Few industries have suffered during the COVID-19 pandemic as much as the tourism and travel industry. In March, the US Travel Association projected a potential loss of $202 billion in travel expenditures due to a significant fall in international demand and global travel restrictions. It also estimated a loss of 4.6 million jobs.
Pfizer’s vaccine news has instilled some hope. However, it will still take some time before the vaccine becomes available globally. Until that happens, we can expect international tourism to remain on the down-low. Let’s take a look at the impact of Coronavirus on the tourist industry. We shall also review how it has affected world resorts such as Walt Disney Parks that derive a significant portion of their revenue from tourists.
International tourism and coronavirus: measuring the economic impact
The tourism industry in the US generates economic output of $2.6 trillion. It is also the source of 15.8 million jobs in the country. Let’s take a look at some key facts and figures reflecting the impact of the pandemic on the travel and tourism industry:
· According to Roger Dow, the President and CEO of the US Travel Association, the pandemic’s effect on travel is six to seven times greater than the 9/11 attacks.
· North American airlines have incurred $50 billion in losses and witnessed a -27% decline in revenue. European airlines have also suffered a loss of $76 billion, with revenue falling by -76%!
· According to a November 19 report, travel spending dropped by -44% compared to last year in the US, translating into a $9.5 billion loss. Moreover, the year-on-year decline in travel spending has remained at -41% to -46% in August, September, and October.
· As per UNWTO, export revenues from tourism may fall by $910 billion to $1.2 trillion this year. It can reduce global GDP by 1.5% to 2.8%.
· Over 100 million tourism-related jobs are currently at risk. Small businesses shouldering 80% of international tourism are very vulnerable. Other at-risk groups include women, making up 54% of the tourism industry’s labor force.
· The decline in tourism has reduced funding for biodiversity conversation. It has led to an increase in looting, poaching, and consumption of bushmeat.
· 90% of nations have closed World Heritage sites, which has led to a devastating socio-economic impact on local communities relying on tourism. 90% of museums are closed, 13% of which may not open again.
The effect of the pandemic on large and small tourism-related companies
The cessation of tourism activities has made the survival of tourism-related businesses increasingly difficult. According to the OECD, tourism businesses in the coastal, rural, and regional areas have suffered far more than those in urban areas.
I mentioned that 80% of small businesses that shoulder international tourism have become vulnerable to shutdowns due to the pandemic. Giants such as Walt Disney are not faring too well, either. As per a recent report on Company performance, Coronavirus’s most significant impact was felt by the Parks, Experiences, and Products segment. Disney Parks were shut down during the second quarter of 2020. In the fourth quarter, these operations’ revenue decreased by $2.6 billion (-61%). It incurred a loss of $1.1 billion in this segment.
Disney said that these operating results were due to a decrease in domestic and international parks and experiences. The Company estimates that Coronavirus’s total negative impact on its quarterly operating income for this segment was approximately $2.4 billion. Its parks and resorts have also operated at a significantly lower capacity in the fourth quarter. Disney’s cruise line businesses and Disneyland Resort were also closed throughout the fourth quarter. However, the Shanghai Disney Resort resumed operations in May. Disneyland Paris and Walt Disney World reopened in mid-July, but Disneyland Paris has undergone closure again.
As far as the Coronavirus pandemic’s total net adverse impact across all Disney businesses is concerned, the Company has suffered $3.1 billion for the fourth quarter and $7.4 billion annually.
Due to loss in revenues, Disneyland also announced about putting more employees on furlough. Walt Disney World has also laid off over 11,000 workers in Florida. Its redundancy plans have affected approximately 28,000 employees during the pandemic.
The way forward: what lies ahead for the tourism industry
The COVID-19 pandemic has the potential to set the international tourism industry back by 20 years. Unless the pandemic magically disappears tomorrow, the tourism industry must prepare for approximately $1 trillion in losses. The UN Secretary-General, Antonio Guterres, reflected on the crisis and stressed that governments work to rebuild the tourism sector. Guterres said that the tourism industry is a stable income provider and provides decent jobs for numerous individuals and families. Governments must also take initiatives to protect the cultural and natural heritage related to the industry.
UN Secretary-General stated that tourism plays a pivotal role in boosting economies and enables countries to thrive.
According to the OECD, governments must focus on the following areas to rebuild the tourism industry:
· Offer support to tourism businesses and take measures to restore traveler confidence
· Take initiatives to sustain domestic tourism and build toward the return of international tourism
· Offer clear information on safety guidelines, limitations, and health protocols to limit uncertainty
· Develop response measures and provide support wherever possible
· Take a proactive approach and build toward sustainable and resilient tourism
How can you do this, though? McKinsey’s new report suggests that countries can model their efforts to revive domestic tourism by using China as an example. Here are some key findings to consider:
· The demand for domestic travel in China is slowly approaching pre-pandemic levels. The number of domestic flight passengers and hotel-occupancy rates has bounced back by 90%.
· The number of people willing to travel again was noted to be 70% in August. Half of these respondents expected to go on a leisure trip in October!
· Confidence in domestic travel being deemed as completely safe has returned to a large extent. Most respondents ranked domestic travel safety at 4 out of 5.
· Restrictive measures were lifted in areas where the rate of local transmission hovered around zero. However, many precautionary rules are still in effect.
As long as the number of cases remains in control, restoring traveler confidence is the key to encouraging domestic tourism. In China’s case, many travel and tourism businesses used price cuts to stimulate demand at the beginning.US tourism businesses can use a similar strategy to rebuild demand through discounts, presales, and up-selling and cross-selling products. They can also offer online experiences. For instance, museums can launch video tours featuring their staff alongside artists.
The Chinese government has also rebuilt confidence by implementing strong health and safety measures. This particular aspect is crucial for encouraging domestic tourism in countries with high anxiety levels surrounding the pandemic.
Besides this, domestic tourism can also thrive by building digital touch-points and experiences. Hotels in China are using live-streaming to increase the sales of travel packages. Businesses can also take advantage of strategic collaborations to increase their market penetrations. For instance, online travel agents can use instant messaging to provide ticket-booking services.
The international tourism industry is in a crisis and has witnessed significant economic and financial losses. The pandemic has curtailed economic activity everywhere. Governments must take the necessary measures to revive domestic tourism as much as possible.
A return of international travel appears difficult and unsafe at the moment. However, focusing on domestic travel and tourism can offer a short-term solution to the industry’s challenges. It can help off-set the worst effects of the virus and help tourism-related businesses survive the COVID-19 pandemic.