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  • Writer's pictureMidhesh Shankar

How the Pandemic has Affected the Tourism-Dependent Sector of the Economy

As the ongoing Covid-19 pandemic continues to march on, more and more nations and their governing bodies are beginning to realize that adapting to the new normal, assembling and instituting essential pubic health measures, and most importantly, reopening the economy to whatever extent possible, is the way to deal with this dire situation until there is an end in sight. Countries have been asking their citizens and residents to go into total lockdowns since late-February to early-March, and it has barely been a month or two since the total shutdown of every necessary (and non-essential) supply chain have been gradually lifted.

While it is extremely important to ''flatten the curve'', a phrase that has become a part of our lives, designed to ease the burden on our hospitals and healthcare services, an even more pressing need is to ensure that the population is able to sustain its livelihood. An overwhelming majority of us depend on a steady flow of income to survive, and yes, while not everyone lives paycheck to paycheck, perhaps only the top of the human pyramid have large savings to fall back on.

There is no end to the list of sectors of the economy that have taken a hit owing to the complete halt the world was brought to. Some federal governments realized before others that someone needs to get things going sooner rather than later, as the impact of the pandemic extends beyond the current number of Covid-19 deaths.

One of the earliest steps taken by governments, when it was clear at the start of 2020 that this situation was evolving into a large-scale global issue, was to impose bans and restrictions on international travel. Initially, it was limited to the worst-hit areas, but as the virus has continued to surge through larger fractions of the population, perhaps the most reasonable decision was to impose curfews and strict lockdowns to limit the spread, while countries expanded their existing healthcare infrastructure to cope better with the anticipated drastic increase in patients. You cannot fault them for erring on the side of caution, as we did not know much about Covid-19 at the very beginning, we knew nothing about its infectiousness or its death rate, two very important parameters in determining the seriousness of a viral vector.

So what we had then was a colossal decrease in both the willingness to travel and indulge in tourism, even domestic for that matter, let alone international, we also had mandatory lockdowns in place, which meant even the bravest of the brave couldn't choose to go for a trek in the nearby mountains, or whatever their plans were for a good time outside. And let's be honest, "virtual travel" and 3D tours from a screen, no matter how big, does not even come close to the real deal.

The damage inflicted to travel is not limited to aviation, something to be remembered. The cruise ship industry, which by definition is heavily influenced by tourism, has seen its major cruise lines(companies) suffer as much as a 70% loss in share prices. The onset of Covid-19 meant that cruise lines had to cancel sailings and bookings on a scale never seen before.

Travel restrictions also massively plagued the aviation industry, once again partly due to the aversion of people from tourism as an activity. Numerous flights have been canceled, they've been flying with lots of empty seats, resulting in a shocking number of layoffs and declarations of bankruptcy, in what has been commonly referred to as the worst crisis in the history of aviation. Cargo prices also skyrocketed to almost triple the average rate by late March.

To give you a rough idea of the extent to which travel and tourism had been hampered by the restrictions(to be fair, these restrictions were expected, and required) put in place, for all worldwide travel destinations, the figures were as follows(as of April 2020):

  • 97 destinations (45%) closed their borders for tourists either entirely, or selectively.

  • 65 destinations (30%) suspended international flights either entirely, or selectively.

  • 39 destinations (18%) implemented border closure by banning passenger entry from specific origin countries.

The World Travel and Tourism Council has estimated a global loss of around 75 million jobs and $2.1 Trillion in revenue. If we were to rank the various major sectors of the economy, travel and tourism are among the most affected. In addition to the roadblock put in place for different means of travel, hotels are also beginning to see tremendous losses. Larger, upscale hotels, which were the sites of frequent conventions, seminars, and meetings, have taken the biggest blow, with an approximate 15% drop in revenue per available room, while the cheaper, budget hotels have taken a hit of 8% on the same metric, although these economy-class hotels are not as likely to handle any sort of disruption to their income very well.

The estimates and projections so far point to a significant decrease of 25% or above even for the first quarter of 2020, including the first 2 months of relatively normal, uninterrupted business. Projections for the rest of the year are as bleak as ever too. Experts say this would by far be the worst figures that international tourism has seen since 1950 and would be an anti-climactic end to the sure but steady growth that the industry has seen from 2009.

Statements by the UNWTO Panel of Experts point to the gradual recovery of international demand in 2021. Domestic demand is expected to recover faster than international demand.

The Organisation for Economic Co-operation and Development(OECD), an association of 37 nations promoting economic growth and world trade, have revised their data projections to point towards a bleak-looking 60% decline in international tourism in 2020, with potential to go as far as 80% if there is no end in sight by December. Interestingly, International tourism within specific geographic areas (like the EU) is expected to rebound first, according to OECD, contrary to UNWTO projections.

To give credit where it's due, a few governmental bodies have recognized and acted upon the observation that tourism and travel is undeniably a major contributing factor to the economy, and can actually be used as a significantly important driving force in the long, strenuous climb back up to pre-COVID economic levels. Economy-wide stimulus packages are in place, and certain countries have also introduced tourism-specific helplines.

Governments and the travel and tourism industry are focusing their efforts on:

  • Lifting travel restrictions and working with businesses to access liquidity supports, apply new health protocols for safe travel, and help to diversify their markets.

  • Restoring traveler confidence and stimulating demand with new safe and clean labels for the sector, information apps for visitors, and domestic tourism promotion campaigns.

  • Preparing comprehensive tourism recovery plans, to rebuild destinations, encourage innovation and investment, and rethink the tourism sector.

(Source: OECD)

Most countries are now reopening everything and steadily replacing total lockdowns with universally mandated masking, enforcing social distancing. And the industry which has perhaps been hit the hardest, travel and tourism, to nobody's surprise, is still facing difficulty to get up and running. While air travel restrictions have been lifted more or less, although air traffic is still significantly down compared to usual levels, people by and large are still not willing to actively indulge and spend on tourism, opting to stick to the bare essentials and weather the storm out until a viable solution is in place to enable the population to return to their lives as usual.

The World Travel and Tourism Council(WTTC) states that tourism generates more than 10% of the global GDP. For such a huge contributor to our economy, the severe decline in figures, large-scale bankruptcy declarations, job losses, and lack of any corrigible income, does not paint a hopeful picture. There is light at the end of the tunnel though, but all sorts of businesses, big or small, working in this industry, have to be extremely smart with their finances, adopt new, innovative measures to give themselves a chance to bounce back, take their services to the digital world and invest heavily in novel digital marketing strategies.

Financial measures are being taken by a few governments and institutions, special mention here to the European Parliament for their legislations. Time will tell what lies ahead.

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