Impacts on COVID-19 on Travel Industry and Hospitality Industry in 2020

What will be the Impacts of Covid-19 or Coronavirus Pandemic on Tourism, Travel, and Hospitality Industry in 2020?

The impacts of COVID-19 have been particularly calamitous for the tourism and travel industry and for several countries, the Tourism & Travel (T&T) plays a huge and decisive role in the economy. With the brief background, we will review the T&T industry, the basic realities, and what strategies should be implemented for mitigating the employment and economic impact of considerably reduced international travel, the reduction of indefinite duration, and severity.

The WTTC (World Travel & Tourism Council) has informed that this COVID-19 pandemic might cut 50 million+ jobs globally in the tourism & travel industry and Asia would have the worst effects. Of these 50 million jobs, about 30 million might be in Asia, 7 million in Europe, 5 million in the USA and the rest on other continents. When the outbreak gets over, it would take around 10 months for this industry to get recovered.

Currently, the tourism industry shares 10% of the global GDP. About 850,000 people travel every month to the United States from Europe, which is equal to the monthly contribution of $3.4 billion in the U.S. economy.

According to WTTC, the equivalent to the loss of three months of international travel in 2020 might result in an equivalent reduction in jobs between 12-14%. Sector-wise, Airlines, and Cruise ships currently being more affected than hotels.

Current Situation in Every Sector

This pandemic is affecting the whole industry. Let’s summarize some important insights from them.

Aviation Industry

• According to IATA (International Air Transport Association), the expected annual loss would be $113-252 billion for the Airline industry.

• Total profit last year was $26 billion or 3.1% of the total revenue that indicates IATA’s “finest-case scenario” for 2020 might not be manageable by the airlines.

• What it means is that the annual revenue projection, which was increased by 4%, will be decreased by 13-30% YoY.

Tours & Activities

• Around 86% of the operators produced less than $250K in the sales in 2019 that implies small businesses might be hit to the hardest.

• As per Arrival, the entire sector has a value of $254 billion in 2019, involving 1 million operators.

• Average YoY drop in bookings is around 52%, partly because of the 37% total cancellation in 2020 bookings.

• Depending on last week’s survey, 28% of operators have a risk of losing their business in the next 3 months as well as 46% in the next 6 months.

Hotels

• As per STR, the occupancy level of the US is still apprehended above 50% for March’s 2nd week however, it is projected to follow a trending line set by Italy and China.

• China’s tenancy increased from 9% to 18% in the initial two weeks of March. At the same time, Trip.Com Group had reported a 20x rise in prepaid hotel bookings.

• Presently, no international brands are prepared to provide guidance. Only Trip.com has issued a few guidelines. They anticipate lodging businesses to drop by 60-65% for the Q1 YoY.

• The US occupancy might drop severely under 10% before it bounces back as well as it is tracing around 8 weeks behind Italy and China.

The Impacts on Travel Industry

The coronavirus has arrived and completely changed our way of living and the way of traveling. The near-term effect is expected to trigger economic recessions across the globe. COVID-19 has got an ominous feeling about the near future. You can say that at least for the next couple of years, the T&T will be completely different. Once-busy airports having thousands of people arriving or leaving have become ghost places with empty parking lots, deserted hallways, and blank screens not showing any arrivals or departures.

Before the appearance of the coronavirus between 1950 and 2019, the international arrivals have achieved yearly growth of 5.5% in the US as well as 12.1% in the Asia Pacific.

Countries, where the revenues from T&T comprise 7% or higher exports, will experience sector-associated bankruptcies as well as inferior unemployment figures than in countries where T&T has less significance.

Portugal, Jamaica, Thailand, the Dominican Republic, Spain, and Turkey where the T&T sector offers 16-50% growth of the GDP through exports are more susceptible to declines of arrivals. These six countries may experience a more severe financial blow because of the relative significance of the T&T financial sector, and might not recover in the medium or short term.

The total volume of international tourists gives income to the public and private sectors, both at the micro and macro levels. Services and goods are obtained from international chains of hotels and stores in every country. The US data excluding Canada includes a population of 37 million with 22 million visitors to the U.S. as well as Mexico as the cross-border traffic might mislead the data.

Secondly, the overall impacts of COVID-19 on the T&T industry will be demoralizing, at least for the short run. A larger share of the labor force working in the T&T won’t have any work. Thinking about the initial waves of unemployment affecting those having a small to zero marginal proclivity to save, cumulative consumption will drop, which will result in better unemployment levels.

According to Okun’s law, every 1% decline in unemployment will composite the financial crisis sourcing a 2% decrease in the GDP. Professional government administrators, as well as financial pundits, are well-aware of the government intervention, policies, and steps needed to salvage a country from the economic depression. Though, success needs the governments’ determination to stimulate growth and consumption.

