Tourism – a life line in free fall

Tourism – a life line in free fall

Public life in countries around the world has come to a near stand still. The drastic measures to combat the coronavirus are unprecedented but are proving critically essential.

We do not yet know the full extent it will have on human and economic costs, but there is no doubt that it will be enormous. Current estimates predict between US$2 trillion to $3.4 trillion of income loss and 25 million job cuts. For one sector, the impact is particularly catastrophic: Tourism.

Tourism is a key contributor to GDP, employment and trade. The crisis severely affects each category of the sector: Travelling for leisure and business is at the moment one of our least priorities and our ability to visit family and friends is highly restricted or even forbidden.

The fall in economic activity is already impacting thousands of tourism establishments. In most countries across Europe, restaurants are closed and many hotels around the world have seen their booking numbers plummet. As tourism is an important income provider, providing roughly one in ten jobs worldwide, this crisis threatens the jobs of millions of people. With a workforce that comprises a comparatively high share of women and young people, it will hit those demographic groups hard which are already often the more vulnerable.

Unemployment, or the prospect of it, will severely restrict the ability and aspiration of many to travel, primarily affecting the leisure tourism industry. In addition to this, as many companies will be needing to consolidate their accounts, it will also constrict business travel, which accounts for around 13% of the sector’s total demand.

In many countries, international tourism is a critical services export sector and thus a key source of foreign exchange. Globally, tourism accounts for almost 30% of services exports, but in many small island developing States (SIDS), this share is much higher. With less international tourism and foreign exchange, the capacity to service debt can quickly diminish. Adding to this the rapidly appreciating US dollar, an additional storm is looming on the horizon. Urgent multilateral action is required to prevent that storm.

The current measures on mobility do not only challenge the sector today but also tomorrow. To slow down the spread of the virus, for weeks and most probably months millions of people will stay at home and severe travel restrictions will apply. Connectivity will be limited with countless flights, bus and train connections cancelled. For several airlines survival will depend on financial aid – some may go into bankruptcy while for others countries prepare for nationalization. Given that nearly 60% of all international tourists reach their destination by air, reduced air connectivity beyond the health crisis will constrain the ability of the sector to recover.

This is a very bleak outlook and affects countries everywhere. The top tourism destinations in terms of international arrivals are all amongst the most affected: France, Spain, the United States, China and Italy. These are big economies where tourism plays an important role. However, for other countries, like Thailand and especially SIDS, the sector is more than that: it is their lifeline. In some cases, tourism is the top foreign exchange earner, GDP contributor or employer, or all three together.

If there is a source of hope, it is the fact that tourism has proven to be resilient and has experienced strong and rapid recoveries after the crisis. We witnessed this after the SARS outbreak and Iraq war in 2003, as well as after the 2008/09 financial crisis. International tourism came back stronger than ever, recording an average annual growth rate of international arrivals of 5% between 2010 and 2018 and surpassing 1.5 billion international arrivals by 2019. Adding to this the demand from domestic tourists, clearly indicates how much is at stake.

Thus, it is important that support measures will extend to the tourism sector so that those whose livelihoods depend on it can cope with this current adversity and then support the sector’s recovery when it rebounds.

Original source: UNCTAD
Published on 26 March 2020