
Deliveries for Internet-based companies are an expanding market for shipping.
This field will grow more efficient as GPS-based truck tracking and other new
technologies spread through the industry.
More efficient vehicles, especially with hybrid power trains, should begin
to reduce the demand for oil by 2008, easing one of the few remaining sources
of inflation.
By 2010, "smart car" technologies will begin to reduce deaths due to auto
accidents in Europe and, slightly later, the United States.
Cities increasingly will struggle to reduce auto congestion, either by limiting
the use of private automobiles—as in Munich, Vienna, and Mexico City—or by
encouraging the development and use of mass transit, as in Copenhagen and Cu-
ritiba, Brazil.
Technology may offer other alternatives. One proposal is "dual-mode trans-
portation," in which private cars would be used normally on short hauls but
^vould run on automated guideways for long-distance travel.
30. The pace of technological change accelerates with each new gener-
ation of discoveries and applications.
® The design and marketing cycle—idea, invention, innovation, imitation—
is shrinking steadily. Thus, products must capture their market quickly,
before the competition can copy them. As late as the 1940s, the product
cycle stretched to thirty or forty years. Today, it seldom lasts thirty or
forty weeks.
® Computer-aided design in the automobile and other industries short-

ens the lag time between idea and finished design.
® Eighty percent of the scientists, engineers, and doctors who ever lived
are alive today—and exchanging ideas in real time on the Internet.
® All the technical knowledge we work with today will represent only 1 per-
cent of the knowledge that will be available in 2050.
Implications: Industries will face much tighter competition based on new

technologies. Those who adopt state-of-the-art methods first will prosper. Those
who ignore them eventually will fail.
Lifelong learning is a necessity for anyone who works in a technical field, and
for growing numbers who do not.
31. Important medical advances will continue to appear almost daily.
• Medical knowledge is doubling every eight years.
® Half of what students learn in their freshman year about the cutting
edge of science and technology is obsolete, revised, or taken for granted
by their senior year.
® The Human Genome Project has already begun to yield promising
new treatments for genetic disease. Early results include possible
cures for hemophilia, cystic fibrosis, familial hypercholesterolemia,
a number of cancers, and AIDS. Eventually, some 4,000 hereditary
disorders may be prevented or cured through genetic intervention. As
many as 300 such treatments are expected to enter clinical testing
by 2005.
® The discovery that human chorionic gonadotropin, or hCG, appears
in all cancer cells tested thus far, and (among adults) only in can-
cer cells, seems to promise the development of a generalized "cure
for cancer." If early tests pan out, by 2010 tumors could be treated
routinely and successfully with simple injections in the family doc-
tor's office.
® Our growing knowledge of biochemistry, aided by advanced computer
modeling, has made it possible to design drugs to fit specific recep-
tors in the cell. Drugs created through this technology often are much
more effective than natural derivatives or the products of "synthesize,
scan, and hope" methods, and they are much less likely to cause ad-
verse side effects.
® By 2005, artificial blood will begin to stretch the blood supply, which is
expected to fall short of demand by 4 million units per year for the next
thirty years.
200 S66 Appendix A
® Memory-enhancing drugs should reach clinical use by 2010.

® New computer-based diagnostic tools are providing unprecedented im-
ages of soft and hard tissues inside the body, eliminating much ex-
ploratory surgery.
® "Magic bullet" drug delivery systems will make it possible to direct enor-
mous doses of medication exactly where they are needed, sparing the
rest of the body from possible side effects. This will improve therapeu-
tic results in cancers and many other conditions that require the use of
powerful drugs.
® Laparoscopic and endoscopic surgeries are providing similar benefits for
a growing number of conditions.
® Brain-cell and nerve-tissue transplants to aid victims of retardation,
head trauma, and other neurological disorders will enter clinical use by
2007. Heart repairs using muscles from other parts of the body will ar-
rive soon after. Transplanted animal organs will find their way into
common use. Laboratory-grown bone, muscle, and blood cells also will
be employed in transplants.
® Other transplanted tissues will come from cloning and related tech-
nologies used to grow stem cells. Radical new treatments for diabetes,
Parkinson's disease, perhaps Alzheimer's, and many other refractory dis-
orders can be expected to arrive within the next five to ten years.
Whether American physicians will be allowed to use them is still being
debated. Forecasting International believes that cloning and related
methods will be accepted for the treatment of disease.
® Surgeons working via the Internet will routinely operate on patients in
remote areas using robot manipulators.
® In the next ten years, we expect to see more and better bionic limbs,
hearts, and other organs; drugs that prevent disease rather than merely
treating symptoms; and body monitors that warn of impending trou-
ble. These all will reduce hospital stays.
® "Foodaceuticals" and "nutraceuticals"—foods and nutritional supple-
ments containing drugs and pharmacologically useful substances—
are earning interest among researchers. So far, most are being
considered as new and improved sources of phytochemicals and an-
tioxidants known to fight disorders from heart disease to Parkinson's,
but other uses are under study. For example, scientists at Cornell, Tu-
lane, and the University of Rochester created a strain of genetically
engineered potatoes that produce a vaccine against human papilloma
virus, a common sexually transmitted disease that causes nearly all
cases of cervical cancer. Edible vaccines for a variety of other viruses
are in the works.
® By 2025, the first nanotechnology-based medical therapies should reach

clinical use. Microscopic machines will monitor our internal processes,
remove cholesterol plaques from artery walls, and destroy cancer cells
before they have a chance to form a tumor.
« The latest research suggests that aging itself originates as genetic de-
terioration in the mitochondria, the cell's energy-producing organelles,
and might be slowed, or even reversed, within the lives of today's
adults.
Implications: Even without dramatic advances in life extension, baby
boomers are likely to live much longer, and in better health, than anyone now
expects. This will reduce the cost of health care well below most current pro-
jections, but is likely to raise dramatically the cost of Social Security, Medicare,
and the few remaining fixed-benefit pension plans.
A growing movement to remove barriers to stem-cell research in the United
States could speed progress in this critical field. This could be expected to
produce new treatments for neurological disorders such as Parkinson's and
Alzheimer's disease and many other illnesses now incurable, and often
untreatable.
High development and production costs for designer pharmaceuticals, com-
puterized monitors, and artificial organs will continue to push up the cost of
health care far more rapidly than the general inflation rate. Much of these ex-
penses will be passed on to Medicare and other third-party payers.
Severe personnel shortages can be expected in high-tech medical specialties,
in addition to the continuing deficit of nurses.
Widespread sex selection is producing many more male than female chil-
dren in countries such as China (120/100), India (as high as 156/100, though the
official figures say 113/100), and Saudi Arabia (125/100). The resulting popu-
lation of unattached young men could act to destabilize the affected countries.
(See Trend 49.)
® In spring 2004, Net users numbered around 945 million worldwide. Just
two years earlier, forecasts said there would be between 709 million and
946 million Net users by 2005.
• The world's population of Net users is expected to grow to 1.1 billion by
2005, 1.28 billion by 2006, and 1.46 billion by 2007.
• One reason for this fast growth is the rapid expansion of Net connectivity
in some developing lands. India had only 170,000 Net subscribers in
1998; by 2004, it had 39 million, more than half as many as had been
predicted just two years earlier.
202 S66 Appendix A
® In early 2003, Chinas population of Net users amounted to more than

95 million.
® Over 80 percent of Japanese households were online by early 2003. Al-
most 78 million people—over 60 percent of Japan's population—access
the Internet via computers, cell phones, and other devices.
® American consumers are finally adopting broadband. Some 8.3 million
homes and businesses signed up for broadband service in 2003, bring-
ing the total to 28.2 million lines.
® Most Internet communication is commercial, business-to-business
rather than personal e-mail.
® Internet-based commerce is growing rapidly. Total e-commerce revenue
is expected to be about $2.7 trillion in 2004, $1 trillion in the United
States alone. Business-to-business sales passed $1 trillion by the end of
2003. Online retail sales in the United States grew by 51 percent in 2003
and are expected to grow another 27 percent in 2004.
® Not long ago, the Internet was predominately English-speaking. By
2004, there were an estimated 280 million Net users in countries
where English is the dominant language, but 680 million in non-
English-speaking countries. (This is a bit more than the total cyber-
population because some Net users access the Internet in more than
one language.)
Implications: Americans made up 42 percent of the total Net-using pop-
ulation in 2000, dropping to less than 20 percent in May 2004.
B2B sales on the Internet are dramatically reducing business expenses
throughout the Net-connected world, while giving suppliers access to customers
they could never have reached by traditional means.
Internet-based operations require more sophisticated, knowledgeable work-
ers. People with the right technical training will find a ready market for their
services for at least the next fifteen years, as major businesses compete to hire
them. However, the specialties required in any given country will change as
some skills are outsourced abroad.
Cultural, political, and social isolation has become almost impossible for
countries interested in economic development. Even China's attempts to fil-
ter the Internet and shield its population from outside influences have proved
relatively ineffective, as "hackers" elsewhere provide ways to penetrate the
barrier.
However, isolationism is still possible for those who are not concerned with
trade. The number of Net users in Iran has fallen from an estimated 1 million
to about 420,000 since the mullahs shut down the country's cybercafes.
TRENDS IN LABOR FORCE AND WORK
33. Education and training are expanding throughout society.

• Approximately 130,000 additional K-12 teachers will be needed in the
United States between 2000 and 2010, according to the National Center
for Educational Statistics.
® Also needed: An annual $ 10 billion increase in federal spending for pro-
grams such as Head Start, aid for disadvantaged children, the Job Corps,
and the Job Training Partnership Act.
® Starting salaries for teachers (as a ratio of per capita GDP) declined in
most OECD countries throughout the 1990s; exceptions were the Nether-
lands and New Zealand.
® The half-life of an engineers knowledge today is only five years; in ten
years, 90 percent of what an engineer knows will be available on the
computer. In electronics, fully half of what a student learns as a fresh-
man is obsolete by his senior year.
® Eighty-five percent of the information in National Institutes of Health
computers is upgraded in five years.
® Rapid changes in the job market and work-related technologies will ne-
cessitate increased training for virtually every worker.
• In the next ten years, close to 10 million jobs will open up for profession-
als, executives, and technicians in the highly skilled service occupations.
« A substantial portion of the labor force will be in job retraining pro-
grams at any moment. Much of this will be carried out by current em-
ployers, who have come to view employee training as a good investment.
® Schools will train both children and adults around the clock. The aca-
demic day will stretch to seven hours for children; adults use much of
their remaining free time to prepare for their next job.
® We already are seeing a trend toward more adult education. One reason
is the need to train for new careers as old ones are displaced or boomers
grow bored with them. The other reason is the need for healthy, ener-
getic people to keep active during retirement.
® In the United States, education is moving rapidly to the Internet, as
small, rural grammar and high schools supplement their curricula with
material from larger institutions, while universities increasingly mar-
ket their programs to distant students.
implications: Even small businesses must learn to see employee training
as an investment rather than as an expense. Motorola estimates that it reaps $30
in profits for each dollar it spends on training.
S66 Appendix A
Both management and employees must get used to the idea of lifelong learn-
ing. It will become a significant part of work life at all levels.
As the digital divide is erased and minority and low-income households buy
computers and log onto the Internet, groups now disadvantaged will be in-
creasingly able to educate and train themselves for high-tech careers.
34. Specialization is spreading throughout industry and the professions.
• For doctors, lawyers, engineers, and other professionals, the size of the
body of knowledge required to excel in any one area precludes excel-
lence across all areas.
® The same principle applies to artisans. Witness the rise of post-and-
beam homebuilders, old-house restorers, automobile electronics tech-
nicians, and mechanics trained to work on only one brand of car.
® The information-based organization depends on its teams of task-
focused specialists.
® Globalization of the economy calls for the more independent specialists.
For hundreds of tasks, corporations will turn to consultants and con-
tractors who specialize more and more narrowly as markets globalize
and technologies differentiate.
implications: This trend creates endless new niche markets to be served

by small businesses. It also brings more career choices, as old specialties quickly
become obsolete, but new ones appear even more rapidly.
35. Services are the fastest growing sector of the global economy.
® Retail sales in the United States grew by about 12 percent between 1999
and 2002, according to the Census Bureau, while revenues in selected
service industries rose by 14.4 percent. Similar trends are seen in other
industrialized countries.
® Service industries accounted for 83 percent of private nonfarm em-
ployment in the United States in 2000, the most recent year for which
figures are available, up from only 70 percent in 1990. In the decade
ending 2010, services are expected to account for virtually the entire net
gain in U.S. employment.
® The U.S. health-care budget will more than double from $1.3 trillion in
2000 to $2.8 trillion by 2011, predicts the Centers for Medicare and Med-
icaid Services.
® Service jobs have replaced many of the well-paid positions lost in man-
ufacturing, transportation, and agriculture. These new jobs, often part
time, pay half the wages of manufacturing jobs. On the other hand,
computer-related service jobs pay much more than the minimum for
those with sound education and training.
® Some of the fastest growth is in some of the least-skilled occupations,
such as cashiers and retail salespersons.
Implications: Services are now beginning to compete globally, just as man-
ufacturing industries have done over the last twenty years. By creating com-
petitive pressure on wages in the industrialized lands, this trend will help to
keep inflation in check.
The growth of international business will act as a stabilizing force in world af-
fairs, as most countries find that conflict is unacceptably hard on the bottom line.
36. Women's salaries are approaching equality with men's—but very
slowly.
• Women's salaries have been rising faster than men's since 1975. However,
there still is a long way to go. Nationally, average earnings for a man
employed full time and year-round reported in the 2000 Census was
about $8,000—$10,000 more than for a woman working a comparable
job. Women doctors make only 58 percent as much as their male
colleagues.
® On average, American men make $38,000 per year in a full-time, year-
round job; for similar jobs, women average only $28,000.
® Women's salaries have reached parity with men's in only five fields,
nearly all of them areas where women have broken into trades long
dominated by men: hazardous material removal workers, telecommu-
nications line installers and repairers, meeting and convention plan-
ners, dining room or cafeteria workers, and construction trade helpers.
® Similar statistics are found elsewhere. In the United Kingdom, govern-
ment statistics report that women earn 19 percent less than men for com-
parable jobs. PayFinder.com, a Web site specializing in salary comparisons,
says the gap is actually 24 percent and, in some regions, rising.
® However, women's average income could exceed men's within a gener-
ation. College graduates enjoy a significant advantage in earnings over
peers whose education ended with high school. Today, some 64 percent
of young American women enroll in college, compared with only 60 per-
cent of young men.
® To the extent that experience translates as prestige and corporate
value, older women should find it easier to reach upper-management
positions. They will strengthen the nascent "old-girl" networks, which
will help to raise the pay scale of women still climbing the corporate
ladder.
S66 Appendix A
Implications: The fact that women's salaries are lagging despite higher
academic achievement than men suggests that many college-educated women
may be underemployed.
More new hires will be women, and they will expect both pay and opportu-
nities equal to those of men.
Competition for top executive positions, once effectively limited to men, will
intensify even as the corporate ladder loses many of its rungs.
The glass ceiling has been broken. One-fourth of upper executives today, and
nearly 20 percent of corporate board members, are women. While this is still
too few, it is far more than in any previous generation, and their numbers can
only grow. Generations X and Dot-com are gender-blind in the workplace, and
there are more women than men among college graduates. As more women
reach decision-making levels in business and government, being a "sister" could
become a career advantage.
37. Workers are retiring later as life expectancy stretches.

® OECD data show that people are retiring earlier in the developed
world, but this is only part of the picture. Americans often return to
work and delay complete retirement for several years. This trend
will spread to other industrialized countries as the retirement-age
population grows and the number of active workers to support them
declines.
® People increasingly will work at one career, "retire" for a while (perhaps
to travel) when they can afford it, return to school, begin another career,
and so on in endless variations. True retirement, a permanent end to
work, will be delayed until very late in life.
® In the long run, it may prove impossible to maintain the tradition of re-
tirement, except through personal savings and investment.
® By 2010, we expect the average retirement age in the United States to be
delayed well into the 70s. Benefits may also continue their decline, and
they will be given based on need rather than as an entitlement.
Implications: Since the penalty on earnings of Social Security recipients
was rescinded, more American retirees will return to work, and those not yet
retired will be more likely to remain on the job.
Older workers will partially make up for the shortage of entry-level employ-
ees. The chance to remain in the workplace will reduce the risk of poverty for
many elderly people who otherwise would have had to depend on Social Secu-
rity to get by.
Retirees will act as technical aides to teachers, especially in the sciences.
38. Unions are losing their power.

© In the United States, unions enrolled 23 percent of employed wage and
salary workers in 1980, but only 13 percent by 2003. By 2005, despite
several recent successes in organizing, contract negotiations, and strikes,
it will fall under 12 percent.
© In South Korea, where organized labor once was invincible, the gov-
ernment has increasingly stood up to strikes by doctors, electrical work-
ers, car makers, and other trade groups.
® In Britain, where the Thatcher government broke union power in the
1980s, labor has recovered little of its former strength.
® One reason for this decline is that jobs now are free to move around the
globe from heavily unionized areas to regions where unions are less well
established. Companies also contract out a growing proportion of busi-
ness activities to nonunion firms.
• Another reason is that the increased use of robots, CAD/CAM, and flex-
ible manufacturing complexes can cut a company's workforce by up to
one-third. The surviving workers tend to be technicians and other com-
paratively well-educated semiprofessionals, who always have tended to
resist union membership. The growing industrial use of artificial intel-
ligence will further this trend.
® A third reason is the high cost of strikes. The once-wealthy Teamsters
Union spent an estimated $ 15 million on its strike against UPS in 1997,
leaving only $700,000 in its coffers—this after substantial borrowing
from the AFL-CIO. In 2002, they settled without a strike.
Implications: For large companies, this promises greater stability in em-

ployee wages and benefits.
Unions eager to regain their membership will target any substantial com-
pany with less-skilled employees to organize. This could raise labor costs for
companies that unions once would have considered too small to organize.
In ten to fifteen years, American labor unions will compete with AARP to
lead the battle for the rights of late-life workers and for secure retirement ben-
efits. They face an inherent conflict between the interests of workers in what
once would have been the retirement years and those of younger members,
who rightly see the elderly as having saddled them with the cost of whatever
benefits older generations enjoy.
Democrats have been losing support from unions as organized labor
declines. However, the three groups replacing unions in the power bloc—
the AARP, Hispanics, and African Americans—also have tended to vote
Democratic.
S66 Appendix A
The old paradigm of unions versus corporations is obsolete. In todays econ-

omy, workers negotiate alongside management, winning shared bonuses.
39. Second and third careers are becoming common, as more people
make midlife changes in occupation.
® The fast pace of technological change makes old careers obsolete, even
as new ones open up to replace them.
® People change careers every ten years, on average.
• A recent Louis Harris poll found that only 39 percent of workers say
they intend to hold the same job five years from now; 31 percent say
they plan to leave their current work; 29 percent do not know.
® Boomers and their children will have not just two or three careers, but
five or six, as dying industries are replaced by new opportunities.
Implications: "Earn while you learn" takes on new meaning: Most people
will have to study for their next occupation, even as they pursue their current
career.
In many two-earner couples, one member or the other will often take a sab-
batical to prepare for a new career.
Self-employment is becoming an increasingly attractive option, as being your
own boss makes it easier to set aside time for career development. This is es-
pecially true for Generations X and Dot-com.
Retirement plans must be revised so that workers can transfer medical and
pension benefits from one career to the next—a change that has long been needed.
® Tardiness is increasing; sick-leave abuse is common.
® Job security and high pay are not the motivators they once were, be-
cause social mobility is high and people seek job fulfillment. Some 48
percent of those responding in a recent Louis Harris poll said they work
because it "gives a feeling of real accomplishment."
® This is not wholly the workers' fault, as job security is increasingly
hard to come by. Gen Xers watched their parents remain loyal to their
employers, only to be downsized out of work. As a result, they have
no corporate loyalty at all. Many will quit their job at even the hint of
a better position.
® For Generation X, the post-Baby Boom generation, work is only a
means to their ends: money, fun, and leisure.
® Fifty-five percent of the top executives interviewed in the poll say that
erosion of the work ethic will have a major negative effect on corporate
performance in the future.
® Ethics at the top are no better: Enron, WorldCom, Tyco International,