According to the research of FM Global Resilience Index, the recovery measures, as well as the flexibility of a few economies, suggest that the journey of recovery will become far tougher for a few major countries than others, having the reliability and strength of supply chains having among the important contributing factors. The requirement of various countries on the T&T industry for economic development, employment, and growth make a journey for strategies and options to mitigate as well as overcome these imperative challenges. We study the opportunities, which might be exploited and extracted during as well as in the outcome of a disturbing economic and human tragedy called the COVID-19 pandemic.

Possible Opportunities

Coronavirus pandemic is an enormous risk to the lives of people around the world. The insecurity of the length has cast dejection on the domain economy as redirected in the dramatic declines of employment as well as the GDP as demonstrated by the U.S., and the worst is yet to come.

During such a situation, the short term to medium terms outlook for tourism business, as currently organized look terrible and need a checkup of the possible operational solutions.

Primarily, the crisis exaggerated Chinese tourists that are the highest spenders across the world, way in advance of the Americans, having $277.6 billion in the year 2018 from which $4.4 billion was from France. Consequently, the virus has infected the world’s leading tourist place, Europe. In the year 2018, this continent had received 672 million travelers, 50% of international appearances in this world. Therefore, it is not a coincidence, which these three nations are in the best six countries most exaggerated by this coronavirus.

Presently, Europe has lost the business of a minimum of 2 million hotel nights ever since January, as well as the airlines, have given a drastic dip in the activities, fly empty, therefore, are already executing emergency plans for dealing with possible bankruptcy.

However, this unique pandemic episode might also give an opportunity of asking the meaning of global tourism, welcoming us to think again about the new start of the tourism business, and surprisingly, COVID-19 might help us analyze as well as compare post-virus pollution stages.

This pandemic has temporarily stopped "over-tourism," well-defined as visitors’ level negatively affects the domestic population. This negative impact might include over-crowding, pollution, quick infrastructure decay, destruction of the cultural icons as well as ecosystem deprivation.

Certainly, the sources of congestion are different, amongst the more applicable culprits are lower-cost air traveling, an increase of cheaper lodging, seasonal tourism, elimination of mediators, increase in the standard of living around the world as well as “must-see” low-cost marketing phenomenon helped through the internet, particularly on likes of traveling advisors, tourist forums, and Instagram.

How to Get Sustainable, Responsible, and Socially Advanced Tourism after the Coronavirus Crisis?

As a reply to the requirement for maintainable and socially advanced tourism, the tendency of “slow tourism” and “staycation” is increasing. More tourist destinations are endorsing domestic tourism. For instance, France is already leading the way by establishing the visitors’ programs like #ExploreParis and Loire à Vélo.

Furthermore, Paris’ high-end hotels are providing the domestic population huge discounts for immediate stays. This staycation provides a new experience to the area residents providing prized services as well as activities, which allow the area travelers in maximizing vacation time and avoid longer traveling times.

For staycation and slower tourism growth, the government has a role to play in offering the required infrastructure as well as in endorsing the private sector’s commitments to make investments in the local tourist spots is anticipated to be important.

Slow tourism looks to provide an option to both quick travelers as well as to the sand, sun, as well as sea mass travel, which started during the 1960s in the Mediterranean. Slower tourism needs the approval of the slower pace and superior personal communication with locals as well as their culture.

Promoters of this kind of tourism assure to provide a more reliable travel experience, better consumption of the local products, protection of heritage, usage of cleaner energy, a proper vision for tourism, as well as a deeper worry about the ecology as well as for the visitors’ quality and life of the locals alike. Additionally, slower tourism in internal rural, as well as urban areas, might reinforce the domestic as well as autochthonous culture. This new approach for tourism might produce new businesses like artisan as well as zero-kilometer markets.

From Mid-Time to the Long-Run

Today’s digital world has transformed the tourism business completely. These tourists have developed well-digitalized and many new business prospects have been developed in this tourism business.

If the quick growth of the web-mobile lasts as expected, customers may use mobile phones to visit the internet to get travel data, to plan their vacations, to do reservations, as well as to pay for the travel services and goods. The mobile internet will support and promote the e-tourism. With this medium term, you can expect today’s digital world to become the engine of the growth of the T&T industry, dominating all the industry aspects.

So, to improve digital changes and growth, the tourism segment must be local, social, as well as mobile. This tactic has developed as a result of the Smartphone’s growth and greater local accuracy they provide.

Though the COVID-19 is perhaps the most horrible threat that the T&T industry has ever encountered, there are some spaces for hopefulness. International tourism is strong and new options like the staycation traveler and the virtual and digital tourists will ease the worries about the investors in the T&T industry as well as of the governments across the globe.

Certainly, a successful future of the T&T industry will see different kinds of travelers. Although, a more active partnership among the private sector and the government will be crucial. Over tourism might not be sourced by unsuspicious tourists alighting at the airports as well as train stations that are very small to include traveler volume.

Conclusion

Because of the lack of sufficient infrastructure apart government revenues, this T&T industry may get labeled as the unwanted economic player as well as in a few cases, might kill a key contributor to financial growth. As the COVID-19 pandemic is attacking the economy and health, there are now opportunities for potential guests and hosts to better organize for a more rewarding and richer tourism experience.

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