Editor’s Note: Connecting the Dots is a series of monthly conversations with Michael Dominguez, President and CEO of Associated Luxury Hotels International. The series examines issues in the global economy in 2024 that will “connect the dots” to be helpful not only in business but in life as well. In this installment, Tim Altbaum, Founder and CEO at Vario, a full-service A/V and production company, sat down with Mike to discuss the impact of international events including shipping, terrorism, trade and the global economy. Altbaum is president-elect of the MPI DFW Chapter, a former board member of NACE, and holds CSEP, CMP, HMCC and CMM designations.
Tim Altbaum: Now we're focusing right now mostly on domestic, but there are other countries in the world right now that are having a recession or having some downturns financially, and you can also touch on maybe that's some of this geopolitical risk we have going on as well. Shipping routes are really in a tough spot. China, a lot of things going negatively for them financially. I'll let you expound upon either of those.
Michael Dominguez: The number one issue in a latest McKinsey survey of CEOs is the geopolitical situations are out there. That's important because just six months ago, it was still recession. It was still cost. It was still labor. Those have fallen well behind and there's enough craziness going on around the world. Let's take the two wars and put them on the side because that is a human tragedy in addition to a political tragedy, but we have to put that over to the side when we talk about what's coming up because at least we know that's in play. What we don't know is in play. What it all means is what's happening in the (Suez) canal. We talked about the attacks of terrorists that are actually hitting these canals in shipping lanes that's making shipping companies go around Africa. It's added nine days, and more importantly, it's adding a lot of costs. The reason that concerns me and the reason it's a high risk is just when we've got supply chains getting back in line. Just when inflation is coming back in line, this is a real headwind. One of the things that I don't think we're talking enough about is that is being driven by terrorism. The (recent) terrorist attack in Russia … we're not talking about how terrorism is raising its ugly head once again. We forget even with what is going on in the Middle East, it started with a terrorist attack. There's a lot of terrorism that is up ticking and one of the risks and the concerns, what does that mean for other parts of the free world? For them to attack Russia the way they did in such a public manner. It's ISIS once again, who we haven't talked about in some time. ISIS is telling you the entire free world is a threat to them. That's how they see it. That's a real danger because we are not talking right now. China makes everybody very nervous and their economy is declining. They are becoming more aggressive on the world stage. What is really interesting is that they just had their State of the Union … for 40 years, they have had a statement that they are pushing for a peaceful reunion with Taiwan. They removed the word peaceful this year. That should tell everybody that it doesn't mean it's happening tomorrow. It does mean their intentions are getting more aggressive. The biggest concern around Taiwan is that they've (China) moved ships into the oceans already around Taiwan. We have military ships around Taiwan. It's getting a little bit hairy in that part of the world. I just read a report and it's really interesting is that we have green berets right now on the ground in Taiwan running through military drills. My dad was in Air Force Intelligence for 42 years and he was also in the Air National Guard for 25 years. When they did field training every two weeks in the summer, his last three field trainings were in the Turkish desert and that was five years before the Persian Gulf War. We tend to know where the hotspots are, and we start to train for those hotspots. The fact that we have troops in Taiwan and naval ships around Taiwan is telling us this is getting to be a little bit hairy. What that all means, I don't know when or where, and I am hopeful that it doesn't turn into a major conflict. I hope it becomes a trade conflict. That's how you're going to get some type of negotiation.
Past Reports
April: How Does an Election Cycle Impact Meeting Industry
March: How Supply, Demand Impact Travel, Hotels, Meetings
February: Global Economy Mostly Good News for Hotel Industry
January: New ALHI Series to Examine Key Global Issues
Altbaum: Turning that back to the financial side, talking about what happens? Because China is in a little bit of a financial decline, and we know that the U.S. and other countries rely heavily on imports from China and their goods and manufacturing. What happens to all that manufacturing business?
Dominguez: The funny thing is what shifted, and it was during the pandemic and especially because China was closed. China has been declining as a U.S. trade partner. The largest benefactors: Mexico and Canada. Mexico and Canada and NAFTA are literally the benefactors right now. We're also seeing more trade with Europe and you're looking at other trade alliances that are now starting to be impacted. We've actually been declining with China, which means we've become less reliant on it. What I think is interesting is what you're finding going on right now is this whole war of chips. China just said they are no longer going to have certain U.S. chips in any of the military phones and or computers. We've done the same thing on our side. Let's not even get into the TikTok conversation. That is a lot of friction that is going on there. Now, the interesting part for China, they've had a decline in foreign investment for the first time ever in their history. Now the benefactors of that, India and then also Indonesia. I was reading a great article in the Financial Times talking about Indonesia has become the safe space for people to have a side bet. What that means is in case things go awry here in China, I'm investing in other manufacturing opportunities in Indonesia, in other parts so that I can still get my supplies. It's going to be an interesting next couple of years. That is the only reason I think this election really matters is because once this election gets settled, we have to get focused on international, not just domestic issues, because there's a lot going on around the world.
In June: Geopolitical implications around group and leisure travel, and the Olympics