Adelphia Cable, and ImClone just begin the list of companies under in-
vestigation for deceptive accounting practices, looting of corporate as-
sets, and other misdeeds with dire implications for stock values.
• Seeking the root of such problems, a Zogby International poll of col-
lege seniors found that 97 percent said that their studies had prepared
them to act ethically in the future. However, 73 percent said that pro-
fessors had taught them that right and wrong are not susceptible to
uniform standards, but depend on individual values and cultural
norms.
implications: The new generation of workers cannot simply be hired

and ignored. They must be nurtured, paid well, and made to feel appreci-
ated. Training is crucial. Without the opportunity to learn new skills, young
people will quickly find a job that will help them to prepare for the rest of
their career.
41. Two-income couples are becoming the norm.
® In 75 percent of U.S. households, both partners will work full time by
2005, up from 63 percent in 1992.
® The percentage of working-age women who are employed has grown
steadily throughout the industrialized world. In the United States, it has
grown from 46 percent in 1970 to 68.8 percent in 2000. The lowest are
Italy, Spain, and Mexico, with just 40 percent of working-age women
employed, according to the Organization for Economic Cooperation
and Development (OECD).
® This emphasis on work is one big reason the richest 25 percent to 50
percent of the U.S. population has reached zero population growth.
They have no time for children and little interest in having large
families.
® The number of working mothers with young children is actually de-
clining. Only 58 percent of married women with children under 3 held
jobs in 2002, compared with 61 percent in 1997. At the same time, the
number of married working women with children under a year old fell
from 59 percent to 53 percent.
Implications: Demand for on-the-job childcare, extended parental leave,

and other family-oriented benefits can only grow. In the long run, this could
erode the profitability of some American companies, unless it is matched by an
equal growth in productivity.
S66 Appendix A
Two-career couples can afford to eat out often, take frequent short vacations,
and buy new cars and other such goods. And they feel they deserve whatever
time-savers and outright luxuries they can afford. This is quickly expanding the
market for consumer goods and services, travel, and leisure activities.
This also promotes self-employment and entrepreneurialism, as one family
members salary can tide them over while the other works to establish a new
business.
Look for families that usually have two incomes, but have frequent intervals
in which one member takes a sabbatical or goes back to school to prepare for
another career. As information technologies render former occupations obso-
lete, this will become the new norm.
• Members of Generation X—roughly, the 30-plus cohort—and espe-
cially of Generation Dot-com, now in their 20s, have more in com-
mon with their peers throughout the world than with their parents'
generation.
• There are approximately 50 million people in Europe between the ages
of 15 and 24; 30 million more are between 25 and 29. The under-30 co-
hort represents about 22 percent of the European population.
® The under-20 cohort is remaining in school longer and taking longer to
enter the workforce than before.
• Generation X should be renamed "Generation E," for entrepreneurial.
Throughout the world, they are starting new businesses at an unprece-
dented rate.
® The younger Dot-com generation is proving to be even more business-
oriented, caring for little but the bottom line. Twice as many say they
would prefer to own a business rather than be a top executive. Five times
more would prefer to own a business rather than hold a key position in
politics or government.
® Many in Generation X are economically conservative. On average, those
who can do so begin saving much earlier in life than their parents did
in order to protect themselves against unexpected adversity. They made
money in the stock market boom of the 1990s, then lost it in the "dot-
bomb" contraction, but have left their money in the market. For Gen-
erations X and Dot-com, time is still on their side.
implications: Employers will have to adjust virtually all of their policies
and practices to the values of these new and different generations, including
finding new ways to motivate and reward them. Generations X and Dot-com
thrive on challenge, opportunity, and training—whatever will best prepare them
for their next career move. Cash is just the beginning of what they expect.
52 Trends Now Shaping the Future 2\3
For these generations, lifelong learning is nothing new; it's just the way life
is. Companies that can provide diverse, cutting-edge training will have a strong
recruiting advantage over competitors that offer fewer opportunities to improve
their skills, and knowledge base.
Generations X and Dot-com are well equipped for work in an increasingly
high-tech world, but have little interest in their employers' needs. They also
have a powerful urge to do things their way.
As both customers and employees, they will demand even more advanced
telecommunications and Net-based transactions.
® Computers, electronic communications, the Internet, and other tech-
nologies are making national and international economies much more
competitive,
• in the United States, workers spend about 10 percent more time on the
job than they did a decade ago. European executives and nonunionized
workers face the same trend.
® In this high-pressure environment, single workers and two-income
couples are increasingly desperate for any product that offers to sim-
plify their lives or grant them a taste of luxury—and they can afford to
buy it.
Implications: Stress-related problems affecting employee morale and well-

ness will continue to grow. Companies must help employees balance their time
at work with their family lives and need for leisure. This may reduce short-term
profits but will aid profitability in the long run.
As time for shopping continues to evaporate, Internet and mail-order mar-
keters will have a growing advantage over traditional stores.
MANAGEMENT TRENDS
44. More entrepreneurs start new businesses eveiy year.

® Workers under age 30 would prefer to start their own company rather
than advance through the corporate ranks. Some 10 percent are actively
trying to start their own businesses, three times as many as in previous
generations.
® A large majority simply distrust large institutions. Most believe that jobs
cannot provide a secure economic future in a time of rapid technological
change. Examples of Silicon Valley start-ups that turned their founders
S66 Appendix A
into billionaires "overnight" dramatically advanced this change of val-

ues. This attitude seems to have been moderated only slightly by the
failure of many dot-com companies.
© By 2006, the number of self-employed people in the United States will
rise to 10,2 million, according to the Bureau of Labor Statistics. How-
ever, Forecasting International believes that figure to be too low: Ex-
pect closer to 12 million self-employed Americans in 2006.
• More women also are starting small businesses. Many are leaving tra-
ditional jobs to go home and open businesses, even as they begin a fam-
ily. In 1980, only 26 percent of nonfarm sole proprietorships were owned
by women. By 2000, the number had grown to 35 percent. An estimated
10.6 million privately held firms in the United States are at least 50 per-
cent owned by women; they employ 19.1 million people and generate
$2.46 trillion in. sales annually.
• Since the 1970s, small businesses started by entrepreneurs have ac-
counted for nearly all of the new jobs created. For much of this period,
giant corporations have actually cut employment. In 1995, small entre-
preneurial businesses produced 1 million new full-time jobs versus
barely 100,000 among larger companies.
• By 2005, 80 percent of the labor force will be working for firms em-
ploying fewer than 200 people.
Implications: This is a self-perpetuating trend, as all those new service

firms need other companies to handle chores outside their core business.
It is driven as well by the attitudes and values of Generations X and Dot-com
and by the rapid developments in technology, which create endless opportuni-
ties for new business development.
Specialty boutiques will continue to spring up on the Internet for at least the
next 20 years.
This trend will help to ease the poverty of many developing countries, as it
already is doing in India and China.
45. Information-based organizations are quickly displacing the old
command-and-control model of management.
® The typical large business is struggling to reshape itself. Soon, it will be
composed of specialists who rely on information from colleagues, cus-
tomers, and headquarters to guide their actions.
• Management styles will change as upper executives learn to consult
these skilled workers on a wide variety of issues. Employees will gain
new power with the authority to make decisions based on the data
they develop.
® Information-based organizations require more specialists, who will be

found in operations, not at corporate headquarters. R&D, manufac-
turing, and marketing specialists will work together as a team on all
stages of product development rather than keeping each stage separate
and distinct.
® Upper management is giving fewer detailed orders to subordinates. In-
stead, it sets performance expectations for the organization, its parts,
and its specialists and supplies the feedback necessary to determine
whether results have met expectations.
Implications: This is a well-established trend. At this point, many large
corporations have restructured their operations for greater flexibility However,
many others still have a long way to go.
Downsizing has spread from manufacturing industries to the service econ-
omy. Again, this process encourages the entrepreneurial trend, both to provide
services for companies outsourcing their secondary functions and to provide
jobs for displaced employees.
Many older workers have been displaced in this process, depriving compa-
nies of their corporate memory. Companies have replaced them with younger
workers, whose experience of hard times is limited to the relatively mild re-
cession since 2000. Many firms may discover that they need to recruit older
workers to help them adapt to adversity.
46. A typical large business in 2010 will have fewer than half the man-
agement levels of its counterpart in 1990, and about one-third the
number of managers.
® Computers and information management systems have stretched the
manager's effective span of control from six to twenty-one subordinates.
Information now flows from front-line workers to higher management
for analysis. Thus, fewer mid-level managers are needed, flattening the
corporate pyramid.
® Downsizing, restructuring, reorganization, and cutbacks of white-collar
workers will continue through 2006. Outsourcing will continue to grow
until at least 2010.
® However, many companies are finding it necessary to bring back older
workers, so as to preserve an effective corporate memory.
® Opportunities for advancement will be few because they will come
within the narrow specialty. By 2001, only one person for every fifty was
promoted, compared with one for every twenty in 1987.
® Information-based organizations will have to make a special effort to
prepare professional specialists to become business executives and
leaders.
S66 Appendix A
implications: Top managers will have to be computer-literate to retain

their jobs and must make sure they achieve the increased span of control that
computers make possible.
Finding top managers with the broad experience needed to run a major busi-
ness already has become difficult and can only grow more so as the demand for
specialization grows.
Executives increasingly will start their own companies rather than trusting
the old-fashioned corporate career path to provide advancement.
47. Government regulations will continue to take up a growing portion
of the manager's time and effort.
• In 1996, the U.S. Congress passed regulatory reform laws intended to
slow the proliferation of government regulations. Nonetheless, by 2001
more than 14,000 new regulations have been enacted, Not one pro-
posed regulation was rejected during this period. The Federal Regis-
ter, where proposed and enacted regulations are published, was 37
percent larger in 1999 than it had been 10 years earlier—73,880 pages
in all. In 2001, that number fell for the first time in more than a decade,
to 64,431 pages. However, it was back up to 75,606 pages in 2002, and
75,795 in 2003.
• This is not solely an American trend. The Brussels bureaucrats of the Eu-
ropean Union are churning out regulations at an even faster rate, over-
laying a standard regulatory structure on all the national systems of the
member countries.
® The growth of regulations is not necessarily all bad. A study by the U.S.
Congressional Office of Management and Budget estimated that the an-
nual cost of major federal regulations enacted between October 1992
and September 2002 amounted to between $38 billion and $44 billion
per year. However, the estimated benefits of those regulations added up
to between $135 billion and $218 billion annually.
implications: Regulations are both necessary and unavoidable, and often
beneficial. Yet it is difficult not to see them as a kind of friction that slows both
current business and future economic growth.
The proliferation of regulations in the developed world could give a com-
petitive advantage to countries such as India and China, where regulations
that impede investment and capital flow are being stripped away, while health,
occupational safety, and environmental codes are still rudimentary or absent.
Other lands, such as Russia, will remain at a competitive disadvantage until
they can pass and enforce the regulations needed to ensure a stable, fair busi-
ness environment.
INSTITUTIONAL TRENDS
48. Multinational corporations are uniting the world, and growing more
exposed to its risks.
• By 2005, parts for well over half of the products built in the United States
will originate in other countries.
« Multinational corporations that rely on indigenous workers may be hin-
dered by the increasing number of AIDS cases in Africa and around the
world. Up to 90 percent of the population in parts of sub-Saharan Africa
reportedly tests positive for the HIV virus in some surveys. Thailand is
equally stricken, and many other parts of Asia show signs that the AIDS
epidemic is spreading among their populations.
• The continuing fragmentation of the post-Cold War world has reduced
the stability of some lands where government formerly could guarantee
a favorable—or at least predictable—business environment. The cur-
rent unrest in Indonesia is one example.
® One risk now declining is the threat of currency fluctuations. In Eu-
rope, at least, the adoption of the euro is making for a more stable eco-
nomic environment.
Implications: It is becoming ever more difficult for business to be confi-
dent that decisions about plant location, marketing, and other critical issues will
continue to appear wise even five years into the future. All long-term plans must
include an even greater margin for risk management. This will encourage out-
sourcing rather than investment in offshore facilities that could be endangered
by sudden changes in business conditions.
Countries that can demonstrate a significant likelihood of stability will enjoy
a strong competitive advantage over neighbors that cannot. Witness the rapid
growth of investment in India now that deregulation and privatization have
general political support, compared with other Asian lands where conditions are
less predictable.
Major corporations also can help to moderate some risks in unstable coun-
tries, such as by threatening to take their business elsewhere.
® State-sponsored terrorism appears to be on the decline, as tougher sanc-
tions make it more trouble than it is worth. However, some rogue states
may still provide logistical or technological support for independent ter-
rorist organizations when opportunities present themselves.
® Until recently, attacks on American companies were limited to rock-
throwing at the local McDonalds, occasional bombings of bank
S66 Appendix A
branches and of American-owned pipelines in South America, and kid-

nappings, Since 9/11, American-owned hotel chains have experienced
several major bombings, in part because American government facilities
overseas have been effectively hardened against terrorist assault.
• Nothing will prevent small, local political organizations and special-
interest groups from using terror to promote their causes.
® However, as the United States has been forced to recognize, the most
dangerous terrorist groups are no longer motivated by specific political
goals, but by generalized, virulent hatred based on religion and culture.
® On balance, the amount of terrorist activity in the world is likely to go
up, not down, in the next ten years. This was seen in corrections to the
State Department's April 2004 report on terrorism, which originally
seemed to show a sharp decline in terrorist incidents and was used to
claim success for the Bush administration's tactics in the "war on terror."
In fact, the State Department's corrections in June 2004 showed that
terrorist attacks have risen sharply since the invasion of Iraq, both in
number and in severity.
® Risks of terrorism are greatest in countries with repressive governments
and large numbers of unemployed, educated young men.
Implications: Western corporations may have to devote more of their re-

sources to self-defense, while accepting smaller-than-expected profits from op-
erations in the developing countries.
Like the attacks on the World Trade Center and Pentagon, and the American em-
bassies in Kenya and Tanzania before them, any attacks on major corporate fa-
cilities are likely to be designed for maximum destruction and casualties.
Bloodshed for bloodsheds sake has become a characteristic of modern terrorism.
Where terrorism is most common, countries will find it impossible to attract
foreign investment, no matter how attractive their resources.
Though Islamic terrorists form only a tiny part of the Muslim community,
they have a large potential for disruption throughout the region from Turkey to
the Philippines.
The economies of the industrialized nations could be thrown into recession
at any time by another terrorist event on the scale of September 11. This is par-
ticularly true of the United States. The impact would be greatest if the attack
discouraged travel, as the hijacking of airliners to attack the World Trade Cen-
ter and Pentagon did in 2001 and 2002.
The U.S. economy is being affected already by American antiterrorism mea-
sures. Since Washington began to photograph incoming travelers and required
more extensive identification from them, tourism to America is off by some 30
percent. The number of foreign students coming to American universities has

declined by a similar amount.
50. Consumers increasingly demand social responsibility from companies
and each other.
® Companies increasingly will be judged on how they treat the environ-
ment. For example, nuclear power plant controversies are now seen in
the light of the Chernobyl nuclear accident.
• Safety testing of children's products also enforces corporate responsi-
bility. One company recently was forced to recall 7 million child car
seats. Another recalled more than 440,000 pairs of children's sneakers
with metal eyelets that could become detached and pose a choking
hazard.
© Government intervention will supplant deregulation in the airline in-
dustry (in the interest of safety and services), financial services (to con-
trol instability and costs), electric utilities (nuclear problems), and the
chemical industry (toxic wastes).
® With 5 percent of the world's population and 66 percent of the lawyers
on the planet, American citizens will not hesitate to litigate if their de-
mands are not met.
Implications: For industry, this represents one more powerful pressure to

adopt environmentally friendly technologies, to work with area schools and
community groups, and to participate in other local activities. It also repre-
sents an opportunity to market to environmentally concerned consumers.
As the Internet spreads Western attitudes throughout the world, environ-
mental activists in other regions will find ways to use local court systems to
promote their goals. Litigation is likely to become a global risk for companies
that do not make the environment a priority
51. On average, institutions are growing more transparent in their
operations, and more accountable for their misdeeds.
® China, rated by PricewaterhouseCooper as the most opaque of the major
nations, was forced to open many of its records as a precondition for
joining the World Trade Organization.
® In India, a country generally regarded as one of the world's most corrupt,
the Central Vigilance Commission has opened the country's banking sys-
tem to more effective oversight.
® In the United States, powerful forces are inspiring demands for greater
transparency and accountability in large institutions. These include both
S66 Appendix A
the current wave of business scandals and the controversy over child
abuse within the Catholic Church.
© The wave of support for government since the September 11 terrorist at-
tacks has made Americans willing to accept greater transparency—that
is, less privacy—in their personal lives.
• At the same time, the nationalist response to September 11 temporar-
ily muted most demands for transparency in the American government.
In mid-2004, this reluctance to question Washington appears to be evap-
orating in the wake of the torture scandal in Iraq.
• Wars against terrorism, drug trafficking, and money laundering are
opening the world's money conduits to greater scrutiny. It is also open-
ing up the operations of nongovernmental organizations that function
primarily as charitable and social service agencies but are linked to ter-
rorism as well.
implications: Countries with high levels of transparency tend to be much

more stable than more opaque lands.
They also tend to be much more prosperous, in part because they find it eas-
ier to attract foreign investment.
Greater transparency seems likely to reduce the operational effectiveness of
the world's drug traffickers and terrorist organizations.
52. Institutions are undergoing a bimodal distribution: The big get bigger,
the small survive, and the midsized are squeezed out.
• By 2005, 20 major automakers around the world will hold market shares
ranging from 18 percent (GM) to 1 percent (BMW). Daimler Chrysler al-
ready owns Mercedes Benz, Dodge, Jeep, Smart, Maybach, Vauxhall,
and part of Mitsubishi. GM owns Hummer, Opel, Saab, two-thirds of
Daewoo, and parts of Fiat and Isuzu, in addition to its traditional prod-
uct lines. Ford owns Volvo, Jaguar, Land Rover, and Aston Martin.
® By 2010, there will be only five giant automobile firms. Production and
assembly will be centered in Korea, Italy, and Latin America.
• By 2005, just three major corporations will make up the computer hard-
ware industry: IBM, Compaq, and Dell.
® Seven domestic airlines in the United States today control 80 percent of
the market, leaving the smaller domestic carriers with only 20 percent.
The most recent consolidation is the alliance between Continental and
Northwest. By 2005 there will be only three major domestic carriers.
® Where local regulations allow, mergers and acquisitions are an inter-
national game. Witness the takeovers of the United States' MCI by
WorldCom in the United Kingdom and of Chrysler by Daimler-Benz.
The continuing removal of trade barriers among EU nations will keep

this trend active for at least the next decade.
• Manufacturers often sell directly to the dealer, skipping the wholesaler
or distributor.
® We are now in the second decade of the micro-segmentation trend, as
more and more highly specialized businesses and entrepreneurs search
for narrower niches. These small firms will prosper, even as midsized,
"plain vanilla" competitors die out. This trend extends to nearly every en-
deavor, from retail to agriculture.
» "Boutique" businesses that provide entertainment, financial planning,
and preventive medical care for aging baby boomers will be among the
fastest-growing segments of the U.S. economy.
Implications: Thus far, industries dominated by small, regional, often
family-owned companies have been relatively exempt from the consolidation
now transforming many other businesses. Takeovers are likely even in these in-
dustries in the next decade.
This consolidation will extend increasingly to Internet-based businesses,
where well-financed companies are trying to absorb or outcompete tiny online
startups, much as they have done in the brick-and-mortar world.
This trend leads us to believe that AT&T may be reconsolidated by 2010.
No company is too large to be a takeover target if it dominates a profitable
market or has other features attractive to profit-hungry investors.
SOCIOPOLITICAL INDICATORS
® Population of men between ages 15 and 30

