Can the Middle East tourism industry's good fortune last?

'The Middle East and Asia were our fastest growing areas last year, we had double-digit growth in the region,' Marriott International boss Ed Fuller told journalists at his annual pre-Arabian Travel Market dinner. 'Everything looks very positive at the moment'.

However, Morgan Stanley's chief economist Stephen Roach sounded a note of caution at the opening of the Arabian Hotel Investment Conference, noting that never before in his life had he seen so much optimism, and that left him worried.

In particular, Dr. Roach is worried that the new US Congress has a sufficient majority to pass protectionist trade legislation against China. He views this shift from globalization to localization as a road back to high inflation, high interest rates, falling profit margins and dollar weakness.

Financial crash coming?

You would never get a doyen of Wall Street to admit it but the subtext of his speech was surely that the financial system itself could shortly tip over the edge, dragged down by a falling US housing market and a crippled consumer.

In the same week HSBC sold its London headquarters for $2 billion, the largest ever property deal in UK history, and will pay a rental yield of just 4.2 per cent over 20 years to stay there. If the world's second largest bank is cashing out, what message should that have for the rest of us?

Certainly an economic slowdown or outright recession in the US would impact on the rest of the world, for when the US sneezes everyone gets a cold. China, which has been a major growth area for hoteliers, would take a tumble on falling trade and emerging market stocks would crash.

Oil market impact

Even the Middle East would not be immune if US growth falters and the speculators pull out of the oil market. Citigroup reckons $30 a barrel of the oil price today is down to speculation, and that could vanish overnight in a financial crash, causing a liquidity squeeze in the Gulf States.

Just as significant for Middle East hoteliers would be the impact of a global economic slowdown on international visitors. For the current strength of the regional tourism industry is a reflection of the spare cash available to tourists as well as the abundance of new luxury hotels in places like Dubai.

It was interesting that fears about terrorism or war in the Gulf are now on the back burner, and at the Arabian Hotel Investment Conference at least, the biggest concerns appeared to be the health of the global economy.

Stephen Roach will testify to Congress for the third time this year next month, but he thinks the 'protectionist train is leaving the station'. If so the globalization of international business will be challenged and the hotel industry would be one of many to feel its impact.