Dhaka: Based on optimistic assumption, the USD 1.5 trillion global tourism industry faces USD 450 billion collapse in revenues.
This is according to TUI, the global travel and vacation giant that owns six European airlines, 1,600 travel agencies, over 300 hotels and 14 cruise ships.
“We are currently facing unprecedented international travel restrictions. As a result, we are temporarily a company with no product and no revenue. This situation must be bridged,” Fritz Joussen, CEO, TUI said in a statement.
The same could be said for millions of companies around the world.
Even as giant travel companies like TUI line up with airlines and cruise owners for multi-billion dollar bailouts, huge question marks loom over the global travel industry’s future.
The World Tourism Organisation (UNWTO), in its updated assessment of the potential impact of COVID-19 — based on the optimistic assumption that the tourism industry will experience a swift recovery over the next 3-4 months — projects that for the whole year 2020, tourist arrivals will have fallen 20-30 per cent from 2019, and international tourism revenues will have plunged by USD 300 billion to USD 450 billion, almost one third of the USD 1.5 trillion generated in 2019.
Taking into account past market trends, this would mean that between five and seven years’ worth of accumulated industry growth will have been wiped out in one fell swoop.
By contrast, the global financial crisis of 2008-09 resulted in a 5.4 per cent fall in international tourism revenues, while the September 11 attacks in 2001 and the SARS outbreak of 2002-3 led to declines of just 2 per cent and 0.4 per cent. These were just momentary blips for an industry that has experienced two decades of almost uninterrupted growth, resulting in a three-fold surge in international tourism receipts, from USD 496 billion in 2000 to USD 1.5 trillion in 2019. Even during the worst year, 2009, the 5.4 per cent fall in tourism receipts was cancelled out by a 5.7 per cent resurgence in 2010.
What is happening now — the total collapse of global travel and tourism — has not happened before. As the UNTWO itself concedes, its own estimates “should be interpreted with caution in view of the magnitude, volatility and unprecedented nature of this crisis. SARS and the 2009 global economic crisis are the existing references, but this crisis is like no other.”
Even the scenario of a 20-30 per cent fall in receipts — four to six times more than in 2009 — assumes that the virus will be contained within the next 2-3 months; and once it is, that everything will return to exactly how it was before. It assumes that the virus will be contained globally to such an extent that it allows for unlimited international mass travel and tourism for leisure and business to resume within the next 2-3 months. And it assumes that this large number of people are actually willing to travel within a few months.
But this is hard to imagine. And once things do end up at some sort of new “normal,” the global economy may be in the throes of a recession deeper and more enduring than the one suffered in 2009.
In the meantime, everything stands still and the economic pain grows. Airlines have already taken a battering, having seen their passenger numbers virtually vanish, most of their planes grounded, and their share prices slump by anywhere between 50 per cent and 70 per cent over the past six weeks. The pain has barely just begun.
By the end of the year, the International Air Transport Association (IATA) expects “revenue passenger kilometers” (RPKS) — an airline industry metric that shows the number of kilometers traveled by paying passengers — to have slumped by approximately 27 per cent in North America, 32 per cent in Africa, 37 per cent in Asia Pacific, 39 per cent in the Middle East, 41 per cent in Latin America, and 46 per cent in Europe. In terms of passenger revenues, the impact is expected to range from just 4 per cent in Africa to 50 per cent in North America, 76 per cent in Europe, and an eye-watering 88 per cent in the Asia Pacific region.
On the ground, things look just as bad. The ten countries with the most reported cases of COVID-19 as of three days ago (China, the United States, Italy, Spain, Germany, Iran, the Republic of Korea, France, Switzerland and the United Kingdom) account for 34 per cent of world tourist arrivals and 53 per cent of world tourism expenditure. Between them, China and the U.S. alone contribute 29 per cent of total expenditure.
Some of these countries’ economies are massively dependent on the income and jobs provided by the tourism industry. In case of the US, inbound tourism provides 10 per cent of total exports. In France and Italy it’s 8 per cent while in Spain it’s a stunning 16 per cent. In some places such as the Canary Islands and the Balearics, tourism represents over a third of the local economy. For years WOLF STREET has been warning about Spain’s excessive dependence on tourism and the huge risk that dependence could pose in the event of a sudden fall in demand. We never thought the fall could be this dramatic.
In February, even before the restrictions on movement were put in place in Europe, Spain had already registered a 15 per cent year-over-year fall in tourist visa applications. Easter, one of the busiest weeks for tourist arrivals in Spain, has already been ruined. If the crisis lasts as long as four months (it’s already lasted six weeks), it could end up costing the industry EUR 45 billion in lost income, according to the industry group Exceltur. Millions of jobs are also on the line.
The same is happening all over the world, albeit to a slightly lesser degree in many places. Millions of jobs that have been created over the past ten years will be destroyed. UNWTO concludes its assessment by calling for protection of the most vulnerable segments such as SMEs, self-employed and the workers that fill the low paid, casual jobs the tourism industry specialises in creating.