® Young men are the most prone to violence.
® Unemployment rate among young males
° Young men are most volatile, and most likely to adopt violent causes if
they are unemployed and without hope.
° A sudden, permanent loss of job opportunities, as when a war is lost,
heightens the possibility of terrorism.
® Educational status of young males
° Young men are most susceptible to terrorist causes if they have been ed-
ucated for a middle-class life that is no longer available to them.
® Percentage of ethnic minorities
° Ethnic divisions reduce national stability, particularly in regions with
traditional tribal animosity. However, division among many ethnic groups
can produce relative peace, so long as power and prosperity are shared.
• Political power of ethnic minorities
° An effective political voice promotes stability among minority popula-
tions and reduces the likelihood of terrorist activity,
o States dominated by an ethnic minority may be even less stable and
more prone to terrorism than those in which the minority is persecuted.
® Percentage of religious minorities
o The effects of religious divisions mirror those of ethnic divisions, but
may be even more vicious and intractable.
® Prevalence of political corruption
o Widespread political corruption undennines the legitimacy of governments
and tends to promote the growth of dissident and terrorist movements.
220
Vital Signs of National Stability 221
® Prevalence of police corruption

o Police corruption is equivalent to political corruption at the local level.
It can be even more damaging to social stability, and more conducive to
terrorism, because the police have both weapons and a coherent man-
agement structure to use them.
® Length of visa lines outside embassies
o Eagerness to leave the country reveals instability; any sudden change in
this indicator is particularly important.
® Hoarding of food, medical supplies, and gasoline
o These all suggest a general expectation of hard times to come and a de-
cline in national stability.
® Number of foreign students in the United States in technical, business, and
liberal arts courses
o American colleges are a traditional haven for the younger members of
wealthy families in unstable lands.
® Percent of homes with indoor plumbing
o A low number indicates widespread poverty and a population with lit-
tle investment in the existing regime.
® Degree of religious freedom
o Great religious freedom indicates a nation with little to fear from social
differences.
® Degree of press freedom
o The press can be free, monitored, or controlled; the greater the freedom,
the more confident the government is likely to be in the acceptance of
its power.
® Consolidation of wealth in the hands of political leaders and their families,
of military leaders, and of political cronies of the head of government
o The more wealth is consolidated within any elite, the less stable any na-
tion will be.
® Subsidies for food, housing, and medicine or medical care
o These indicate that the nation's underlying economy is not adequately
providing for all its citizens and when they become a major source of in-
come for a large fraction of its citizens, suggest that social and political
stability are low.
® Changes in subsidies to the poor
o Sudden increases in subsidies often are an attempt to buy the loyalty of
a population that is no longer willing to grant it.
® Percent of the population below the poverty line
o Social and political stability is inversely related to poverty rates.
® Number of AIDS patients
o In extreme cases, such as in Central Africa and Thailand, high rates of
AIDS can undermine entire economies and cause instability.
S66 Appendix A
® Rates of morbidity and mortality

® High rates indicate that the society has not been able to deliver basic
social services to its population, which will have little loyalty to the ex-
isting government.
• Life expectancy
o This extends the previous indicator.
® Sharing data and information on technology, politics, economics, social con-
ditions, criminal activity, military intelligence, and terrorism
« Governments unwilling to share basic information often are uncertain
of their hold on power.
ECONOMIC INDICATORS
® Percentage of home ownership

® A high rate of home ownership suggests that wealth is being distributed
relatively fairly and indicates that much of the population has a stake in
the country's continued stability and prosperity.
® Percentage of imports
° In the absence of some balancing factor, the need to import an unusu-
ally high fraction of a nations goods suggests the absence of a native
manufacturing base, and perhaps the existence of widespread poverty.
® Percentage of exports
Strong exports of manufactured goods suggest a prosperous economy,
0
and therefore a stable nation; an export economy based on raw materi-

als suggests the reverse.
» Oil-based economies will be vulnerable to unrest so long as petroleum
remains relatively cheap.
® Difference in income and wealth between the richest and poorest deciles of
the population
° A wide gap between the rich and poor is one of the most reliable warn-
ings of social and political instability,
o Developed by Forecasting International many years ago, this indicator
has recently been adopted by the Central Intelligence Agency for the
country reports presented in the CIA World Facthook, which is available
on the Internet.
® Transfer of wealth to other countries
® In the absence of other investment incentives, this may suggest strong
doubts about political stability among those well positioned to make
such a judgment.
Vital Signs of National Stability 223
© Movement of cash to the United States

o This is one measure of the previous indicator.
® Investment in U.S. stocks or bonds
o And yet another.
« Increased sales of diamonds
® This may reveal conversion of wealth to easily portable form, a tradi-
tional sign of instability.
® Increased numbers of expensive homes on the market
° Another harbinger of impending flight by the wealthy.
® Growing investment in homes or real estate in the United States or Canada
by the wealthy elite, by high-ranking military officers, and by politicians
o This strongly confirms the previous indicator.
® Form in which workers are paid
® Payment in goods or credit—in any form other than a regular salary—
indicates a severely unhealthy economy in which unrest is likely.
° For a time, Russian teachers were paid in vodka, which is easily sold
and resisted inflation better than rubles. They had refused to accept pay-
ment in toilet paper or credit toward funeral costs.
« Access to drug funds
0 Drug money represents a convenient and lucrative way both to support
terrorist activity and to make it pay.
TECHNOLOGY INDICATORS
® Number of automobiles
® A high rate of automobile ownership suggests at least moderate general
prosperity and the existence of a well-developed infrastructure to main-
tain and supply the cars and roads; both these implications suggest po-
litical and economic stability.
« Availability of modern communications facilities
® General access to information-related technologies suggests the exis-
tence of a high-tech infrastructure to manufacture, operate, and main-
tain the equipment; a population both sufficiently well educated to have
use for telephones, computers, and the like and wealthy enough to buy
them; and a government that trusts its citizens with information and
with access to the world at large. Specific indicators include:
Number of cell phones per capita
Number of regular telephones per capita
Number of computers per capita
Number of printers per capita
S66 Appendix A
Number of copiers per capita

Number of fax machines per capita
Number of shortwave radio receivers per capita
Number of satellite receivers per capita
Number of Internet users per capita
MILITARY INDICATORS
® Percentage of military
o In a stable country, the military usually employs a small fraction of the
population and forms a minor segment of the economy.
® Military salaries
o Military pay scales substantially above those of the population at large
may indicate a nation with little social cohesion.
® Numbers of palace guard or "elite" guard
® The existence of a strong elite guard indicates that leaders cannot trust
even their own military.
® Changes in salary of palace guard per year
® A sudden, substantial pay raise for an elite guard is often an attempt to
buy loyalty where none is otherwise available and is a clear sign of im-
pending unrest.
® This was one of the most important symptoms of social and political in-
stability in Iran in the years before the fundamentalist revolution in 1980.
More than any other single factor, it allowed Forecasting International to
warn its clients of impending trouble fully two years before the event.
® Role of military in politics
° Relatively few governments remain stable for long unless the military is
subservient to civilian rule.
® Nuclear, biological, and chemical weapons capabilities
® There is little impetus for nations to develop weapons of mass destruc-
tion in the face of international sanctions unless they perceive some im-
minent threat to their sovereignty or are planning future aggression.
® Use of underground tunnels or laboratories
® The felt need to hide weapons development and other such military
preparations are a clear warning that war is contemplated.
Appendix C
Hospitality Associations
and Publications
LISTING OF ASSOCIATIONS
American Correctional Foodservice Association
304 West Liberty Street, Suite 301
Louisville, KY 40202
Tel: 502-583-3783
Fax: 502-589-3502
Website: www.acfsa.com
American Culinary Federation
P.O. Box 3466
St. Augustine, FL 32085
Tel: 904-824-4468
Fax: 904-825-4758
Website: www.acfchefs.org
American Dietetic Association
216 West Jackson Boulevard, Suite 800
Chicago, IL 60606-6995
Tel: 312-899-0040
Fax: 312-899-1758
Website: www.eatright.org
American Hotel & Lodging Association
1201 New York Avenue NW, #600
Washington, DC 20005-3931
Tel: 202-289-3100
Fax: 202-289-3199
Website: www.ahma.com
225
S66 Appendix A
American Hotel & Lodging Association Educational Institute

800 North Magnolia Avenue, Suite 1800
Orlando, FL 32803
Tel: 407-999-8100; 800-752-4567
Fax: 407-236-7848
Website: www.ei-ahla.org
American School Food Service Association
1600 Duke Street, 7th Floor
Alexandria, VA 22314-3436
Tel: 800-877-8822
Fax: 703-739-3915
Website: www.ahma.com
American Society for Hospital Food Service Administrators
840 North Lake Shore Drive
Chicago, IL 60611
Tel: 312-280-6416
Fax: 312-280-4152
Website: www.ashfsa.org
Club Managers Association of America
1733 King Street
Alexandria, VA 22314
Tel: 703-739-9500
Fax: 703-739-0124
Website: www.cmaa.org
Council on Hotel, Restaurant and Institutional Education
1200W 17th Street NW
Tel: 202-331-5990
Fax: 202-331-2429
Website: www.chrie.org
Council on Hotel and Restaurant Trainers
11515 Orchid Avenue
Fountain, CA 92708
Tel: 714-531-8263
Fax:714-839-0465
Website: www.chart.org
Cruise Lines International Association
80 Broad Street, Suite 1800
New York, NY 10004
Hospitality Associations and Publications 227
Tel: 212-921-0066
Fax: 212-921-0549
Website: www.cruising.org
Dietary Managers Association
400 East 22nd Street
Lombard, IL 60148
Tel: 708-932-1444
Fax: 708-932-1482
Website: www.dmaonline.org
Education Foundation of the National Restaurant Association
250 South Wacker Drive, Suite 1400
Chicago, IL 60606
Tel: 312-715-1010
Fax: 312-715-0807
Website: www.rcfws.com
Foodservice Consultants Society International
Fax: 502-589-3602
Website: www.fcsi.org
Healthcare Food Service Management Association
204 E Street NE
Washington, DC 20002
Tel: 202-546-7236
Fax: 202-547-3648
Website: www.hfm.org
Inflight Foodservice Association
Tel: 502-583-3783
Fax: 502-589-3602
Website: www.ifsanet.com
International Association of Amusement Parks and Attractions
1448 Duke Street
Tel: 703-836-4800
Fax: 703-836-4801
Website: www.iaapa.org
228 Appendix F .
International Association of Culinary Professionals

Tel: 502-583-3783
Fax: 502-589-3602
Website: www.iacp.com
International Council on Hotel, Restaurant and Institutional Education
2613 North Parham Road, 2nd Floor
Richmond, VA 23294
Tel: 804-346-4800
Fax: 804-346-5009
Website: www.chrie.org
International Foodservice Distributors Association
201 Park Washington Court
Falls Church, VA 22046
Tel: 703-832-9400
Fax: 703-583-4673
Website: www.ifdaonline.org
International Foodservice Executives Association
1100 State Road 7, #103
Margate, FL 22068
Tel: 305-977-0767
Fax: 305-977-0874
Website: www.ifsea.org
International Foodservice Manufacturers Association
334 North Clark Street, Suite 2900
Chicago, IL 60610
Tel: 312-644-8989
Fax: 312-644-8185
Website: www.ifmaworld.com
MICROS Systems, Inc.
7031 Columbia Gateway Drive
Columbia, MD 21046-2289
Tel: 443-285-6000
Website: www.micros.com
National Association of Black Hospitality Professionals, Inc.
P.O. Box 5443
Plainfield, NJ 07060
Tel: 908-354-5117
Fax: 908-354-8804
National Association of College University Foodservice
Michigan State University
1405 South Harrison Road, Suite 103
East Lansing, MI 48824
Tel: 517-332-2494
Fax: 517-332-8144
Website: www.nacufs.org
National Association of Concessionaires
35 East Wacker Drive, Suite 1545
Chicago, IL 60601
Tel: 312-236-3585
Fax:312-236-7807
Website: www.naconline.org
National Association of Food Equipment Manufacturers
401 North Michigan Avenue
Chicago, IL 60611
Tel: 312-644-6610
Fax: 312-321-6869
Website: www.nafem.org
National Automatic Merchandising Association
20 North Wacker Drive, Suite 3500
Tel: 312-346-0370
Fax: 312-704-4140
Website: www.vending.org
National Club Association
3050 K Street N, Suite 330
Tel: 202-625-2080
Fax: 202-625-9044
Website: mvw.natlclub.org
National Restaurant Association
1200 17th Street NW
Tel: 800-424-5156
Fax: 202-289-3199
Website: www.restaurant.org
230 Appendix F.
The Professional Convention Management Association

2301 South Lakeshore Drive, Suite 1001
McCormick Place-Lakeside Center
Tel: 312-423-7262
Fax: 312-423-7222
Website: www.pcma.org
Research and Development Associates for Military Food
and Packaging Systems, Inc.
16607 Blanco Road, Suite 305
San Antonio, TX 78232
Tel: 210-493-8024
Website: www.militaryfood.org
Roundtable for Women in Foodservice
425 Central Park West, 2A
New York, NY 10025
Tel: 212-865-8100
Fax: 212-688-6457
Society for the Advancement of Foodservice Research
Conrad N. Hilton College of Hotel
and Restaurant Management
University of Houston
Houston, TX 77204-3902
Tel: 713-743-2560
Fax: 713-743-2482
Website: www.hrm.uh.edu
Society for Foodservice Management
Tel: 502-583-3783
Fax: 502-589-3602
Website: www.sfm-online.org
Technomic, Inc.
300 South Riverside Plaza, Suite 1940 South
Chicago, IL 60606
Tel: 312-876-0004
Fax: 312-876-1158
Website: www.technomic.com
Travel Industry Association of America

1100 New York Avenue NW, Suite 450
Tel: 202-408-8422
Fax: 202-408-1255
Website: www.tia.org
PUBLICATIONS AND JOURNAL PUBLISHERS
Activities Report and Minutes of Work Groups and Sub-Work Groups
of the R&D Associates
R&D Associates
16607 Blanco Road, Suite 305
San Antonio, TX 78232
Tel: 210-493-8024
Fax: 210-493-8036
Club Director
National Club Association
3050 K Street NW, Suite 330
Tel: 202-625-2080
Website: www.nationalclubassociation.org
Club Managers Association of America
1733 King Street
Tel: 703-739-9500
Fax: 703-739-0124
Website: www.cmaa.org
Club Management
Financial Publishing Company
8730 Big Bend Boulevard
St. Louis, MO 63119
Tel: 314-961-6644
Website: www.nationalclubassociation.org
Cornell Hotel & Restaurant Administration Quarterly
Elsevier Science Publishers
P.O. Box 882, Madison Square Station
New York, NY 10159
Tel: 212-633-3950
Website: www.hotelschool.cornell.edu/publications/hraq/
232 Appendix F.
Food Executive
International Food Service Executive Association
1100 South State Road 7 #103
Margate, FL 33068
Tel: 305-977-0767
Website: www.ifsea.org
Food Institute
One Broadway
Elmwood Park, NJ 07407
Tel: (201) 791-5570
Fax: (201) 791-5222
Website: www.foodinstitute.com
Food Management
Penton Publishing
1100 Superior Avenue
Cleveland, OH 44114
Tel: 800-659-5251
Food Technology
Institute of Food Technologists
Subscription Department
221 North LaSalle Street, Suite 300
Chicago, IL 60601
Tel: 312-782-8424
Website: www.ift.org
Foodservice Consultants Society International
Tel: 502-583-3783
Website: www.fcsi.org
Foodservice Research International
Food and Nutrition Press
6527 Main Street
Trumbull, CT 06611
Tel: 203-261-8587
Fax: 203-261-9724
Website: www.foodscipress.com
Foodservice Director
Bill Communications, Inc.
355 Park Avenue South
New York, NY 10010
Tel: 212-592-6530
Health Care Management Review
Aspen Publishers, Inc.
7201 McKinney Circle
Frederick, MD 21701
Tel: 800-234-1660
HOTELS
2000 Clearwater Drive
Oak Brook, IL 60544-8809
Tel: 630-288-8260
Fax: 630-288-8265
Website: www.hotelsmag.com
Journal of the American Dietetic Association
American Dietetic Association
216 West Jackson Boulevard, Suite 800
Tel: 312-899-0040
Website: www.eatright.org
Journal of Child Nutrition and Management (online)
School Nutrition Association
(formerly ASFSA)
700 South Washington Street, Suite 300
Tel: 800-877-8822
Fax: 703-739-3915
Website: www.schoolnutrition.org
Journal of Food Protection
Margaret Marble
502 East Lincoln Way
Ames, IA 50010-6666
Tel: 515-232-6699
Website: www.foodprotection.org
234 Appendix F.
Journal of Food Science

Institute of Food Technologists
Subscription Dept.
221 North LaSalle Street, Suite 300
Chicago, IL 60601
Tel: 312-782-8424
Website: www.ift.org
Journal of Hospitality & Tourism Research
Sage Publications
2455 Teller Road
Thousand Oaks, CA 91320
Tel: 805-499-9774 or 800-818-7243
Fax: 805-499-0871 or 800-583-2665
Website: www.sagepub.com
Journal of Nutrition Education
Williams & Wilkins
428 East Preston Street
Baltimore, MD 21202
Tel: 800-638-6423
Website: www.jneb.org
Lodging Magazine
385 Oxford Valley Road, Suite 420
Yardley, PA 19067
Tel: 215-321-9662
Fax:215-321-5124
Website: www.lodgingmagazine.com
National Restaurant News
Lebhar Freidman, Inc.
425 Park Avenue t
New York, NY 10022
Tel: 800-447-7133
Website: www.nrn.com
Restaurant Hospitality
Penton Media, Inc.
1300 East 9th Street
Cleveland, OH 44114
Tel: 216-696-7000
Fax:216-696-1752
Website: www.restaurant-hospitality.com
Restaurants and Institutions

Reed Business Information
2000 Clearwater Drive
Oak Brook, IL 60523
Tel: 630-288-8242
Fax: 630-288-8225
Website: www.rirrag.com
Restaurants USA
National Restaurant Association
1200 17th Street NW
Tel: 202-331-5900
Website: www.restaurant.org
Smith Travel Research
735 East Main Street
Hendersonville, TN 37075
Tel: 615-824-8664
Fax: 615-824-3848
Website: www.smithtravelresearch.com
Training and Development
American Society for Training and Development
1640 King Street, P.O. Box 1443
Alexandria, VA 22313-2043
Tel: 703-683-8129
Website: www.astd.org
Appendix
College Programs
in Hospitality
Academie Internationale de Management (AIM)—Hotel Management—Paris,
France
http://www.academy.fr
Academy of Travel and Tourism—New York, NY
http://www.naf.org/theacademies/travel
Alexandria Technical College—Hotel & Restaurant Management Program—
Alexandria, MN
http://www.alextech.org/hotelrestaurant
Arkansas Tech University—Hospitality Administration—Russellville, AR
http://www.atu. edu
Art Institutes International Minnesota—Culinary Arts—Minneapolis, MN
h ttp://www. aim. artinstitutes. edu
Asheville-Buncombe Technical Community College—Dept. of Hospitality Edu-
cation—Asheville, NC
http ://www. asheville .cc. nc .us/bh/hospitality/Default. asp
Blue Mountains Hotel School—Tourism & Hospitality Management—Leura,
Australia
http ://www.hotelschool. com. au
Borough of Manhattan Community College—New York, NY
http://www.bmcc.cuny.edu
Boston University—School of Hospitality Administration—Boston, MA
http://www.bu.edu/hospitality/
236
College Programs in Hospitality 24 i
Canadian Tourism College—College of Tourism & Hospitality Management—

