Reading the economic section of the newspaper has never been more depressing than over the last few months. The news is dominated by headlines of the failing economy with stories about the crumbling financial and real estate industries, the halt of manufacturers' production lines as well as companies announcing yet another wave of job cuts. The tourism industry has not gone untouched. In December 2008 the World Travel Organisation (UNWTO) forecast that in 2009 there would be a decline in international tourism of approximately 0- 2%. Such a decline does not seem that bad when compared to other sectors, however this is the first time since the Second World War that the tourism industry will have negative growth or, at best, flat growth. Whoever claims to be untouched by the recession, whether it be a country, industry sector or company, will be looked upon with scepticism as people think they are either in denial or simply have not yet been directly hit. But is every sector really suffering from the economic turmoil or do recession-proof sectors exist?
The current economic downturn is testing one sector that has long been believed to be recession proof – the health care sector. It seems that even though the residential real estate market has fallen flat, banks are still willing to lend money for medical space development since there continues to be a rise in demand. If you break an arm, for example, seeking treatment is not optional. According to the Association of Executive Search Consultants (AESC), search consultants anticipate that executive job opportunities in the health care industry will increase by 32%.(1) This is good news for hoteliers looking for a job, since some hospitals and clinics recruit hotel General Managers to run their operations. For the hotel industry at large, the even better news is that within the health care economy, there is one small sector that is booming: medical tourism.
Medical tourism is a term used to describe the rapidly growing practice of travelling across international borders to obtain health care. Such services include not only short hops to Colombia for a nip and tuck, but also trips for infertility treatment, dental surgery or complex specialised procedures such as joint replacements or cardiac surgeries. To minimise the dangers of travelling soon after the operation or simply to take full advantage of the trip, medical tourist patients often combine their medical trips with vacation time set aside for rest and recovery in the destination country. A number of travel agencies now offer “health care holidays”. In South Africa, for example, low-cost plastic surgery can be followed by recuperation on a safari, away from friends or family who might disapprove or stare at post-op wounds or scarring. Nearly every operation is followed by a few days in a nearby luxury resort where the patient can relax, recover, and do some sight seeing.
Medical tourism has been with us for many decades. Thousands of years ago, health pilgrims travelled to mineral-rich thermal springs and during the 16th Century, medical tourism experienced a boom in Europe where tourist towns grew in places like Baden Baden, Bath or St. Moritz. However, globe-trotting patients only ever occupied a niche. What is getting people really excited today is the fact that medical tourism is on the threshold of a dramatic boom and is quickly becoming the only viable option for more and more people. According to a study published by Deloitte Consulting in August 2008 the number of Americans travelling abroad for treatment will increase from 750,000 in 2007 to 6 million by 2010 and reach 10 million by 2012. The authors reckon that this exodus will be worth US $21 billion a year in developing countries in four years time. The forecasted growth is particularly important in the US since around 46 million Americans lack health insurance and other tens of millions have minimal insurance coverage. Europe's state-funded systems still give patients a reason to stay at home, but even here, private patients may start to travel more as it becomes cheaper and easier to get treated abroad or as they become impatient with long waiting lists for treatment.
The key factors fostering the growth of this industry include:
Quality & Price: An increasing number of hospitals are gaining international accreditation and common surgical procedures can be done in world-class hospitals for about a fifth or less of the price charged in American hospitals. Asian hospital chains stand to be the biggest winners with one of the most famous hospitals being the Bumrungrad in Thailand. Bumrungrad has been described as the “United Nations of hospitals” since it attracts more foreign patients than any other hospital in the world. It is run as a five star hotel (on-site valet parking, team of interpreters to help with language problems, limousine pick-up service at the airport) and is considered one of the top hospitals in the world with treatment here costing about one-eighth of what it does in the United States. There are also “local hospitals” going global. In recent years leading American hospitals such as the Mayo Clinic and Johns Hopkins have set up offshoots in the Middle East and Asia.
Convenience & Speed: Two major draws to medical travel are the convenience and speed. Countries that operate public health care systems are often so taxed that it can take considerable time to get non-urgent medical care. In Britain and Canada it could take 1 year to get a hip replacement, while in Thailand, for example, it can be done within a week.
Global Economy: A new global citizen whose life and work transcends borders is emerging. Many people no longer live exclusively in their country of origin and are becoming increasingly mobile in both their temporary and permanent work assignments. These global citizens are willing to pay for the healthcare systems which match their global lifestyle.
Global Private Health Insurance Coverage: In an attempt to stay competitive and referring back to the “global citizen”, there are a number of private health insurances who offer global coverage including costs of transportation. After all, if it is cheaper for the uninsured patient to go global, it is cheaper also for the insurer.
It is no surprise that, given the attractive growth forecasts of this sector, various countries are trying to promote themselves as “health care destinations” to get a piece of the pie. According to McKinsey & Company, the top 5 medical tourism destinations are currently Panama, Brazil, Malaysia, Costa Rica and India. India in particular is looking to become the world leader in medical tourism. Last year India received around 150,000 medical tourists and is forecasting an annual growth rate in this sector of 30%. The Middle East has also tried to learn from these destinations and is trying to create local brands in order to attract international patients and insurance companies. One of the most well known medical tourism projects in the Middle East is Dubai Healthcare City. Dubai Healthcare City was designed not only to attract medical tourists but also to reduce the need for residents to travel abroad to receive high quality treatment.
As these health care destinations develop, so does the need for more traditional local services such as hotels, restaurants and other commercial property. In order to offer attractive medical packages these developments actually go hand in hand. If we take Dubai as an example, surely the current economic environment putting several tourism related projects on hold will not help promoting Dubai as a medical tourism destination. Additionally, the number of expats leaving the country will also put a strain on the system. In fact, Tatweer has apparently put some projects in Dubai Healthcare City on hold. Another point to consider is that during tough times, we assume that medical tourism will accelerate due to its vastly lower cost, but on the counter side, a lack of cash may impact offshore medical business since customers just don't have the money for non life-threatening surgeries like cosmetic surgery, dentistry, and Lasik/laser procedures.
The recession proof vaccination in health care tourism isn't 100% effective and Deloitte's estimates in the current environment are probably over optimistic since these were published only a few months before the entire financial meltdown. On the other hand, HVS Executive Search will keep a close eye on this sector since medical tourism is still shining in this dim economy and there is evidence that the future of health care promises to become increasingly global.
1 AESC SearchWire: Despite Economic Recession, Executive Jobs in Several Sectors Expected to Grow In 2009, posted 1/15/09
Lorenza Alessie is Associate Director of HVS Executive Search in London. Lorenza joined HVS Executive Search from an international recruitment company where she held the position of Director focusing on appointments in the hospitality sector. A graduate in Hospitality Management from the Ecole hôtelière de Lausanne, Switzerland, Lorenza is Dutch and Italian by nationality and fluent in Italian, Spanish and French.