COVID-19: The fate of tourism in the face of a pandemic

The world spends nearly US$1.5 trillion each year on tourism, an industry nearly as big as the entire economies of Canada or Russia. Last year saw 1.4 billion arrivals internationally alone, the equivalent of nearly 20% of the world’s population. Supporting 330 million jobs, this market was growing at more than 5% year on year (especially in Asia and the Middle East). Then COVID-19 happened, and it fell off a cliff.   

For many visitor attractions, the impact of COVID-19 to tourism in its own right is significant enough, let alone the addition of lockdowns, potential recessions and more. What international tourism will look like near term is also one of the biggest unknowns of the future. Who might be able or even allowed to travel post lockdown? Will tourism exist at all? Given this industry is responsible for 10% of the world’s Gross Domestic Product (GDP), the question has everyone worried.

The hit is already easy to see. Or hear, for that matter, the sound of aeroplanes overhead diminished, illustrated in dramatic images showing a 55% and counting year on year drop of flight traffic as airlines park fleets on the tarmacs of major airports, coupled with mass redundancies. Many airlines such as Emirates have announced halts to flying, significant schedule reductions and reduced capacity to allow for physical distancing. For most airlines, it is devastating. Just like the banks in ‘08, the hardest hit have already appealed to governments for bailouts, potentially the start of deprivatization of national airlines for those lucky enough to secure it. An unwelcome sore for most ports right now, cruise ships may not be so lucky. When it comes to travellers getting about, a lack of seat supply coupled with rising prices will contribute to contraction.

29th February 2020 versus 29th March 2020 (data, image: FlightRadar24)

 

Tourism during a pandemic versus a recession

As COVID-19 set in, the World Tourism and Travel Council (WTTC) initially warned of a 25% shrink in 2020. With the benefit of hindsight, even this seems optimistic. It has now warned the industry could suffer catastrophic collapse. The world’s top tourism spenders – China, the United States, Germany the United Kingdom and France – are among the likely to be the worst hit by the health crisis. In the 2008 recession, a reduction in household consumption, business expenditure and currency strength played out in the tourism industry. With COVID-19, this could be combined with further effects of older travellers electing to stay at home, or people suffering or recovering from ill health. Whilst visitor attractions usually feel a more muted reaction due to the staycation effect, the prospect of an absence of tourism is a frightening one, especially following lengthy closures. 

 

Barriers to movement

Government and foreign policy will have a significant part to play, both in controlling the departures of citizens and arrivals of tourists. When COVID-19 first emerged, many governments quickly denied entry to travellers from hotspots such as China, Iran and Italy, following this with border closures to all foreigners. The Department of State has now advised all U.S. citizens to avoid all international travel and countries such as Australia called its citizens to come home ‘while they could’. In the absence of commercial options for returning travellers, others such as the UK government arranged special charter flights to repatriate those stranded overseas. Some countries moving to attempt domestic eradication, such as New Zealand, intend on keeping borders closed until the crisis is over. Others are enforcing state run quarantine. None of these measures are conducive to tourism.

 

The insurance dilemma

Until a vaccine is found, the future of travel is anyone’s guess – a new reality which may exist for a year or two. Despite the likelihood pandemic psychology will split the public between the fearful and the fearless, one insurmountable obstacle is the issue of travel insurance. No insurer would take the odds on a reasonable premium with such an infectious disease, especially given the potential for hospital stays and the incredible cost of weeks long intensive care. Without insurance, travellers are unlikely to take the personal risk either, nor governments in the position to accept another potential patient in the uninsured. 

But there is one target market that may be free to move about – welcomed by economies needing the boost and comfortably insured by companies otherwise without custom: the recovered. Researchers have already started looking into the prospect of so called ‘Immunity Passports’ with the idea of potentially releasing workers from lockdown, depending on the strength and length of immunity. The same concept could potentially be applied to travellers on some sort of visa program where a medical certificate proving antibodies can be produced.

In the absence of a crystal ball, the best we can do is plan for the worst, hope for the best and wait for the headlines. Scenario simulation provides visitor attractions with a way to think about how visitation and revenue may look without international tourism, or with dampened recovery from particular origin markets, or with bigger impacts to markets such as cruising which take longer still to crawl their way back. Recent trends might also reverse, such as the decentralization of accommodation with Airbnb

In the meantime, cultural institutions and commercial attractions have their eyes on domestic travellers, especially from drive in origins, and a ‘staycation’ market no doubt already itching to get out after being stuck at home. Visitor attractions will also rely on local governments to drum up business through destination marketing to boost local activity. Then we can all wait, for the vaccine.