Vancouver, BC, Canada
http://www.tourismcollege.com
Cecil B. Üay School of Hospitality Administration—Georgia State University—
Atlanta, GA
http://robinson. gsu. edu/hospitality
Champlain College—Hospitality Industry Management Program—Burlington, VT
http://www.champlain.edu/majors/hospitality
Chemeketa Community College—Hospitality Systems Management Program—
Salem, OR
http://www.hsm.org
College of Charleston—Hospitality & Tourism Management—Charleston, SC
http://www.cofc.edu/-baecon/tourism.htm
Columbus State Community College—Hospitality Management—Columbus, OH
http://www.cscc.edu/hospitality
Conrad N. Hilton College of Hotel and Restaurant Management Program—
Houston, TX
http://www.MHMOnLine.uh.edu
Cornell University—School of Hotel Administration—Ithaca, NY
http://www.hotelschool.corneIl.edu
Culinary Institute Of America (CIA)—Hyde Park, NY
http ://www. ciachef.edu
Culinary School of the Rockies—Professional Culinary Arts Programs—
Boulder, CO
http://www.culinaryschoolrockies.com
Dedman School of Hospitality—Tallahassee, FL
http ://www. cob. fsu. edu/ha
Delaware State University—Hospitality & Tourism Management—Dover, DE
http://www.crmdsc.com
Douglas College—Hotel and Restaurant Management Diploma Program—
Coquitlam, BC, Canada
http ://www. douglas .be. ca
East Carolina University—Dept. of Nutrition & Hospitality Management—
Greenville, NC
http://www.ecu.edu/hes/nuhrri/NUHMhome.htm
238 Appendix F.
Eastern Michigan University—Hotel and Restaurant Management—Ypsilanti, MI

http : //www. emich. edu/public/hecr
Emirates Academy of Hospitality Management—Dubai, United Arab Emirates
http://www.emiratesacademy.edu
ESHOTEL—Ecole Supérieure de Gestion Hôtelière et de Tourisme—Paris/Lille,
France
http://www.eshotel.fr
Fairleigh Dickinson University—International School of Hospitality & Tourism
• Management—Teaneck, NJ
http :// www. fdu. edu
Florida Gulf Coast University—Resort & Hospitality Management (RHM)—
Fort Myers, FL
http ://cps. fgcu.edu/resort
Florida International University—Hospitality/Tourism Management—North
Miami, FL
http://hospitality.fiu.edu
Foothill College—Travel Careers Program—Los Altos Hills, CA
http://bss.foothill.fhda.edu/tc
Fort Lewis College—School of Business Administration—Durango, CO
http://www.fortlewis.edu
Frederick Community College—Culinary & Hospitality Institute—Frederick, MD
http : //www. frederick. edu
George Washington Univ.—Dept. of Tourism and Hospitality Management—
Washington, DC
http://www.gwutourism.org
Griffith University—School of Tourism and Hotel Management—Queensland,
Australia
http ://www. gu .edu. au/school/thm
Hesser College—Assoc. of Business Science Degree: Travel & Tourism—Man-
chester, NH
http://www.hesser.edu
Highline Community College—Hotel & Tourism Management—Seattle, WA
http : //flightline .highline .edu/hoteltourism
Hong Kong Polytechnic University's School of Hotel and Tourism Manage-
ment (HTM)
http://www.polyu. edu. hk/~htm
Hotel School—Sydney, Australia

http://www.scu.edu.au/schools/tourism/hotel
Humber College—School of Hospitality, Recreation & Tourism—Toronto,
Ontario, Cánada
http://www.hrtalliance.com
Imperial Hotel Management College—Hotel Management School—Vancouver,
BC, Canada
http://www.ihmc.ca
Indiana University-Purdue University (IPFW)—Hospitality & Tourism Man-
agement—Fort Wayne, IN
http://www.ipfw.edu/cfs/dinnerl .htm
International College of Tourism & Hotel Management—Manly (Sydney),
Australia
http : //www. icthm .edu .au
International Hotel Management Institute and International Tourism Institute—
Switzerland
http://www.imi~luzern.com
Iowa Lakes Community College—Travel and Tourism Management—.
Emmetsburg, IA
http://www.ilcc.cc.ia.us/ProgramsStudy/Technical/HoteI.htm
http://www.ilcc.cc.ia.us/ProgramsStudy/CareerOptions/Travel.htm
IUPUI—Department of Tourism, Conventions and Event Management—
Indianapolis, IN
http ://petm .iupui .edu
J. Sargeant Reynolds Community College—School of Hospitality and Tourism—
Richmond, VA
http://old.jsr.cc.va.us/dtcbusdiv/hospitality
Johnson State College, Hospitality & Tourism Management—Johnson, VT
http://www.johnsonstatecollege.edu/academics/257.html
Johnson & Wales University—Hospitality College—North Miami, FL
http://www.jwu.edu/florida
Kemmons Wilson School of Hospitality & Resort Management—University
of Memphis—Memphis, TN
http://memphis.edu/hospitality
Kendall College—Hospitality & Restaurant Management—Evanston, IL
http:www.kendall.edu
240 Appendix F.
Lester E, Kabacoff School of Hotel, Restaurant & Tourism Administration—

University of New Orleans, LA
http ://www. uno .edu/- hrt
Lexington College—Hospitality Management—Chicago, IL
http://www.lexingtoncollege.edu
Lincoln University—Hotel & Institutional Management—Lincoln (Canterbury),
New Zealand
http://www.lincoln.ac.nz/study/areas/him.htm
Mercyhurst College—Hotel, Restaurant & Institutional Management Dept.
(HRIM)—Erie, PA
http://www.mercyhurst.edu
Metro Community College—Tourism Career Programs—Edmonton, Alberta,
Canada
http: //w ww. metrocommunitycollege. ca
Miami Dade Community College—Hospitality Management Program—
Miami, FL
http://www.mdcc, edu
Michigan Licensed Beverage Association—National Hospitality Institute—East
Lansing, MI
http ://www. mlba .org
Michigan State University—The School of Hospitality Business—East Lansing, MI
http://www.bus.msu.edu/shb
Montclair State University—Commercial Recreation, Tourism & Hospitality
Management—Upper Montclair, NJ
http://www.montclair.edu
National Schools—National Culinary & Bakery School—La Mesa, CA
http://www.nationalschools.com
New England Culinary Institute (NECI)—Hospitality Education Programs—
Montpelier, VT
http://www.neculinary.com
New York University, Tisch Center for Hospitality, Tourism & Travel Adminis-
tration—New York, NY
http://www.scps.nyu.edu/dyncon/hosp
Niagara University—College of Hospitality and Tourism Management—
Niagara Falls, NY
http ://www.niagara. edu/hospitality
Normandale Community College—Tourism & Hospitality Management—

Bloomington, MN
http://www.normandale.edu
North Carolina Central University—Hospitality and Tourism Program—
Durham, NC
http://www.nccu.edu/Academics/More_Services/ewsp.shtml
Northeastern State University—Meetings and Destination Management—
Tahlequah, OK
http://arapaho.nsuok.edu/~mdm
Northern Alberta Institute of Technology (NAIT)—Hospitality Management—
Alberta, Canada
http://www.nait. ab. ca/schools/hospitality
Northern Arizona University—School of Hotel & Restaurant Management—
Flagstaff, AZ
http://www.nau.edu/hrm
Northwestern Business College—Chicago, IL
http ://www.northwesternbc .edu / cf-
dbm/careeropps/careeroppspages.cfm?page=hospitality
Oklahoma State University—School of Hotel and Restaurant Administration—
Stillwater, OK
http://www.osuhrad.com
Penn State—School of Hotel, Restaurant, and Recreation Management—
University Park, PA
http ://www. hrrm. psu. edu
Professional Development Institute of Tourism (PDIT)—Parksville, BC, Canada
http://www.pdit.ca
Purdue University—Department of Hospitality and Tourism Management—
West Lafayette, IN
http://www. cfs .purdue. edu/htm
Red Deer College—Hospitality & Tourism Program—Red Deer, Alberta, Canada
http://www2.rdc.ab.ca/hospitality
Richland College—Travel, Exposition and Meeting Management Program—
Dallas, TX
http://www.rlc.dcccd.edu/HAD/temmhome/temmhome.html
Robert Morris University—Hospitality and Tourism Programs—Pittsburgh, PA
http://www.rrnu.edu
Appendix D
Rochester Institute of Technology—School of Hospitality & Service

Management—Rochester, NY
http://www.rit.edu
Roosevelt University—Steinfeld School of Hospitality & Tourism Management—
Chicago, IL
http://www.roosevelt.edu/academics/etsuc/hosm.htm
Rosen School of Hospitality Management—University of Central Florida—
Orlando, FL
http://www.hospitality.ucf.edu
San Diego State University, Hospitality and Tourism Management Program—
San Diego, CA
http ://www. sdsu.edu/business/htm
Schiller International University—Hotel Management University—Engelberg,
Switzerland
http://www.schiller-university.ch
Seneca College—Centre for Tourism and Leisure Studies—King City, Ontario,
Canada
http ://www. senecac. on. ca/tourism
Seton Hill University—Bachelor of Science in Hospitality and Tourism—
Greensburg, PA
http://www.setonhill.edu
Sinclair Community College—Hospitality Programs—Dayton, OH
http://www.sinclair.edu
Southern Cross University—New South Wales, Australia
http://www.scu.edu.au/schools/tourism/
Southern Illinois University Carbondale—Hospitality and Tourism—
Carbondale, IL
http ://siu. edu/departments/coagr/ animal/ht
St. Cloud State University—Travel and Tourism Program—St. Cloud, MN
http://www.condor.stcloudstate.edu/~geog/
Sullivan County Community College—Division of Business & Culinary—Loch
Sheldrake, NY
http://www.sullivan.suny.edu
Sullivan University—National Center For Hospitality Studies—Louisville, KY
http://www.sullivan.edu/nchs
SUNY College of Agriculture/Technology—Culinary Arts, Hospitality & Tourism—

Cobleskill, NY
http://www.cobleskill.edu
SUNY College of Technology at Delhi—Hospitality Programs (inc. F&B)—
Delhi, NY
http://www.delhi.edu
Temple University—School of Tourism & Hospitality Management (STHM)—
Philadelphia, PA
http://www.temple.edu/sthm
Texas Tech University—Restaurant, Hotel & Institutional Management—
Lubbock, TX
http ://www. hs. ttu.edu/enrhm/rhim
Travelcampus—Education Systems—Salt Lake City, UT
http:// www. travelcampus .com
University of Arkansas, Fayetteville—Hospitality & Restaurant Management—
Fayetteville, AR
http://www.uark.edu/depts/hesweb/fdnh/hosprest.html
University of Calgary—World Tourism Education and Research Centre—
Calgary, Alberta, Canada
http://www.haskayne.ucalgary.ca/tourism
University of Colorado at Boulder—Tourism Management Program—Boulder, CO
http://www.sustainabletourism.org
University of Delaware "HRIM"—Newark, DE
http://www.udel.edu/HRIM/home.html
University of Denver—School of Hotel, Restaurant and Tourism Management—
Denver, CO
http://www.daniels.du.edu/hrtm
University of Guelph—School of Hospitality & Tourism Management—Guelph;
Ontario, Canada
h ttp .7/www. htm .uoguelph. ca
University of Hawaii-Manoa—School of Travel Industry Management—Honolulu,
Hawaii
http://www.tim. hawaii .edu
University of Massachusetts—Department of Hospitality & Tourism
Management—Amherst, MA
http://www.umass.edu/hrta
244 Appendix F.
University of Missouri-Columbia—Hotel & Restaurant Management—

Columbia, MO
http://www.fse.missouri.edu/hrm
University of Nebraska at Kearney—Travel & Tourism—Kearney, NE
http://www.unk.edu/acad/hperls/travel.html
University of Nevada, Las Vegas—Harrah College of Hotel Administration—
Las Vegas, NV
http://hotel.unlv.edu
University of New Brunswick—Bachelor of Applied Management in Hospitality/
Tourism—New Brunswick, Canada
http://business.unbsj.ca/bamht/welcome.html
University of New Hampshire—Department of Hospitality Management—
Durham, NH
http://orbit.unh.edu/dhm
University of New Mexico—Travel & Tourism Management—Albuquerque, NM
http://traveltourism.mgt.unm.edu
University of North Texas—Hospitality Management—Denton, TX
http://www.smhm.unt.edu
University of San Francisco—Hospitality Management Program—San Fran-
cisco, CA
http://www.usfca.edu/sobam/under/hosp/hospitality.html
University of South Florida/Sarasota-Manatee—B/S in Hospitality Manage-
ment—Sarasota, FL
http://www.sarasota.usf.edu
University of Tennessee—Consumer and industry Services Management—
Knoxville, TN
http://trcs.he.utk.edu
University of Wisconsin-Stout—Hotel, Restaurant^ Tourism Management—
Menomonie, WI
http://www.uwstout.edu
Virginia State University—Hospitality Management Program—Petersburg, VA
http://www.vsu.edu
Virginia Tech—Hospitality and Tourism Management—Blacksburg, VA
http://www.cob.vt.edu/htm
Washburne Culinary Institute—Culinary Arts—Chicago, IL
http ://ww w. ccc. edu/washburne
College Programs in Hospitality 245
Washington State University—School of Hospitality Business Management—

Pullman, WA
http://www.cbe.wsu.edu/departments/hra
Widener University—School of Hospitality Management—Chester, PA
http://www.widener.edu/soh
William Rainey Harper College—Hospitality Management—Palatine, IL
http://www.harpercollege.edu/academics/career/hm.htm
AIRLINES
Markus, F. "Competition between network carriers and low-cost carriers—
retreat battle or breakthrough to a new level of efficiency?" Journal of
Air Transport Management, 10.1 (2004), 15-21.
<http://www.sciencedirect.com/science?„ob=MImg&:_imagekey=B6VGP-
4B4RRNS-2-F&_cdi=6044&_orig=search&„coverDate=01%2F31%2F2
004&„sk=999899998&view=c&wchp=dGLbVzz-zSkzk&„acct=C0000
15498&__version= 1 &_userid=260508&md5=6f9506afbd5ca2d5722edc3b
Ieef86c3&ie=f.pdf>.
In the authors' view, the crisis of the global aviation industry grew out of
a temporary revenue "bubble" after the first Iraq war, leading to histori-
cally high airline profits and major capacity expansions. After the end of
the 1990s, an economic downturn and a fear of terrorism resulted in
massive overcapacities, with yields returning to long-term decline. This
article analyzes the key drivers of the current transition and outlines a
vision of advanced airline business models that might lead to a new era
of equilibrium.
CRUISE LINES
Carnival News. Carnival Launches New On-Line Embarkation Portal.
Carnival News. 23 December 2003
<http://www. carnival. com/CCLNews/NewsD esk. asp?page=2 & type=
cclnews>.
246
Annotated Bibliography 247
To comply with the new data-gathering requirements by the U.S. De-

partment of Homeland Security (DHS), Carnival Cruise Lines has estab-
lished a new online embarkation portal that enables guests to submit
the required information for their upcoming "Fun Ship" cruise. The new
system was launched November 25, 2003, and was in effect for all Car-
nival departures beginning December 15, 2003.
Doidge, Jennifer. "Expédia Charts Cruising Trends and Unique Customer Sto-
ries at Sea During 'Wave Period'." PR News wire. 1 April 2004.
This article looks at some new trends in the cruise industry, where
cruises to the Caribbean, Europe, and Alaska all are regaining customer
interest.
Marti, B.E. "Trends in world and extended-length cruising (1985-2002)."
Marine Policy, in press. 19 November 2003
<http://www.sciencedirect.com/science?_ob=QuickSearchListURL&_me
thod=list&_aset=W-WA-A-A-EV-MsSAWA-UUW-AUDVDUVWYY-AEZU
DWWYA-EV-U&_sort=d&view=c&__st= 13&_acct=C000015498&„
Version=l&„userid=260508&md5=bf6923ef34a74f73f8f55cb507c53ee2>.
A comparative empirical analysis identifies and reviews the status and
trends of the world and extended-cruise markets. It also tests and sup-
ports three broad hypotheses regarding cruise ship attributes and cruise
characteristics.
Stieghorst, T., & Ridder, K. "Hotels Outpacing Airlines and Cruises with In-
ternet Bookings." Hotel Online.
< http ://www. hotel-online. com/Ne ws/PR2003__3 rd/ Jul03_Internet
BookingStats.html>.
Credit Suisse First Boston predicts that by 2006, the share of cruises
sold by travel agents will fall from 90 percent to 60 percent. The report
forecasts that one-fourth of cruises will be sold directly over the phone
or online by the cruise companies, while 15 percent will come from on-
line travel agencies.
Wood, R.E. "Caribbean cruise tourism: Globalization at sea." Annals of
Tourism Research, 27.2 (2000), 345-370.
<http://www.sciencedirect.com/science?„ob=MImg&:Jmagekey=B6V7Y-
3 Y6H0P7-5-1 &_cdi=5855&_orig=search&_coverDate=04%2F30%2F
2000&„sk=999729997&view=c&wchp=dGLbVtz-zSkWz&„acct=
C000015498&_version=l&_userid=260508&md5=a6b61bec72ceffdec23
Id81e344788d9&ie=f.pdf>.
After documenting the rapid expansion of Caribbean cruise tourism, the
paper explores manifestations of globalization at work in this industry.
248 Appendix F.
The author asserts that "globalization at sea" illustrates the contradic-

tions, ambiguities, and uncharted course of contemporary globalization
processes.
GENERAL TRENDS
Blair, A.R., Nachtmann, R., Saaty, T.L., & Whitaker, R. "Forecasting the resur-
gence of the US economy in 2001: An expert judgment approach."
Socio-Economic Planning Sciences, 36.2, (2002), 77-91.
< http://www. sciencedirect. com/science ?_ob=MImg&J.magekey=B 6V6Y-
44B2232-3-3&_cdi=5827&_orig=search&_coverDate=06%2F30%2F2002
&_sk=999639997&vie w=c&wchp=dGLb Vzz-zSkzk& acct=C000015498
m
&_version=l&_userid=260508&md5=600a67fa94a93f6d9fe252d994805a
24&ie=f.pdf>.
This paper, written early in 2001, describes a forecast of the date for the
resumption of growth of the U.S. economy. It uses an expert judgment
approach within the framework of decision theory, the Analytic Hierar-
chy Process, as well as its generalization to dependence and feedback,
the Analytic Network Process. Though its conclusions were invalidated
by the terrorist attacks of September 11, 2001, the study provides a valu-
able example of the forecasting techniques.
"Bush Deficit Reduction Plan Criticized." Associated Press. 18 December 2003
<http://wwwioxnews.com/story/0,2933,106122,00.html>.
President Bushs goal of halving 2003's projected $500 billion deficit by
2009 distracts from the more serious crunch the government faces later
as the huge Baby Boom generation ages, critics say.
Mohammad, A. "Urbanization by implosion." Habitat International, 28.1
(2004), 1-12.
<http ://www. sciencedirect. com/science?_ob=MImg&_imagekey=B6V9H-
49DFBKH-l-7&„cdi=5899&„orig=search&„coverDate=03%2F31%2
F2004&_sk=999719998&view=c&wchp=dGLbVlb-zSkWb&„acct=
C000015498&_version= 1 &_userid=260508&md5=e5b 1 Id3cecf8846ba3c
4a823flb6d623&ie=f.pdf>.
Rural parts of the Third World are becoming urbanized through in-
place growth of population producing densities that equal or surpass
the urban threshold of 400 persons per km . This level of density may or
2
may not bring about social, economic, or local government institutions

associated with the urban living, but it surely recasts settlement pat-
terns, land tenure systems, and demand for facilities and services in
urban modes. This spatial urbanization is building up another urban

crisis that remains unnoticed. It is another frontier opening up for
urban planning in the twenty-first century.
Murray, A. "Mortgage rates hit 40-year low." Eagle-Tribune Publishing.
27 September 2002.
<http://www.eagletribune.eom/news/stories/20020927/FP_001 .htm>.
The average interest rate on a 30-year mortgage has dropped below 6
percent for the first time in 40 years, triggering a torrent of refinancing
applications from local homeowners seeking to reduce their mortgage
payments.
Ommeren, J., Rietveld, P., & Nijkamp, P. "A model of workplace and resi-
dence choice in two-worker households." Regional Science and Urban
Economics, 27.1 (2002), 30-40.
<http://www.sciencedirect.com/science?„ob=MImg&„imagekey=B6VCT-
44SHF9C-8-4F&_cdi=5963&„orig=search&_coverDate=03%2F16%2
F2002&_sk=998629996&view=c&wchp=dGLbVzz-zSkWA&_acct=
C000015498&„version= 1 &_userid=260508&md5=6af7a.f2.f58f48fd2fafac
62564812626&ie=f.pdf>.
Evidence from five cities shows that women's earnings opportunities and
commuting burdens influence not only the wife's choice of workplace
but the husband's job site and the household residence as well. Where
strong downtown economies offer attractive earnings opportunities for
professional women, wives' uninterrupted professional careers encour-
age the choice of central jobs for both spouses and a central residence.
United States Census Bureau. Population Profile of the United States.
23 December 2003
http://www.census.gov/population/pop~profile/2000/chap02.pdf
This article provides data on population distribution and composition
across the United States in 2000.
Vincent, M. "Scientists prove humans are living longer." The World Today.
29 September 2000
<http://www.abc.net.au/worldtoday/sl93207.htm>.
Among a group of people born every year in Sweden, the oldest age for
the group is increasing, thanks to better treatment of chronic disease in
old age and the reduction of death rates earlier in life.
Zhou, W., & Sornette, D. "2000-2003 real estate bubble in the UK but not in
the USA." Physica A: Statistical Mechanics and its Applications, 329.1-2
(2003), 249-263.
250 Appendix F.
chttp: //www. sciencedirect. corn/science ?__ob=MImg&_imagekey=B6TVG-

492W066-8-39&„cdi=5534&_orig=search&_coverDate=l 1%2F01%2
F2003 &_sk=996709998&view=c&wchp=dG Lb Vzb- zSk Wb&_acct=
C000015498&_version=1 &_userid=260508&md5=0ba2c4a5d2c226175
f997e6ebl 7734d8&ie=f.pdf>.
There is growing concern that historically low interest rates in the
United States are creating a bubble in real estate, as strong housing de-
mand is fuelled by historically low mortgage rates. The authors rule out
this possibility for the United States but find evidence of a strong, un-
sustainable bubble in Britain.
TECHNOLOGY
Ayres, R.U., & Williams, E. "The digital economy: Where do we stand?"
Technological Forecasting and Social Change, in press. 14 January 2004
chttp : //www. sciencedirect. com/science ?__ob=MImg&Jmagekey6V71 -
4BFVRP7-1 -1 &_cdi=5829&_orig=search&_coverDate=01%2F14%2
F2004&_sk=999999999&view=c&wchp=dGLbVlb-zSkzV&_acct=
C000015498&„version=l&_userid=260508«&md5=de389c8436bdea25
b2b7c74d 1 a964e5d&ie=f.pdf>.
This article surveys the converging innovations that produced the digital
economy and looks ahead to the new "killer apps" that could stimulate a
new round of growth. Possibilities include interactive video-on-demand
and telecalls/teleconferencing. However, providing such high-bandwidth
services will probably require new networking protocols and changes in
the economic model of information transfer via the Net.
Credé, M., & Sniezek, J.A. "Group judgment processes and outcomes in
video-conferencing versus face-to-face groups." international Journal of
Human-Computer Studies, 59.6 (2003), 875-897.
<http://www.sciencedirect.com/science?_ob=MImg&„imagekey=B6WGR
-49RCDPY-2-2K&_cdi=6829&„orig-search&;„coverDate=12%2F31%2
F2003&__sk=999409993&view=c&wchp=dGLb Vzz~zSkWW&_acct=
C000015498&_version-l&„userid=260508&md5=ea37b4el6cb6889650
78971 lfdddf775&ie=f.pdf>.
A sizable experiment found that small-group decisions made by video-
conferencing were objectively as good as those made in face-to-face dis-
cussions, but left the participants feeling less confident about them.
Implications for the design and application of advanced systems for
decision-making support and research are discussed.
"E-procurement in the Hospitality Industry." December 2003. Accessed

14 March 2004.
<ftp://ftp.software.ibm.com/software/retail/marketing/fs/eprocurement
_fsuj.dec2003.pdf>.
E-procurement is a new phase in the inventory management of the food
and beverage industry. While facilitating ordering and receiving, e-
procurement is the new hot wave in getting business done. Better com-
munication and greater control are the reasons behind this new trend.
Liu, Z. "Internet Tourism Marketing: Potential and Constraints." Hotel Online.
<http://www.hotel-online.com/Trends/ChiangMaiJunOO/Internet
Constraints. html>.
This paper examines the Internet as a marketing tool and the charac-
teristics of the tourism industry, suggesting that the Internet is ideal
for marketing tourism. The author concludes with a brief discussion of
the major strategic issues in the implementation of Internet tourism
marketing.
Long, R.L. "e-business—from the inside." Hospitality Upgrade Magazine.
Summer 2000. 23 December 2003
<http://www.hospitalityupgrade.com/client/hu/articles. nsf/(Article
Listings)/BEA6FBlADFFlA40885256900006B6E47?OpenDocument
&Fiag=Hide&Selection=Article&Issue=Summer-2000>.
Republished by Hotel Online.
<http://www.hotel-online.com/News/PressReleases2000_3rd/Sept00
_EbusinessInside.html>.
Most companies in the hospitality industry have implemented intranets,
but have not realized their true potential in terms of cost savings, em-
ployee productivity, and business effectiveness. This article explores inter-
nally focused initiatives by taking a look at "e-business from the inside."
"Over 39 Million Americans Booked Travel Using the Internet in 2002; Up
25% Over Last Year." Hotel Online.
<http://www.hotel-online.com/News/PR2002_4th/Dec02_Online
Bookings, html >.
According to the Travel Industry Association of America's latest Travel-
ers' Use of the Internet study, some 96 million travelers are currently
using the Internet, while 64 million Americans used the Internet for ac-
tual travel planning in 2002. The rate of growth in the online travel
planning market has slowed considerably, due to slower growth of
"wired" households in the United States.
252 Appendix F.
Wilde, S.J., Kelly, S.J., & Scott, D. "An exploratory investigation into e-tail
image attributes important to repeat, Internet savvy customers." Journal
of Retailing and Consumer Services, in press. 19 June 2003
<http://www.sciencedirect.com/science?_ob=MImg&_imagekey=B6VGN
-4 8 WB666-1-1 &_cdi=6043&_orig=search&_coverDa te=
06%2F19%2F2003&_sk=999999999&view=c&wchp=dGLbVtb-zSkWA&
_acct=COOOO 15498&_version= 1 &_userid=260508&md5=45dd0f8f9f3ed
9b5c86458a44c9e2f55&ie=f.pdf>.
This paper offers results from a study investigating e-tail store image at-
tributes important to repeat, Internet savvy customers of a major Aus-
tralian grocery e-tailer. Three components incorporating traditional and
e-tail specific attributes were identified: core demands, institutional fac-
tors, and information.
HOTEL MANAGEMENT
Badinelli, R.D. "An optimal, dynamic policy for hotel yield management."
European Journal of Operational Research, 121.3 (16 March 2000),
476-503.
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3YB4CWB-3-l&_cdi=5963&„orig=search&_coverDate=03%2F16%2
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COOOO15498&_version= 1 &_userid=260508&md5=1 d4f7345c898cc318a
3745a Id21e89c4&ie=f.pdf>.
Most research into the yield management problem has been based on
simplifying assumptions about the demand process and heuristic deci-
sion rules. This paper gives a dynamic programming formulation of the
problem that allows for general demand patterns and a policy that is
based on time and the number of vacancies. Furthermore, this policy in-
corporates both revealed-price and hidden-price market behavior. This
formulation has a simple, closed-form solution that can be efficiently
computed. This model was developed specifically for small hotels.
Donaghy, K., McMahon, U., & McDowell, D. "Yield management: an
overview." International Journal of Hospitality Management, 14.2 (1995),
139-150.
<http://www. sciencedirect. com/science?_ob=MImg&_imagekey=B6VBH
-3 Y45T3X-P-1 &„cdi=5927&_orig=search&_coverDate=06%2F30%2
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COOOO 15498&_version= 1 &_userid=260508&md5=3572 Ia88d3eb329118
3ec 1 cfa2c2fbb0&ie-f .pdf >.
The concept of yield management is reviewed, and the authors present a

comprehensive structured operational framework for management in
the hospitality industry, focusing on ten key areas. The article concludes
with a look at the future of yield management and some areas for fur-
ther research.
Luciani, S. "Implementing yield management in small and medium sized ho-
tels: An investigation of obstacles and success factors in Florence ho-
tels." International Journal of Hospitality Management, 18.2 (June 1999),
129-142.
<http://www.sciencedirect.com/science?_ob=MImg&_.imagekey=B6VBH
-3WSMRP8-4-l&_cdi=5927&„orig=search&_coverDate=06%2
F30%2F1999&„sk=999819997&view=c&wchp=dGLbVlz-zSkWb&_acct
=C000015498&_version=l&_userid=260508&md5=5262eaelba38e23cb
4b305667546a61 d&ie=f,pdf>.
Where most authors deal with yield management for large businesses,
this paper explains this technique as it applies to small- and medium-
size hotels, whose managers are concerned primarily with surviving in a
changing market. This article focuses on the situation in Florence, a city
with characteristics that can be found in many other European cities.
O'Neill, J.W., & Lloyd-Jones, A.R. "Hotel values: In the aftermath of Septem-
ber 11, 2001." The Cornell Hotel and Restaurant Administration Quar-
terly> 42.6 (2001), 10-21.
t
<http://www.sciencedirect.com/science?_.ob=MImg&_imagekey=B6V60-
45WG12K-4-1 &„cdi=5800&„orig=search&_coverDate= 12%2
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_acct=COOOO 15498&_version= 1 &_userid==260508&md5=a6090ffb447ac
4246be05 Ibfdc75d7ab&ie=f.pdf>.
This model of hotel values demonstrates the importance of maintaining
solid fundamentals, such as occupancy percentage and average daily rate.
Sheldon, P.J. "The impact of technology on the hotel industry." Tourism Man-
agement, 4.4 (1983), 269-278.
<http://www.sciencedirect.com/science?„ob=ArticIeURL&:_aset=W-WA-
A-A-W-MsSAYVW~UUA~AUDWBDCWDE~AZWZEYBWZ-W-U&„rdoc=
2&_fmt=summary&„udi=B6V9R-45P18SD-MN&„coverDate=12%2
F31%2F1983&„cdi=5905&_orig=search&„st= 13&_sort=d&view=
c&_acct=C000015498&_version= 1 &_urlVersion=0&„userid=
260508&md5=973a44e779bclc67a86c392b28ec08df>.
This article discusses the use of front-office information-processing sys-
tems, telecommunications and teleconferencing, energy management,
security systems, and other technologies in the lodging industry.
254 Appendix F .
Sturman, M.C. "The hospitality industry one year since September 11, 2001:
An introduction to this special-focus issue." The Cornell Hotel and
Restaurant Administration Quarterly, 43.5 (2002), 7-10.
<http://www.sciencedirect,com/science?_ob=MImg&_imagekey=B6V60-
47HJXT0-4-1 &„cdi=5800&_orig=search&_.coverDate= 10%2F31 %2
F2002&_sk=999569994&view«c&wchp=dGLbVlz-zSkWb&_acct«
COOOO 15498&„version=l&_userid=260508&md5=337c7c50cde7bd3c4f
3d5efe4bl4c950&ie=f.pdf>.
The effects of 9/11 extend from personal experiences and reactions to
distortions in the industry's business patterns, company policies, and
government statutes.
RESTAURANTS
"Acting casual." Prepared Foods, 172.11 (November 2003), 22(1).
This article describes the growing segment of fast, casual restaurants
that provide fresh foods.
Alison, A. "At Area Restaurants, Change is on the Menu." Boston Globe. 4
February 2004, Third Edition: El.
This article looks at the trend of "reinventing" the menu to attract
guests. It looks at what many big restaurants in the Boston area have
done to reposition themselves in that market, changing the name,
menu, and even décor of an entire restaurant.
Arnst, C. "Let Them Eat Cake—If They Want To." Business Week, 23 February
(2004), 110.
The World Health Organization has made several proposals for govern-
ments to help them solve their citizens' weight problem, which include
restriction on advertising and increased taxes on junk food. However,
the U.S. views obesity as a personal responsibility.
"Beefing up foodservice: Despite flat foodservice sales in recent years, beef is
poised for future growth." Business and Indusùy, 217.10 (October
2003), 34.
This article looks at why beef consumption may increase greatly in the
future: It is a low-carb item high in protein and a healthy part of a regu-
lar diet if eaten in moderation.
Bindon, B.M., & Jones N.M. "Cattle supply, production systems and markets
for Australian beef." Australian Journal of Experimental Agriculture, 41.7
(25 October 2003), 861(17).
The authors examine the effects of globalization and the increasing
problem of diseases such as hoof and mouth and mad cow in markets
such as Europe and the United States. They suggest that Australia will
have an advantage in supplying these markets.
Britton, I. "Wining and dining." Leisure Management, 20.1 (2000), 50-52.
This article examines how current eating-out trends are likely to affect the
future of restaurants. Trends are reported by frequency, by region, by food
type, and by type of visit, whether during the evening or during the day.
Brumback, N. "Orient Express: Asian fast-casual in on the fast track, with
more new players jumping on board." Restaurant Business, 15 January
2004, 42-43.
The Asian/noodle subsegment is growing twice as fast as the total fast-
casual category—about 20 percent annually for the next three years,
compared with 10 percent annual growth for all fast-casual. This article
introduces several big Asian chain restaurants that are building their
own brand and working hard on brand strategies.
Cadji, M. "The power of one: Miriam Cadji finds out how restaurant and bar
chains have reacted since the public began to lose its appetite for brazen
branding." Design Week, 18.23 (June 5, 2003), 16.
The author states that designers are being asked to walk a tightrope be-
tween maintaining a certain degree of familiarity in a tried and tested for-
mula and avoiding a soulless, bland, branded look. Designers must find
subtler ways of conveying the values their client aims to communicate.
"Chain Restaurant Trends—Chocolate Cake." DessertExperts.com. Accessed
14 March 2004.
chttp ://www. dessertexperts .com/trend. asp ?ID=7 >.
This article reports that chocolate cake has gained new popularity in the
top 200 restaurant chains, defying the weight-conscious, low-carb trend.
Childs, N., & Maher, J. "Gender in food advertising to children: Boys eat
first." British Food Journal, 105.7 (2003), 408-419.
Although food products are most often gender-neutral, a sample of food
advertisements to children exhibits greater gender preference in presen-
tation than a comparison sample of nonfood advertisements to children.
Cole, W. "Sweet Priorities." Time, 161.8 (24 February 2003), 67.
In a minor trend, a number of restaurants across the United States
focus primarily on dessert.
Cortese, A. "An Ancient Drink, Newly Exalted," Business Week, 1 March 2004, 122.
Exotic teas are appearing in restaurants and shops, in part because of
its reputation as an elixir. The tannins and vitamin in tea are believed to
have potent antioxidant and antibacterial properties that can help com-
bat cancer, heart disease, and many other diseases.
256 Appendix F.
Cullen, L.T., "Have It Your Way." Time, 1 March 2004, 63.

This article states that "cook-it-yourself restaurants" are booming, as
heartland diners discover its fun to play with food.
Dalin, S. "Are We There Yet?" St. Louis Post-Dispatch, 26 February 2004 CI
A restaurant in Missouri lets parents rent a portable DVD player that
their children can use. The article also takes a brief look at some other
"toys" that assist parents with having a nice, quiet meal, a trend that is
becoming more and more common in the restaurant industry.
Daniel, J. "Do Fondue and Cigars Still Swing?" Everyday Magazine, 8 February
2004, El.
This article profiles The Melting Pot, where this apparently dead trend is
now coming to the forefront. It also briefly talks about the trend of cigars.
Dombkowski, D. "More diners today are eating fast slowly; Trend in fast
food is making dining casual." Sunday Telegram (Worcester, MA), 21
December 2003.
This article examines "fast-casual" dining restaurants that are being seg-
mented off from bigger chains. It looks in depth at Panera and what
they are doing to attract people away from the other QSRs.
Druce, C., Wood, J., & Sims, F. "Trends in high places; Future trends in food,
wine and restaurants? We asked the experts what they thought."
Restaurants & Institutions, 19 February 2004, 36.
This article looks at trends for the future of new food items, wines, and
organic foods for the restaurant, bar, and pub.
Eade, R. "What's hot (and not): We ask prominent chefs for their take on ex-
citing food trends this year." The Ottawa Citizen, 7 January 2004, B4.
This article looks into trends being found in the Canadian restaurant in-
dustry that might easily be applied in the U.S. market. It talks about
fresh ingredients such as herbs, poultry, beef, lamb, etc.
Ebbin, R. "Restaurateurs Cope With Tight Labor Market." Restaurants USA.
September 2002.
The labor market has been the most pressing operational challenge for
the restaurant industry for several years. Although the recent economic
downturn pushed the unemployment rate up, the industry continues to
experience a labor shortage.
ElBoghdady, D. "Takeout: They Take Out to You; More Casual-Dining
Restaurants Begin Offering Curbside Service." The Washington Post, 13
September 2003, E01.
This article looks at the relatively new trend of curbside pickup from
major chain restaurants such as Outback Steakhouse, Applebees, and
Ruby Tuesday.
"Flavor trends in foodservice." Food Beat, 171.12 (December 2002), 20.
This article looks at many new trends that are occurring in the food ser-
vice industry, from dips and appetizers to main course entrees. It also
examines the burger versus vegetarian debate.
Godinez, V. "Chains tailor dishes to suit followers of latest diet trend." Dallas
Morning News, 13 February 2004.
Many big chains are now adopting low~carb and other specialty
requests/diets.
Josiam, B.M., & Monteiro, RA. "Tandoori tastes: perceptions of Indian
restaurants in America." International Journal of Contemporary Hospital-
ity Management, 16.1 (2004), 18-26.
This article examines perceptions of the food and service in Indian
restaurants and finds universal likes/dislikes as well as differential per-
ceptions between ethnic groups. The authors discuss implications for
researchers and operators of Indian restaurants.
Hochwald, Lambeth. "Dining out, eating organic a new trend in restaurants."
Natural Health, February 2004, 31
An interview with Nora Pouillon, the owner of Restaurant Nora, the
first of many organic restaurants certified by the U.S. Department of
Agriculture's National Organic Program.
Horovitz, B. "You want ambiance with that?" USA Today, 30 October 2003, 3B.
McDonald's, Boston Market, Cheesecake Factory, and Ruby's Dinner and
other fast-food chains are undergoing new market segmentation. They
discuss what they are planning and what they are offering.
Hoover, L.V., Ketchen, D.J., Jr., & Combs, G.J. "Why restaurant firms fran-
chise: An analysis of two possible explanations." The Cornell Hotel and
Restaurant Administration Quarterly, 44.1 (February 2003), 9-16.
This article uses data from 91 large restaurant chains to identify two
reasons for franchising: It resolves some outlet-monitoring problem cre-
ated by expansion, and it gives the firm access to inexpensive capital.
"Implementation Trends and Strategic Growth of Restaurant IT: 5th Annual
Restaurant Industry Technology Study." Hospitality Technology Maga-
zine.. (2003)
<http://www.htmagazine.com/2003_RTS/index.html>.
Appendix E
For the fourth time in five years the Restaurant Industry Technology
Study finds that restaurateurs are predicting growing investment in in-
formation technologies. Topics include: IT investment culture, consider-
ations for IT investment, IT strategy, communicating with technology,
and conclusion and recommendations.
Johnson, N. "Low-carb menus at area eateries a response to growing demand."
South Bend Tribune, 13 January 2004, CI.
This article looks at how restaurants are doing in response. It considers
TGI Friday's and their new Atkins menu selections, but also Don Pablos,
Ruby Tuesday, and Subway, all of which either have or plan to roll out
low-carb menus.
Kant, K.A., & Graubard, B.I. "Eating out in America, 1987-2000:
Trends and nutritional correlates." Preventive Medicine, in press.
3 December 2003.
< http ://www. sciencedirect. com/science ?_ob - MIrng&_irnagekey=B6 WPG
-4B3NM86-5-1 &„cdi=6990&_orig=search&„coverDate= 12%2
F03%2F2003&„sk=999999999&view=c&wchp=dGLbVlz-zSkzk&„acct=
COOOO 15498&_version= 1 &_userid=260508&md5«022c78995706e228b
282el0896a66cfd&ie=f.pdf>.
This study examined the increasing popularity of restaurant dining and
its possible contribution to increasing adiposity of the American popula-
tion. The results confirm that in 1999-2000, more Americans ate out,
and ate out more frequently than in 1987 and 1992. Higher eating-out
frequency was associated with adverse nutritional consequences includ-
ing higher caloric intake.
Kauffman, M. "Sauce is OK, but hold the pasta; Trendy Low-Carb Diets
Change Restaurants' Ways." Hartford Courant, 3 January 2004, Al.
This article looks at the new trend of low-carb diets in the restaurants.
Many restaurants, and even pizza parlors, are adding Atkins and South
Beach diet food items to their menus. This "specialty diet'Vpreparation
may soon become a major trend in the industry.
Kim, K. "National Restaurant Association commends HHS for focus on nu-
trition education as solution to address obesity." National Restaurant
Association. 12 March 2004
<http://www.restaurant.org/pressroom/pressrelease.cfm?ID=834>.
The National Restaurant Association plans to combat obesity with an
aggressive effort to educate consumers about the importance of living a
healthy lifestyle.
Kotis, M. III. "New restaurant trends provide entree into local markets."
Commercial Investment Real Estate Journal, 22.3 (May/June 2003), 8.
Increasing municipal restrictions on development are a growing con-
cern in the restaurant industry. Therefore, restaurants look at the regu-
latory environment first when entering a new market. More stringent
planning standards are a product of local governments' desire to en-
courage smart growth and improve quality of life.
Macarthur, K. "Fast-food rethinks marketing; the fat police are taking names,
and quick-service alters ad message, menu." Advertising Age, 74.26 (30
June 2003), S2.
This article looks at what QSRs are doing to convince increasingly wary
consumers that fast food does not equal bad food. It also shows that
while many of these companies are trying to change their image, that
may not be necessary.
McCarthy, T. "The Four-Bite Feast: A graze craze catches on, serving up mini-
meals that are full of flavor and easy on the wallet." Time, 162.16 (11
August 2003), 56.
"Grazing"—eating small portions of many different foods—is, as the au-
thor states, "the newest trend in food."
Macdonald, D. "Hot, Hot, Hot in 2004." Florida Times-Union, 1 January 2004, E-l.
This article gives food and beverage trends for the upcoming season:
champagne, low-carb menus, Cuban and Puerto Rican influences, re-
duced portion size, more popular pork, and seating outside.
"McDonald's Restaurants Gone Wireless in Manhattan: Eat In and Log On."
TEKLatino. 22 March 2003.
< http://teklatino.com/news/ennews/archives/00000057. shtml>.
This article states that high-speed Internet access is now growing in the
quick-service foodservice establishments. With the business and leisure
travel in urban areas, you can almost not afford to not keep up with the
changes in technology.
Mclaughlin, L. "Fondue: Now It's Hip to Dip." Time, 161.6 (10 February 2003), 83.
The low-carb diet is causing a resurgence in Fondue restaurants, because
cheese is an increasingly popular replacement for high-carb foods.
"Make it convenient to come." The Economist (US), 369.8354 (13 December
2003), 11.
This article looks into the rapid growth of the convenience food market,
what restaurants are doing, and how grocery stores are responding by
stocking hot and cold premade foods.
260 Appendix F .
Markels, A. "Gourmet chain gangs." U.S. News & World Report, 8 March
2004, 76.
This article looks at the new trend toward "polished-casual" chains such
as Bonefish Grill and The Cheesecake Factory, which are a step above
TGI Friday's and Olive Garden.
Meier, M., & Cerovic, Z. "Food marketing in the function of tourist product
development." British Food Journal, 105.3 (2003), 175-192.
This article views tourist products as combinations of goods and ser-
vices. In food marketing, a guest is offered not only food and beverages
but also a variety of immaterial satisfactions. These immaterial "partial
tourist products" eventually will be manifested in an increase in the
room-and-board and secondary expenditures.
Much, M. "Restaurant Trends, Panera, Krispy Kreme Downplay Diet Impact."
Investor's Business Daily, 3 March 2004.
This interesting article looks at the fast-casual trend and how Panera
and Krispy Kreme are meeting the Atkins diet craze. It shows numbers
for growth for Krispy Kreme, Panera, and California Pizza Kitchen.
Nwogugu, M. "Corporate governance, strategy and corporations law; The case
of Jack in the Box Inc." Managerial Auditing Journal, 19.1 (2004), 29-67.
This article looks at the impact of a number of trends on the restaurant
and food service industries. These include demographic changes, ad-
vances in technology, growing competition, changes in labor laws,
changes in food sourcing/purchasing, increasing regulation, and many
other developments.
"Outlook for Restaurant Industry Positive as Restaurant Performance Index
Remained Steady in December." U.S. Newswire. 30 January 2004.
The Restaurant Performance Index is increasing, and the Expectation
Index has risen by over 0.6 percent.
Panitz, B. "Food Trends: Tracking What's Hot and What's Not." Restaurants
USA. March 2000.
This article describes the upcoming trends in the restaurant industry,
from Nuevo Latino to tapas, with interviews of people who are heavily
invested in the field. It also warns that these "fads" can disappear just as
rapidly as they appeared.
Perlik-Senior, A. "Drivers Wanted; Perpetual drive-thru upgrades help
QSRs keep up with life in the fast lane." Restaurants & Institutions,
15 February 2004, 73.
This article looks at what the fast food and QSR community is doing to
help improve its biggest moneymaker, "the drive-thru." It goes into
depth on what many of the big chains are doing, how they plan on im-
plementing change, and how it will affect them.
Perry, C. "Before there was Hard Rock. ..." Los Angeles Times, 7 January
2004, F.1.
This article looks at new restaurant theme concept trends, emphasizing
that while the themes may be new, one thing has not changed at all:
They serve exotic, cutting-edge food.
Pethokoukis, J.M. "Bye-Bye, Burgers." U.S. News & World Report, 2 December
2002, 36.
This article says that stagnation in the fast-food industry may get worse
before growth returns. It also looks at a few of the "quick-casual"
restaurants that are giving the major players a run for the profits.
These include Chipotle Mexican Grill, Baja Fresh Mexican Grill, and
Panera Bread.
"Quickservice Restaurant Trends." National Restaurant Association. 20
April 2004.
<http://www.restaurant.org/research/qsr.cfm>.
According to this article, quickservice restaurants have reported an in-
crease in hiring,
Richler, J. "Next on the menu: Simplicity seems to be the future trend in
restaurants." National Post, 7 January 2004, AL02.
Menus and décor are being simplified, while quality receives greater at-
tention at upscale restaurants.
Ricketson, L. "Now it's 'fast casual' for your dining pleasure." Providence
Business News, 17.42 (3 February 2003), 3.
Rhode Islanders are trading in their greasy fast foods and restaurant
reservations for quickly prepared, nutritious meals. "Fast-casual" eater-
ies are now catching on in New England, as they have elsewhere.
Roberts, W.A, Jr. "Lost in the Translation." Prepared Foods, 172.2 (February
2003), 11(3).
Restaurants such as TGI Friday's and California Pizza Kitchen are
putting their brand names on a growing number of products offered to
the consumer via grocery stores instead of at the branded store.
Rojas, M. "Learning the fats about life." The Journal News (White Plains, NY),
8 March 2004.
This article considers McDonald's announcement that it would phase
out its Super Size servings by the end of the year.
262 Appendix F.
Scarpa, J. (2003). "Best Western." Restaurant Business, 15 October 2003, 1.

The article talks about the trend toward Southwest cuisine, listing menu
items from Lonesome Dove Western Bistro, James Beard House, Red
Sage, and Tejas. Even chain restaurants are following the trend.
Sheridan, M. "European Union: Though no longer the sole source of Ameri-
can culinary inspiration, Europe continues to export food trends worth
savoring." Restaurants & Institutions, 112.28 (15 December 2002), 18(6).
This article looks at the trend of chefs traveling the world for new
restaurants and bringing back ideas, ingredients, and new dishes to
spice up American cuisine. Many chefs are able to take old-world clas-
sics and finely tune them to be more health- and taste-conscious.
Sloan, E. "Bet your bacon on breakfast." Food Technology, 57.1 (January 2003), 16.
Food manufacturers are introducing nontraditional items into the early-
morning meal. In-home breakfasts continue to lose share to eating out,
but 77 percent of all breakfasts are still eaten at home. The biggest news
is in grab-and-go products like the $2.4B bar category, but soy and juice
combinations are becoming more important. Restaurants are serving
bigger portion sizes and more spicy flavors.
Soriano, J.M., Font, G., Molto, J.C., & Manes, J. "Enterotoxigenic staphylo-
cocci and their toxins in restaurant foods." Trends in Food Science and
Technology, 13.2 (February 2002), 60-67.
This article presents an overview of the increasing threat of bacterial
toxins in restaurant foods. It also reviews food poisoning outbreaks,
principal sources of contamination, and food safety measures that can
be applied to eliminate enterotoxigenic staphylococci in restaurant
foods. This is a critical issue for restaurants in light of diseases affecting
the beef and poultry divisions.
Sparks, B., Bo wen, J., & Klag, S. "Restaurants and the tourist market." In-
ternational Journal of Contemporary Hospitality Management, 15.1
(2003), 6-13.
This study finds that restaurants are an important factor in the choice
of a holiday destination for some tourists. It also provides insight into
how tourists select restaurants. Both destination marketers and restau-
rant managers will benefit from this work.
Steven, K. "Salad fad latest and greatest, new menu items, new restaurant loca-
tion coming." Charleston Daily Mail (West Virginia), 1 October 2003, P1D.
This article looks at salads and other new menu items that are appear-
ing on many QSRs menus. It cautions that some salads are more dan-
gerous than a full-size burger with all the fixings.
Thompson, M.G. "Optimizing Restaurant-table Configuration: Specifying

Combinable Tables." The Cornell Hotel and Restaurant Administration
Quarterly, 44 (1 February 2003), 53-60.
The author suggests that restaurant managers should know how best to
combine tables to ensure service level and maximize revenue during
peak hours. Knowing the number of different-sized combinable tables
to have on hand is by far the most important determinant of capacity
optimization. The article focuses on walk-in restaurants.
Turner, M. " 'Waiter, Hold the Carbs, Please.'" News & Record (Greensboro,
NC), 11 February 2004, Dl.
This particular article looks at the low-carb trend from a different stand-
point. It looks at what both chain and nonchain restaurants were and
are doing to accommodate guests with low-carb requests.
Witkowski, T.H., Ma, Y., & Zheng, D. "Cross-cultural influences on brand
identity impressions: KFC in China and the United States." Asia Pacific
Journal of Marketing and Logistics, 15.1 (2003), 74-88.
This research measured and compared the brand identity of Kentucky
Fried Chicken (KFC) in China and the United States. The Chinese had
much more positive impressions of KFC than their U.S. counterparts.
Brand identity impressions were correlated with overall customer satis-
faction and future patronage intentions for both groups, but much more
so for the Americans.
Wolf, B.D. "Catering To the Low-Carb Crowd." Columbus Dispatch, 25 January
2004, OIF.
This article talks about the low-carb craze. One consultant says that it
may be essential for restaurants to offer low-carb items.
Wootan, M., & Berman, R. "Should chain restaurants be required to publish
nutrition labels on their menus?" CQ Researcher, 13.4 (31 January
2003), 95(12).
This article is part of a series debating the issue of including nutritional
information on menus. It concludes that legislation will require this in
the near future. The authors look at the current obesity problem in the
United States and the issue of liability as it relates to restaurants.
Yee, L. "The Invisible Chef." Restaurants & Institutions, 113,10 (1 May
2003), 14.
This article suggests that restaurants based on chef-driven concepts and
style may not be able to survive. Because of high turnover, restaurants
must focus more on their own definition and style rather than on a par-
ticular chef.
264 Appendix F.
SECURITY
Caplan, H. "War and Terrorism Insurance: How to Promote Long-Term Inter-
national Stability and Affordability." Air and Space Law, 29.1 (February
2004), 3-28.
This article suggests that leading economies can lay foundations for a
comprehensive international structure of stable and affordable insur-
ance for war and terrorism risks covering all classes of personal and
commercial insurance business. A Draft Convention is submitted as a
focus for discussion.
Hall, H.V. Terrorism Strategies for intervention. New York. Haworth Press,
2004.
Written for threat-assessment professionals in the post-9/11 era, this
timely book will help you understand the motivation to commit acts of
terror, the thinking patterns common to many terrorists, the psychology
of Muslim fundamentalists, methods for predicting the likelihood of
chemical/biological attacks, and a great deal more.
Jtirgensen, A. "Terrorism, Civil Liberties, and Preventive Approaches to Technol-
ogy: The Difficult Choices Western Societies Face in the War on Terrorism."
Bulletin of Science, Technology & Society, 24.1 (February 2004), 55-59.
Expanding the law enforcement and surveillance authority of govern-
ments to combat terrorism undermines the freedoms and civil liberties
necessary to democratic institutions. An alternative might target high-
risk technologies vulnerable to terrorism, such as civilian airlines and
nuclear reactors, and protect civil liberties by reducing or eliminating
their use.
Lepp, A., & Gibson, H. "Tourist roles, perceived risk and international
tourism/' Thesis, University of Florida.
International tourists can be classified according to the degree of nov-
elty and familiarity sought. This study investigated the hypothesis that
tourists seeking familiarity would perceive higher levels of risk associ-
ated with international tourism than those seeking novelty. Women per-
ceived a greater degree of risk regarding health and food, while more
experienced tourists downplayed the threat of terrorism. However,
tourists' role was the most significant variable, with familiarity seekers
being the most risk-adverse.
MacGeoch, A. "Terrorism: Who's Liable? The Legal Status of Hotel Owners
and Management Companies." Hotel Online.
<http://www.hotel-online.corn/News/PR2003_4tli/Oct03_TerTorism
Liability.html>.
This article considers the liability of owners and operators for terrorist
risks in a typical hotel-management contract. Force majeure provisions
and "damage, destruction, and condemnation" clauses have become
crücial in allocating the respective liabilities of an owner and an opera-
tor following a terrorist attack.
Mankin, L.D., & Perry, R.W. "Commentary: Terrorism Challenges for Human
Resource Management." Review of Public Personnel Administration, 24.1
(March 2004), 3-17.
This article addresses changes in the U.S. government since 9/11 from
the standpoint of human resource management. It covers both changes
in the environment in which public organizations operate and how to
cope with behaviors that can be reasonably expected from employees
exposed to terrorist incidents.
Nunn, S. "Seeking tools for the war on terror: A critical assessment of emerg-
ing technologies in law enforcement." Policing: An International Journal
of Police Strategies and Management, 26.3 (2003), 454.
As the war on terrorism escalates, police agencies are using technologies
that electronically scan individuals, structures, and vehicles to identify
things hidden from public scrutiny. Public policy gaps arise when new
systems give police sensory capabilities that fall outside existing proce-
dural standards such as probable cause and reasonable suspicion. As
these new technologies diffuse among police agencies, policies should
be guided by questions about whether technologies work as designed,
whether they are effective, and whether they accomplish antiterrorist
and crime control objectives. Traditional rules for wiretapping can
offer models for operating policies for the new scanning and imaging
technologies.
Perry R.W. "Municipal terrorism management in the United States." Disaster
Prevention and Management: An International Journal, 12.3 (2003), 190.
Many cities, building on a federal program begun in 1997, have devel-
oped metropolitan medical response systems (MMRS) to address the
consequences of terrorist incidents. The basic system design has been
tested both through drills and incidents, including the attacks on the
World Trade Center, and appears to function well. This paper describes
the philosophy and elements of the MMRS model.
Rathmell, A. "Controlling Computer Network Operations." Studies in Conflict
and Terrorism, 26.3 (2003), 215-232.
Efforts to control military use of computer network operations (CNO)
through arms control or multilateral behavioral norms are being
266 Appendix F .
undermined by the failure of the leading powers to decide whether it is

more important to exploit their CNO advantage for national security or
to protect the global information environment on which it depends. In
resolving this dilemma, strategists need to consider global interdepen-
dency and the role of the private sector.
Ridder, R. "Jakarta Bombing Likely to Harm Thai Tourism and Slow Recov-
ery from SARS Scare." Bangkok Post, 7 August 2003. Republished by
Hotel Online.
< http:// www. hotel-online. com/News/PR2003„.3rd/Aug03
_JThaiTourism.html>.
The car bombing at the JW Marriott Hotel in Jakarta raised concerns
across the region that renewed terrorism fears would hurt investor con-
fidence and economic growth, but the impact of the bombing on hotel-
industry stock prices has been limited.
Sacco, K., Galletto, V., & Blanzieri, E. "How has the 9/11 terrorist attack in-
fluenced decision making?" Applied Cognitive Psychology, 17.9 (Novem-
ber/December 2003), 1113-1127.
Prospect theory is used to examine decision-making behavior since the
September 11, 2001, terrorist attacks. The results show the emergence
of two tendencies not seen during "normal" historical periods: a strong,
long-term, lasting search for security when the outcome of a decision is
perceived as a gain, and medium-term, risk-avoiding behavior in the
loss domain.
Szyliowicz, J.S. "Aviation Security: Promise or Reality?" Studies in Conflict
and Terrorism, 27.1 (2004), 47-63.
This article analyzes the state of aviation security as it existed prior to
the 9/11 terrorist attacks and then evaluates the changes that have oc-
curred since. It concludes that no overall systematic program has yet-
been put in place to deal with the threats that terrorism poses to the var-
ious elements of aviation.
Tzannatos, E.S. "A decision support system for the promotion of security in
shipping." Disaster Prevention and Management: An International Jour-
nal, 12.3 (2003), 222.
Despite efforts to address the issues of maritime security, the shipping
industry still lags in implementing security measures. A decision support
system (DSS) for the promotion of security in shipping is presented.
Whisenant, W.A. "Using biometrics for sport venue management in a post
9/11 era." Facilities, 21.5/6 (2003), 134.
This paper assess technologies that may be used to assist venue opera-
tors in preempting a terrorist act or some other organized act of vio-
lence. This forecast focuses on biometric technologies. It includes both
interviews with industry experts and a review of published and unpub-
lished materials about biometrics.
TRAVEL AND TOURISM

Barrett, R. "Travelers Ready to Open Wallets: More consumers will venture
farther from home, spend more in 2004, survey finds." Milwaukee Jour-
nal Sentinel 10 November 2003.
< http://www.jsonline.com/bym/news/nov03/!84025.asp>.
This article states that the number of vacationers planning to spend
more than $5,000 on a vacation in 2004 is up nearly double from 2003's
numbers. On average, a vacationer is expected to "spend $2,962 in 2004
on airfare, accommodations, sightseeing, meals, souvenirs, and other
vacation expenses. That's up 37 percent from $2,163 in 2003."
Barrett, D., Jr. "Tourists want nature, wildlife official says; Jean Lafitte urged
to develop lures." Times-Picayune (New Orleans), 9 October 2003, 11.
This article talks about a growing segment of the tourism industry,
nature-based tourism.
Bercovici, J. "Adventure Travel Comes in From the Cold." Folio, 1 February
2004, 2,
<http://foliomag.com/strategies/marketing_adventure_traveLcomes
/index. html>.
This article looks at the gradual resurgence of adventure tourism as con-
sumers recover from September 11, the market crash, wars in
Afghanistan and Iraq, and the rise in terrorism. Using such words as
"secret" and "hideaways," as is common in this market, lures tourists in
need of a break.
Bodeen, C. "China an engine of growth for world tourism industry battered
by terrorism, war and epidemics." Associated Press Worldstream.
19 October 2003.
This article reports that in 2001 China came in fifth in the world for
tourism markets. By 2020, China is predicted to be the top destination
for tourists. It is predicted to surpass France with over 130 million
tourists.
268 Appendix F .
Cahill, D. "Consumers Highly Inclined To Purchase Vacation Packages On-

line, But Frustrated With Lack of Flexibility in Planning." Business
Wire. 17 December 2003.
This article states that consumers are increasingly open to purchasing
vacation packages online, but frustrations with the lack of flexibility in
the planning process have kept completion of such transactions low.
The majority of consumers (68 percent) feel that they can assemble a
better package on their own, and often do so at multiple sites.
Carmichael, T. "Americans Pick Their Favorite Romantic Destinations; Na-
tional Geographic Traveler and Yahoo! Travel Survey Reveals Romantic
Travel is on the Rise." Business Wire. 5 February 2004.
This article reports that 80 percent of Americans surveyed said they
were planning to take a romantic vacation in 2004, compared to the 50
percent who went on one last year. It lists both the most romantic do-
mestic and international locations.
Chapman, B. "Ready for the rebound: Many planners are cautiously optimistic
for a better year in 2004." Successful Meetings, 52,13 (December 2002), 33.
This article says that "2004 could actually be a good year for the meet-
ings business, as long as SARS, terrorism, and Wall Street don't inter-
fere." It goes on to say, "Planners are seeing signs of increasing demand
for meetings, and increasing budgets to fund them. They're just hoping
that nothing happens to derail this progress."
De Lollis, B. "Corporate travel accounts go online." USA Today, 9 February
2004, IB.
This article looks at attempts by Internet booking agencies to gain cor-
porate accounts. It states that "Expedia, Orbitz and Travelocity have
gained more than 2,000 business clients since they began chasing corpo-
rate accounts in late 2002, based on interviews with the three compa-
nies' executives."
Dezember, R. "Surfside Retail Areas Are New Shopping Meccas." Newhouse
News Service. 3 March 2004.
Many contemporary beach resorts are turning into year-round shopping
destinations. After Hurricane Frederic, Baldwin County, Florida, went
from being an agricultural and fishing economy to a thriving shopping
mecca.
Doonar, J. "Special Report—Travel: A state of independence." Brand Strategy,
4 December 2003, 26.
"Greater accessibility, cheaper flights, and online purchasing have
changed the way people go on holiday," Doonar reports.
Doyle, P. "Tourism industry gearing up for busy year." St. Johns Telegram
(Newfoundland), 10 January 2004, BIO.
This article looks at the resurgence of tourism to Newfoundland,
Labrador, and Canada in general. Tourism is expected to increase in 2004,
due in part to the 500th anniversary of the French presence in the area.
Gilden, J. "As the traveler's world changes, the agent's role does too." Los An-
geles Times, 7 March 2004, L3.
This article looks at the tough time travel agents are facing as a result of
9/11, the Internet, and the economic slowdown. It advises that for mak-
ing complex travel arrangements consumers should still seek the help of
a travel agent.
Goodrich, J.N. "September 11, 2001 attack on America: A record of the im-
mediate impacts and reactions in the USA travel and tourism industry."
Tourism Management, 23.6 (2002), 573-580.
<http://www. sciencedirect. com/science ?„ob=MImg&_imagekey=B6 V9R-
46081GP-4-1 &_cdi=5905&„orig=search&_coverDate= 12%2F31 %2F2002
&_sk=999769993&view=c&wchp=dGLbVzb-zSkWb&_acct=C000015498
&„version=l&_userid=:260508&md5=39eó3e6af4c6755145701e8306c
9087a&ie=f.pdf>.
This article reviews published reports of the September 11 attacks and
discusses the impact of the terrorist event on the travel and tourism in-
dustry in the United States.
Greene, K. "Agents: Americans will travel more in 2004." Telegraph Herald
(Dubuque, IA), 28 December 2003, Al.
In early 2004, for the first time since 9/11, there is an increase in all
travel categories. "Americans will take 213.4 million trips this winter, an
increase of 2.3 percent over last winter," Greene notes.
Hammond, R. "Forget the outdated idea of'ecotourism'." The Observer, 28
March 2004, Observer Special Supplement, 2.
This article talks about the new trend in "eco-tourism" and delves into
the idea of responsible travel and tourism.
Herndon, D. "America Seen Lagging in Tourism Recovery." Newsday, 23
November 2003, E04.
This article states that "While the rest of the world appears to be learn-
ing to cope with times of crisis, America is not expected to share in a
travel recovery until 2005 at the soonest, according to forecasts pre-
sented earlier this month at London's annual World Travel Market. Ever
fewer Americans have been traveling abroad each year, and fewer for-
eigners are coming to America."
270 Appendix F .
Jaakson, R. "Beyond The Tourist Bubble?, Cruiseship Passengers in Port."

Annals of Tourism Research, 31.1 (January 2004), 44-60.
Passengers from four cruise ships on port visits to Zihuatanejo, Mex-
ico, were observed. The study shows that passenger activities in port
fit into four patterns. The area in port visited was identified as a
tourist bubble consisting of a core and a periphery. Strong boundary
cues define this space.
Jones, C. "Increase in tourism spending bodes well for LV, official says." Las
Vegas Review-Journal, 23 March 2004, ID.
While this article uses Las Vegas as its primary example, it has some
very good numbers for tourism as a whole. It goes into depth on the 3.5
percent increase of tourism industries sales, as well as air transporta-
tion and restaurant and bar sales.
Marble, A. "National Business Travel Association Releases 6th Annual Busi-
ness Travel Cost Forecast." Business Wire. 14 October 2003.
This article looks at a study recently released by the National Business
Travel Association (NBTA). The study indicates that business airfares
will increase 5 percent, hotel rates by 3 percent, and corporate car
rentals by 2 percent in 2004.
Marble, A. "Positive Economic Trends Seen Fueling Business Travel Upturn."
Business Wire. 30 January 2004.
This article looks at another study by the NBTA. In this one, 71 percent
of respondents feel that business travel will "rebound significantly in
2004 and into 2005, with more than half (54%) predicting the recovery
to occur sometime this year."
Maria, A. "Tourism Malaysia's aggressive promotion in Jakarta paying off."
Business Times (Malaysia), 15 December 2003, 2.
This article details how Malaysia is working to pull more tourists in
from Jakarta, Indonesia, and other surrounding areas. It cites attrac-
tions such as a Formula 1 race and predicts that because of this and sev-
eral other factors, the number of tourists visiting Malaysia will increase
from 750,000 to 1.5 million this year.
Marta, S. "Corporate travel may hamper travel industry recovery." Dallas
Morning News, 7 October 2003.
This article is different in that it looks at the trend of tighter travel
spending by corporations, which the author suggests is actually harm-
ing the major players in travel. This in turn is making the entry into the
market much easier for new low-cost carriers, taking more and more
business from the major carriers.
"Nigeria; Tourism: an 'Untapped' Goldmine." Africa News, 29 November 2003.

This article looks at the untapped "gold mine" of Nigeria. The author
states that Nigeria "has clearly been left to us to exploit since the gov-
ernment has set the ball rolling."
Obenour, W.L. "Understanding the meaning of the 'journey' to budget travel-
er's." International Journal of Tourism Research, 6.1 (Jan./Feb. 2004), 1-15.
<http://www3.interscience.wiley.com/cgi~bin/fiilltext/107583835/
PDFSTART>.
The purpose of this study was to construct a better understanding of the
significance of the journey to budget travelers. This research confirms
the complexity, holistic reflections, and personal travel history associ-
ated with the journey. The participants' narratives indicated the primacy
of personal authenticity instead of cultural authenticity.
Olsen, M.D., & Connolly, D.J. "Experience-based Travel: How Technology Is
Changing the Hospitality Industry." The Cornell Hotel and Restaurant Ad-
ministration Quarterly, 41.1 (2000), 30-40.
<http://www.sciencedirect.com/science?„ob=MImg&_imagekey=
B6V60-40JGlFD~3-l&„cdi=5800&_orig=browse&_coverDate=
02%2F29%2F2000&_sk=999589998&view=c&wchp=dGLbVzb-zSkWA
&_acct=C000015498&_version=1 &_userid=260508&md5=b9c38197ef
289bc9b3966babld3eb3f3&ie=f.pdf>.
Two think tanks sponsored by the International Hotel and Restaurant
Association examine the use of information technology to build cus-
tomer satisfaction in the hospitality industry.
Rawls, L. "Tourism Making Strong Revival." Palm Beach Post, 13 December
2003, 10B.
This article shows that although Palm Beach County has not fully recov-
ered from 9/11, the numbers show a great increase in travel to the re-
gion. Bed taxes have increased, as have occupancy rates and the number
of passengers coming through Palm Beach Airport.
Sakaguchi, S. "JTB Publishes Survey Results on Travel Trends and Prospects
for 2004." JCN Newswire, 20 January 2004.
This report of study results shows many good numbers for domestic
and overseas travel, average expenditures, total travel, and average num-
ber of journeys. It then discusses those topics in depth.
Shattuck, H. "Minority travel surge mirrors industry outreach." Houston
Chronicle, 25 January 2004, 4.
This article looks at the travel industry's outreach to minority travelers.
It shows that during the 2000-2002 travel years, Hispanic American
272 Appendix F .
travel increased by 20 percent, Asian American travel by 10 percent, and

African American travel by 4 percent.
Sims, S. "The Fido Friendly Travel Club—Traveling with Your Dog Just Got
Easier for this Growing Trend." Business Wire. 28 October 2003.
Traveling with your pooch is a growing trend, with 14 percent of all U.S.
adults saying that they have taken their dog(s) with them on a trip of 50
miles or more away from home.
Smith, R. "Travel study predicting higher room rates in 2004." Las Vegas
Review-Journal, 23 October 2003, ID.
This article looks at the possibility of hotel room rates climbing in 2004.
The author states that low supply growth suggests a recovery may begin
in 2004 and build gradually over the course of the year.
Satler, G. "New York City Restaurants: Vernaculars of Global Designing."
Journal of Architectural Education, 56.3 (1 February 2003), 27-32.
This paper explores some of the unique characteristics that define glob-
alization and global cities through an investigation of recent design
trends in New York City restaurants over the past fifteen years.
Tedeschi, B. "E-Commerce; If you are looking on an Internet discount site for
a bargain hotel rate, look fast. The hotels are striking back." New York
Times, 15 March 2004, C6.
According to this article, hotel properties are fighting back against on-
line booking agents. To combat the rise of the e-travel agencies, hote-
liers last year began investing more heavily in their own websites and
started guaranteeing consumers that their sites would offer the same
prices available anywhere else.
Thornton, K. "Orbitz Survey Reveals That Cost-Savings Tops the List of
Business Travel Priorities for 2004." PR Newswire. 29 March 29, 2004.
Orbitz's study shows that the most important factor for business travel-
ers is cost savings for their companies. The study also revealed that re-
spondents choose to use an online travel booking agency 2 to 1 over
more traditional methods.
"Tourists flocking to Australia in record numbers, figures show." Agence
France Presse. 16 March 2004.
This article shows that the tourism market in Australia is increasing
rapidly, with 420,200 international arrivals in January, up 6 percent on
the same month last year.
Wadula, P. "Tourism body to spend R468m marketing SA." Business Day

(South Africa), 23 March 2004, 2.
This article looks at the large sum South Africa is spending to try to at-
tract more tourists to their growing country. The countiy already has 2
percent of the global tourism market, and tourism marketers there want
to raise that number.
White, A.A. "American Express study reveals improved prospects for business
travel industry in 2004." Canada NewsWire. 6 October 2003.
This article looks at the results of a study conducted by American Ex-
press. The firms Global Business Travel Trends and Forecast for
2003-2004 indicates that the travel industry is showing strong signs of
recovery. It warns, however, that this may raise prices for the business
traveler later in 2004.
Wilson, E. "China tourism to triple in size over next 10 years; challenges re-
main." AFX-Asia. 14 October 2003.
This article looks at the tourism market in China. It shows that the Chi-
nese economy has overcome the SARS epidemic, and the number of
tourists visiting the countiy is set to triple in the next 10 years.
"Why Tourism to Business Is a Vital Attraction and Rising Profits." Daily Post
(Liverpool), 13 November 2003, 4-5.
This article looks at the growing travel and tourism market in North and
Mid Wales. According to the North Wales Hoteliers Association, busi-
ness was up 8 to 10 percent in 2003.
A security, 49
Advertising improvements, 125
future of, 161 technology, 129-30
virtual tours, 78 as terrorist target, 49
Aerospatiale, 33 U.S. carriers, 124
Africa Air pollution, 40-41
air travel to, 133 diseases related to, 41
outsourcing to, 27 implications for airlines, 136-37
tourism in, 71 implications for cruise lines, 119
Aging population, 104-5 implications for the economy, 41
impact on restaurants, 141-43 implications for tourism, 77
Agricultural exports, 15t industrial development and, 41
Air France, 33, 124 Airport check-in, future of, 159
Airlines, 49, 122-38 AirTran, 131
bimodal distribution, 131-34 A1 Arab Hotel, 71, 105
discount, 131-32 AI Qaeda, 47, 49, 55, 122
European, 127, 134 Amazon.com, 78
fast growing markets for, 129 American Airlines, 122
forecasts for, 134-35 American consumers
fuel costs, 125 confidence, 25-26
fuel efficiency, 129 feelings toward the economy, 24
hub-and-spokes model, 132, 133 American economy, see United States
impact of SARS on, 123 economy
impact of the economy on, 125-28 American Hotel & Lodging Association, 58
key trends for, 135-38 American salaries, 29
losses shared by, 124 Angola, U.N. Security Council, 17
population growth and, 128-29 Antarctic, 69
post-9/11 effects for, 51, 122-23 Anthrax, 57
274
index 275
Asia outsourcing, 27
impact of SARS on meetings and British Airways, 109
exhibitions, 85 Brookings Institute, 5
tourism in, 71 ' Brown, Dean, 109
Asian flu, 30, 38 Budget Travel (Frommer), 115
Associations, hospitality, 225-31 Bureau of Citizenship and Immigration
Atkins diet, 144 Services, 58
Atlanta, Georgia, 50 Bureau of Labor Statistics, 8, 27
Olympic Games in, 50 Bureau of Transportation Statistics
Attendee shortages, meetings and (BTS), 124
exhibitions, 82 Business
Australia, life expectancy in, 75 accountability in, 39
Automatic translators, future of, 160 transparency in, 39
Automation, 42
C
B Capitalism, 30
Baby boomers, influence on restaurant Cardiopulmonary disease, 41
industry, 141-43, 147-48 Caribbean, 69
Bankruptcy, airline, 123 tourism in, 70
Basque terrorist movement, 51 Carnival Cruise Lines, 107, 111
Belgium, outsourcing to, 27 Casino, site safety/security, 57, 59-60
Bellagio Hotel & Casino, Las Vegas, NV, Centers for Disease Control and Preven-
57, 59 tion, 143
Bibliography, 246-73 Central America, tourism in, 70
Bibliothèque, 71, 105 Central Vigilance Commission, 31
Bimodal distribution, 46, 83 Chile, 68
airlines, 131-34 China, 29-30, 39
implications for MICE, 100-1 air pollutants in, 41
implications for restaurants, 156 capitalism in, 30
implications for the airlines, 137-38 economic growth in, 29, 36-37, 140
implications for the economy, 46 economy in, 30, 127
restaurant industry, 151-52 future of, 30
bin Laden, Osama, 55 gen-X and dot-com entrepreneurs in, 39
Biometrics, 58 Internet subscribers, 43
Biotechnology, 42 outsourcing to, 26
Bird flu, 125 population growth in, 128
Bombay, India, 31 SARS epidemic, 30
Borgata casino, Atlantic City, NJ, 59 deaths from, 35
Brazil, 68 wages in, 30, 42, 84
Britain, 9 Cloning, 10
childhood obesity in, 144 Club Med, 75
economic growth in, 126 College programs in hospitality, 236-45
276 índex
COMDEX, Las Vegas, 87 increased security for, 49

Communism, 30 Internet access, 109
Competitive advantage, 114-15 security aboard, 112
Computer viruses, costs of, 63 as terrorist target, 49
Concerns, trends in, 176-83 Crystal Harmony, 107, 115
Concorde, 129 Cultural diversity, implications for
Consumer confidence, 25-26 MICE, 97-98
Consumer Confidence Index, 25 Cultural extremism, 39
Consumerism, 40 Cultural indicators, 19t
economic implications, 40 Cutting costs, 28
effects on restaurants, 145-46 Cyber-cruising, 108-10
implications for cruise lines, 118-19 Cyberterrorism, 50-51
implications for restaurants, 154
implications for tourism, 76 D
Consumer Price Index, 24 Data-processing centers, as terrorist
Cost(s) target, 50
of computer viruses, 64 Debt, U.S., 35
cutting, 28 Delphi poll, 4
of European exports, 32 Delta Airlines, 124
of outsourcing, 27 Department of Homeland Security, 58
Cruise industry, 69, 102-21 Diplomacy indicators, 17t
bimodal distribution, 113-14 Discount airlines, 131-32
capacity, 102 Donors of foreign aid, 17t
cleaning up, 107-8 Dot-com generation, 38, 39
competitive advantage, 114-15 economic implications of, 44
cyber-cruising, 108-10 influence on restaurant industry,
design innovations, 108 147-48, 155
economical energy, 107 marketing to, 44
effect of aging population on, 104-5 in the MICE market, 91-92, 99-100
fear of terrorism, 111-12 security implications, 63-64
growth of, 105-6 tourism implications, 78-79
impact of American economy on, 103 Durable goods, 23
key trends for, 116-21
savvy consumers, 112-13 E
technology, 106, 108 Eco-friendly aircraft, 162
ten trends, 115-16 E-commerce, 43 \ see also Internet
theme cruises, 114 Economical energy, 107
through 2010, 116 Economic growth
yield management, 115 in China, 30, 127
Cruise Line International Association, 104 in France, 32-33
Cruise lines in Germany, 33
future of, 158 global, 36-46
index 277
impact on airlines, 125-28 decline in, 32

implications for airlines, 135-36 economic growth in, 36-37
implications for cruise lines, 116-17 knowledge workers in, 37
implications' for MICE, 96 package tours, 131
implications for restaurants, 152-53 population in, 37
implications for security, 60 restaurant industry in, 139, 142
implications for tourism, 60 tourism in, 70
in India, 29, 30-31, 36-37, 127-28 European Union, 32, 34, 37, 127
key trends, 36-46 Expanding travel and tourism, 67-68
in Russia/USSR, 34 Exports, 14t
in the United Kingdom, 33-34 agricultural, 15t
in the United States, 28-29, 36-37 European, costs of, 32
Economic indicators, 14t Russia/USSR, 34
of national stability, 222-23
Economic recovery, 22-25 F
Economic Report of the President, 26 Facial recognition software, 58
Economic trends, 165-76 Federal Reserve Board, 35
Economist, The, 8 Fertility, 37
Elderly, 37 Fiji, 69
and the cruise industry, 104-5 Fingerprint scanners, 58
implications for MICE, 96-97 Food contamination, 150
implications for tourism, 75-76 Forecasting International, 4
Energy trends, 183-88 Forecasting techniques, 4, 6-7
Engineers, demand for, 42-43 Foreign aid, 17t
Entrepreneurs, 39 "Fortress World," 6
future of, 159 France, 9, 126
implications for the economy, 45 consumer spending, 33
Environmental issues, 40-41 economic growth, 32-33
air travel, 129-30 economy in, 126
drinking water, 136 outsourcing, 27
implications for airlines, 136-37 rise in tourism, 33
implications for cruise lines, 119 Freshwater supplies, 15t
implications for the economy, 41 Fuel costs, airlines, 125
implications for tourism, 77 Future of tourism, 157-64
industrial development and, 41 Futurist, The, 8
noise, 129-30
sewage dumping, 107 G
Environmental treaties, 17t GDP growth
Environmental trends, 188-94 France, 33
Europa, 106 India, 30
Europe, 32-33 Russia, 34
air travel in, 127 United Kingdom, 33-34
278 índex
Generation X, 38, 39 Household

economic implications of, 44 incomes, 68
effect on the future, 44 spending, 33-34
implications for MICE market, Hub-and-spokes model for airlines, 132,
99-100 133
implications for security, 63-64
implications for tourism, 78-79 Hydrogen-powered cars, 161
influence on restaurants, 147-48, 155
marketing to, 44 I
in the MICE market, 91-92 Identification, future of, 158
Germany, 9 Illiteracy, 31
economic growth of, 33 Immigration, future of, 159
fear of terrorism in, 51 Index of Consumer Sentiment, 25
outsourcing, 27 India, 30-31,39
recession in, 32 air pollutants in, 41
restaurant industry in, 140 computer and telecom industry in, 38
unemployment in, 33 concerns of environmental decay in, 41
Global economic growth, 36-37 demand for air travel in, 128
Global positioning system (GPS), 130 economic growth in, 29, 36-37
Global warming, 41 economic reform plan in, 31
Goldman Sachs, 30, 31 economy in, 30-31, 127-28
Government regulations, restaurant generation X/dot-com entrepreneurs
industry, 149-50 in, 39
Great Depression, 25 Internet subscribers in, 43
Greece, Olympic Games in, 50 middle class in, 31
outsourcing to, 26
H population growth in, 128
Health care, 43 tourism from, 71-73
Health concerns for restaurants, 143-45 trade barriers, 31
Hong Kong, impact of SARS in, 85 travel destinations, 31
Hospitality industry Indicators
associations, cultural, 19t
college programs, 236-45 diplomacy, 17t
publications and journal publishers, economic, 14t
231-35 resource, 15t
screening of employees in, 57 security, 20t
as targets for terrorism, 48-51 social, 18t
Hotels technology, 16t
future of, 160 Indonesia, 8
screening of employees, 57 Industrial development, 41
site safety/security in, 57, 59-60 Inflation, 24
as terrorist target, 48 Information industries
economic implications, 37-38
index 279
implications for cruise lines, 117-18 S

implications for MICE, 97 Japan, 9, 31-32
Information technology, 42 donors of foreign aid, 17t
Institute for Supply Management Index, economic growth in, 29, 32, 36-37
23 exports, 14t, 127
Institutional trends, 215-19 impact of SARS on meetings and exhi-
International Air Transport Association bitions, 85
(IATA), 123 knowledge workers in, 37
International exposure, risk of terrorist life expectancy in, 75
attack population in, 37
economic implications of, 45 population of young males in, 53
implications for cruise lines, 121 research and development in, 42
implications for restaurants, 155-56 restaurant industry in, 139, 140
implications for security, 64 U.S. debt and, 35
implications for the airlines, 137 JetBlue, 131
implications for tourism, 80 Jihad, 56, 62
International Task Force, 143 Job creation, 36
Internet, 37, 42, 43
based commerce, 43 Journal publishers, hospitality, 231-35
consumerism, 40
economic implications of, 38, 43 K.
global population of users, 43 Kasayanov, Mikhail, 34
impact on cruise industry, 108-10 Kashmir, India, 31
impact on MICE market, 86 Key account selling, 83
impact on restaurant industry, 148 Knowledge dependent travelers
implications for cruise lines, 120 economic implications of, 37-38
sawy travelers, 44 implications for cruise lines, 117-18
specialty boutiques on, 45 implications for MICE, 97
users, 16t Kuwait, oil reserves, 15t
virtual meetings, 97
virtual tours, 40, 78 Labor force, trends in, 203-11
virus, 63 Labor productivity, 148-49
wireless access to, 86-87 growth of, 26
Iraq, 25 Las Vegas, NV, 57
American death rate in, 25 Leisure time, 44-45, 79-80
war in, 55 future of, 160-61
Italian National Tourist Office, 22-23 implications for cruise lines, 120-21
Italy implications for MICE, 100
agricultural exports, 15t implications for the economy, 44-45
childhood obesity in, 144 implications for tourism, 79-80
fear of terrorism in, 51 influence on restaurants, 155
recession in, 32 Liberia, freshwater supplies, 15t
280 índex
Libya, oil reserves, 15t specialization in, 89-90

Life expectancy, increase in, 104 threat of terrorism, 85
implications for cruise lines, 117 time as commodity in, 92
implications for MICE, 96-97 women in, 90
implications for tourism, 75-76 Middle East
Lifestyles, trends in, 176-83 air travel to, 133
Long-term economic trends, 165-76 tourism in, 70-71
Low-fare airlines, 131 Midway Airlines, 123
Militant Islam, spreading and gaining
M power, 61-62
Mad cow disease, 144 security implications, 61-62
Malaysia, 68, 69 Military indicators, 13t
Management trends, 211-14 of national stability, 224
Mankiw, Gregory, 27 Military spending, 10, 13t
Manufacturing strength, 23 Millennium Project, 5
Mariner of the Seas, 114 Moscow, Russia, 34
Markets, travel, 69-71 Movie tickets sold/year, 19t
"Market World," 6 Munich Olympics, 50
McDonald's, 142, 151 Muslim extremists, 4, 48
Meeting Professionals International, 82 Muslims, 39
Melissa virus, 63
Men, life expectancy of, 75 N
Mergers, 83 Nanotechnology, 42
Mexico, 69 National Restaurant Association, 149
population of young males in, 53 National stability, 7-12
wages in, 30 vital signs of, 220-24
MICE market (meetings, incentives, con- Nepal, 69
ventions, and exhibitions), 81-101 Net. see Internet
attendee shortages, 82 Netherlands
biomodal distribution, 100-1 outsourcing, 27
challenges, 83 recession in, 32
convenient travel options, 89 New Zealand, 69
difficult challenges facing, 94 freshwater supplies, 15t
farming out, 92-93 university students, 18t
growth of, 88-89, 95 Niche markets, 46, 90
impact of telecommunications on, Nigeria, oil reserves, 15t
86-87 Nobel prizes in science, 16t
international concerns for, 85 North America, tourism in, 69
new generations dominate, 91-92 North Korea, nuclear warheads, 13t
opportunities, 92-96 Norwalk virus, 102
retirement-age population, 85-86 Norwegian Cruise Lines, 107, 112
rise in bookings, 84 Norwegian Dawn, 116
index 281
Norwegian Dream, 112 Q

Norwegian Sky, 102 Quality of life, 18t
Nuclear warheads, 13t Queen Mary 2, 35, 108, 111, 113
O R
Obesity, 143-44 Recession, 26, 35
Offshore support costs, 29 Recycling, 41
Oil prices, 40 Regency cruises, 107
economic implications, 40 Research and development (R&D),
implications for airlines, 136 42-43
implications for cruise lines, 119 role in the economy, 42-43
security implications, 62-63 Resource indicators, 15t
tourism implications, 76-77 Restaurant industry, 139-56
Oil reserves, 15t addressing health concerns, 143-4-5
Omar, Mullah, 55 adjusting for aging population, 141-43
Opacity index, 20t bimodal distribution, 151-52
Outsourcing, 26-27, 28 effect of consumerism on, 145-46
loss of American jobs, 27 generation x/dot-coms influence on,
147-48
F government watchdogs, 149-50
Pakistan, nuclear warheads, 13t impact of economic growth, 139-41
Palestinian territories, population in, 37 impact of population growth, 141-43
Patents granted, 16t influence of baby boomers, 141-43
Pentagon, terrorist attack on, 24; see also issue of obesity, 143-44
September 11, 2001 terrorist key trends, 152-56
attacks labor productivity, 148-49
Petroleum, 34 smoking ban, 144
Pollution controls, 41, 77, 119, 136-37 technology, 146-47
Population growth, 37 threat of terrorism, 150-51
in China, 128 in tourist destinations, 143
impact on air travel, 128-29, 133 Retail sales, 23
impact on restaurant industry, in Europe, 32
141-43 in the United States, 23
implications for airlines, 136 Retinal scanners, 58
implications for restaurants, 153 Retirement age population, 85-86
implications for the economy, 37 and the cruise industry, 104-5
in India, 128 implications for cruise lines, 117
security implications, 61 implications for MICE, 96-97
Productivity growth, United Kingdom, implications for tourism, 75-76
33 Room service, future of, 162
Publications, hospitality, 231-35 Royal Caribbean, 107
Putin, Vladimer, 34 Ruby Tuesday, 144
282 índex
Russia/USSR personal identification, 57-58

economic growth, 34 restaurant, 151
exports, 34 screening employees, 57
outsourcing to, 26 site safety, 58-60
terrorist attacks in, 47 terrorism, 56-57
tourism in, 34 threats, 56-57
U.N. Security Council, 17 Self-service ticket kiosks, 159
weapons exports, 13t September 11, 2001, terrorist attacks, 36
impact on air travel, 67, 122-23, 134
S U.S. economy following, 36
Safety, site, 58-60 Service industry, growth of, 43-44
Salaries Sewage dumping, cleaning up, 107; see
American, 29 also Cruise industry
in China, 42, 84 Singapore, impact of SARS on meetings
Indian programmers, 29 and exhibitions, 85
in Mexico, 30 Singh, Manmohan, 31
Sante Fe Initiative, 5 Smoking ban in restaurants, 144
SARS (severe acute respiratory distress Social indicators, 18t
syndrome), 35, 67, 123, 125 Social Security, 35
death from, 35 Societal trends, 165-76
impact on air travel, 123 Societal values, changing
Saudi Arabia economic implications, 38-39
military spending, 13t security implications, 62
nuclear warheads, 13t tourism implications, 76
oil reserves, 15t Sociopolitical indicators of national
weapons exports, 13t stability, 220-22
Scenarios, 5-6 South Africa, 69
Scientists, demand for, 42-43 concerns of environmental decay, 41
Screening passengers, 112 opacity index, 20t
Screening procedures, 57 South America, tourism in, 70
Seaboura Cruise Line, 104 Southwest Airlines, 109, 131
Sea marshals, 111 Space travel, 162
Security, 56-57 future of, 159
biometrics, 58 Spain
cameras, future of, 158 agricultural exports, 15t
in casinos, 57 childhood obesity in, 144
cruise lines, 111-12 U.N. Security Council, 17
in hotels, 57 university students, 18t
identity concerns, 57-58 Specialization, implications for MICE,
improvements on airlines, 125 98-99
indicators, 20t Sports events, as terrorist target, 50
key trends for, 60-64 St. Petersburg, Russia, 34
index 283
Stability, national, 7-12 future shocks, 54-56

Stem-cell research, 10, 43 hospitality industry targets, 48-51
Stockholm Environmental Institute, 5 impact on air travel, 122-23
Subways, as terrorist target, 49 impact on travel, 39
Sweden, outsourcing, 27 implications for cruise lines, 121
Swissair, 123 security, 45, 56-58, 64
Switzerland implications, 64
life expectancy in, 75 measures, 45
outsourcing, 27 procedures, 56-58
study of, 4
T terror-prone lands, 52-54
Tahiti, 69 threat to the restaurant industry,
Taiwan, impact of SARS on meetings 150-51
and exhibitions, 85 tourism implications, 80
Taj Mahal, 31 weighing the risk, 51-52
Taliban, 55 TGI Friday's, 144
Technicians, demand for, 42-43 Time, see Leisure time
Technology, 42 Total GDP, 14t
airline, 129-30 Tourism
cruise industry, 106 attire, future of, 158
economic implications, 42, 4242 expanding, 67-68
implications for cruise lines, 120 future of, 157-64
implications for restaurants, 154 key trends for, 74-80
indicators, 16t and the restaurant industry, 143
indicators of national stability, virtual tours, 78
Tourism, growth in, 39-40
in the restaurant industry, 146-47 implications for cruise lines, 118
security implications, 63 implications for MICE, 98
tourism implications, 77-78 implications for restaurants,
trends, 195-202 153-54
virtual meetings, 97 implications for the economy, 40
virtual tours, 78 threat of terrorism and, 39
Telecommunications Trade barriers, 31
downside of, 87 Trade shows, 93, 95; see also MICE
impact on MICE market, 86-87 market
Terrorism, 45, 47-64 Tradeshow Weekly, 85
concern for meetings and exhibitions Trains, future of, 160
market, 85 "Transformed World," 6
economic implications, 45 Transportation industry, targets of terror-'
effect on tourism, 48 ist attacks, 49
factors that inspire, 52-54 Transportation technology, implications
fear of, 51 for MICE, 98
284 índex
Travel debt, 35
cost of, 67 durable goods, 23
destinations, see Travel markets inflation, 24
expanding, 67-68 Internet subscribers, 43
future of, 157-64 job deficit, 25
Travel agents, future of, 158-59 job growth, 24
Travel Industry Association, 58, 109 manufacturing strength, 23
Travel Industry Association of America, price inflation, 30
109 restaurant industry in, 139, 142
Travel markets, 69-71 retail sales, 23
Africa, 71 technology in, 10
Caribbean, 70 unemployment, 23
Central America, 70 United States economy
Europe, 70 effect of terrorism on, 46
Middle East, 70-71 growth in, 28-29, 36-37
North America, 69-70 influence on air travel, 125-26
South America, 70 influence on the cruise industry, 103
Trend analysis, 6-7 recovery, 22-25
Trend correlation, 7 University students, 18t
Trend extrapolation, 7 U.S. Customs and Border Protection,
Trouble-prone young men, 2 I t 58
U.S. Immigration and Customs Enforce-
V ment, 58
Ultra Voyager, 114 US Airways, 123, 132
U.N. Security Council, 17 U.S.S. Cole, 111
Unemployment, 23, 33
in Germany, 33 V
United Kingdom, 33-34 Vacation time, see Leisure time
United Airlines, 122, 132 Vacationing, future of, 160-61
United Kingdom, 33-34 Values, trends in, 176-83
economic growth, 33-34 Venetian casino, Las Vegas, NV, 59
exports, 14t Vietnam, 69
household spending, 33-34 Virtual meetings, 97
technology in, 10 Virtual technology, future of, 161
total GDP, 14t Virtual tours, 78
U.N. Security Council, 17 growth of tourism and, 40
unemployment, 33-34
United Nations, 5 W
United States, 43 Warsaw Pact, 32
agricultural exports, 15t Water pollution, 41
air travel in, 124, 130 32 Weapons exports, 13t
cardiopulmonary disease in, 41 Wireless Internet access, 86-87
index 285
Women World Trade Organization, 30,

better opportunities for, 90 72-73
life expectancy of, 75 World Travel and Tourism Council
salaries for, implications for MICE, 99 (WTTC), 68
Work ethic
implications for MICE, 99 Y
implications for restaurants, 154-55 Yemen, 68
trends in, 203-11 Yield management, 115
World tour, 29-34 Yuan, 30
World Trade Center, terrorist attack on,
24; see also September 11, 2001 Z
terrorist attacks Zimbabwe, outsourcing, 27

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PART II Sector Forecasts

Money Matters 125

Appendix E Annotated Bibliography 246

This is where Hospitality 2010 shines. Marvin Cetron is a pioneer of fore-

1. Build a strong foundation.

7. Unleash the power of people.

process, we have managed to anticipate calamities that took many onlookers by

CONSULTING THE ORACLE

variety of contexts. They are commonly known as "Market World," "Fortress

Trend correlation is even simpler in principle. Some trends follow others.

Table 1-1 Military Spending Table 1-2 Nuclear Warheads

1 United States $335.7 1 United States 10,640

Table 1-3 Weapons Exports

Table 1-4 Total GDP Table 1-5 Competitiveness*

*Worid Economic Forum Ranking of Business Competi-

Table 1-6 Exports

1 United States $731

Table 1-7 Oil Reserves Table 1-8 Freshwater Supplies

Table 1-9 Agricultural Exports

1 United States $55.6

TabJe 1-10 Nobel Prizes

1 United States 137 1 Japan 994

Table 1-12 Internet Users Table 1-13 Personal Computers

1 Iceland 76 1 San Marino 738

Table 1-14 Donors of Foreign Tabic 1-15 U.N. Security Council

1 United States $12.9 1 China Permanent

Table 1-16 Environmental Treaties

Table 1-17 Housing—People Per Boom

Table 1-18 Quality of Life* Table 1-19 University Students

1 Norway 1 Canada 5,997

"UN Human Development index

Table 1-20 Feature Film Production

Table 1 -22 Movie Tickets

1 United States $14,461 1 India 2,860

Table 1-23 Opacity Index

Table 1-24 Trouble-Prone Young Men

Number (thousands) in 2000 Percent of population

Iraq 3,335 28.3%

Coming Global Growth

CONSUMERS SNVSTE CAUTION

kitchen appliances, and about 37 percent of its hard drives. As a competitor,

japan After a dozen years of stagnation, and sometimes outright reces-

KEY TRENDS FOR THE ECONOMY

hypercompetitive business environment demands new emphasis on rewarding

Internet "virtual" tours replace printed brochures in promoting vacation desti-

gaseous pollutants. In the United States alone, medical researchers estimate

12. Technology increasingly dominates both the economy and society.

destinations. However, there is some evidence that growing numbers of tech-

As time for shopping continues to evaporate, Internet and mail-order mar-

« Transportation is a prime target for terrorists.

® Major sports events are terrorist magnets.

inconvenience to thousands of customers might ruin existing relationships

WEIGHING THE RISK

In forecasting, we often distinguish among several different categories of

This indicator clearly differs between the prosperous industrialized coun-

Iraq 3,335 28.3%

Of course, there is more to it than statistics. In almost any society where

KEY TRENDS FOR SECURITY