Coronavirus Forecast to Cost Global Tourism at Least $1.2 Trillion

Up until February, CY Yau says he was looking forward to vacationing in Vietnam with his friends. The 25-year-old Hong Kong resident, a social media officer at the University of Hong Kong, says he and his friends had spent months planning their visit to Hanoi and other parts of the country.

Those plans changed a week before departure when the group saw a bulletin from Vietnam’s government preventing visits from residents of Hong Kong, Macau and mainland China due to the rapidly spreading coronavirus that originated in Wuhan.

“We canceled everything,” Yau says. “Today we’re still very much grounded.”

Half a year into the deadly global coronavirus pandemic, people around the world remain largely grounded. As summer deepens across the Northern Hemisphere — a traditional time to take vacations — few industries have been hit as hard as tourism, a broad sector that includes transportation, lodging, restaurants, entertainment and venues such as parks, among others.

Now, a newly released report from the United Nations is charting how big the losses will be in global tourism, and which countries will be most adversely affected. The world’s tourism industry is losing at least $1.2 trillion, or 1.5% of global gross domestic product after four months of travel being shut down, according to research from the U.N.’s Conference on Trade and Development. Those numbers could nearly double to $2.2 trillion and 2.8% of global GDP if the stoppage in international tourism lasts eight months; losses could soar to $3.3 trillion (4.2% of global GDP) if international tourism shuts down for 12 months.

Developing countries such as Jamaica, Kenya and Thailand that rely heavily on tourism will experience the greatest shocks to their economies, according to the report.

But wealthy countries will be hit, as well. The United States will lose nearly $1.9 billion from its GDP, far more than any other country and nearly double that of the projected $1 billion loss of second-place China. Other developed countries suffering from tourism’s downturn include France, Germany, Greece, Portugal and Spain.

“These numbers are a clear reminder of something we often seem to forget: the economic importance of the sector and its role as a lifeline for millions of people all around the world,” said Pamela Coke-Hamilton, the UNCTAD’s director of international trade, in a statement.

In fact, few sectors better symbolize the challenge leaders in countries face as they try to balance public health and safety against the need to energize their economies and prevent national recessions morphing into depressions. Those anxieties were underscored in late June, when officials at the International Monetary Fund produced a grim economic forecast predicting global economic growth will fall nearly 5% this year.

A Downturn ‘Without Any Precedent’

For years global tourism has been increasing, both in sheer value and as an anchor in many countries’ economies. International travel and tourism grew by 3.5% in 2019 compared to the previous year, according to the World Travel and Tourism Council, a London-based forum charting the global industry. That figure outpaced overall global economic growth for the ninth straight year.

Today, travel and tourism directly accounts for more than 3% of global GDP, says Tiffany Misrahi, vice president of policy at the WTTC. When factoring in other industries that benefit from travel and tourism, such as retail and entertainment, tourism indirectly accounts for 10% of the world’s economy, Misrahi adds.

Tourism’s growing influence on countries’ economies is making this year’s pandemic-fueled economic downturns all the more painful, industry experts say.

“The falls (in tourism activity) we’re seeing are without any precedent,” says David Goodger, managing director for Europe and the Middle East at Tourism Economics, a U.K.-based market research organization focused on global travel and tourism. Goodger, speaking by telephone from London, says the recent events that most closely resemble this year’s downturns in tourism were the Sept. 11, 2001, terror attacks in the United States and the April 2010 eruption of the Eyjafjallajökull volcano in Iceland, an event that threw so much ash into the air that it shut down air travel across much of Europe for nearly a week.

In May, the U.N.’s World Tourism Organization released a report stating that international tourism fell 22% in the first quarter of this year compared to the same period last year. UNWTO researchers said at the time that international tourism for all of 2020 could fall anywhere from 60% to 80%. Those estimates were based on factors such as how well countries contain the spread of the virus, how long travel restrictions are in place and how long nations’ borders are closed.

Two months after those projections, the worst-case scenario for tourism seems increasingly likely. The United States, which has recorded by far the most deaths due to the virus, has yet to escape a first wave of the pandemic as states that lifted lockdown restrictions in May and June are experiencing record numbers of new daily cases, a development forcing local officials to reinstall some degree of travel and other restrictions.

The pandemic’s impact on the U.S. is so great that when European Union officials decided to reopen the region to visitors from 15 countries, they excluded travelers from the U.S., as well as hard-hit Russia and Brazil. South America’s largest country has recorded the second-highest global numbers of virus deaths as its daily cases surge — punctuated by Tuesday’s announcement that President Jair Bolsonaro has tested positive for COVID-19.

All told, 121 million of the 330 million jobs tied to tourism around the world will be lost in 2020, Misrahi says. And Goodger says his organization now estimates that international travel and tourism won’t return to its booming 2019 levels until 2023 at the earliest.

A Chance to Reshape an Industry

The global pandemic’s adverse impact on tourism has a spillover effect on other industries that supply the services tourists seek, such as food and entertainment. In its report, the UNCTAD estimates that for every $1 million lost in international tourism revenue, a country’s national income could decline by $2 million to $3 million.

The drop in tourism is having outsize impacts on smaller countries and territories whose national economies rely heavily on tourism. Many places in the Caribbean and Mediterranean are facing sharp declines in their economies; Aruba, for example, relies on travel and tourism to fuel nearly three-fourths of its economy, Misrahi says. The international casino destination of Macau, a semiautonomus territory belonging to China, relies on travel and tourism for 91% of its GDP, she adds.

“For many countries, like the small island developing states, a collapse in tourism means a collapse in their development prospects. This is not something we can afford,” said the UNCTAD’s Coke-Hamilton.

Also being hit hard are unskilled workers and women — the latter group whom the U.N. report states make up about 54% of the workers in the accommodation and food services sectors.

“The impact has been devastating. Travel and tourism has prided itself in giving work to minorities, women,” says Misrahi, speaking by telephone from London. Women comprise a substantial share of entrepreneurs and business owners in the tourism industry, she says. In Panama and Nicaragua, for example, more than 70% of tourism-connected enterprises are owned and run by women.

And like so many other sectors, tourism has an opportunity to reshape itself in more equitable and sustainable ways in a post-pandemic world, advocates say.

“How do we highlight how this sector shapes societies, creating opportunities for people,” Misrahi asks. “There’s a move beyond economic numbers, to thinking about nature, caring more about humanity. How do we work these into travel and tourism?”

Learning from this pandemic will be crucial to rebuild tourism, Misrahi adds. That will require governments and the private sector to collaborate more closely than before.

“Consistent communication from your leadership that is actually accurate will be vital.”

Back in Hong Kong, Yau says he is hopeful that by next year he will be able to vacation somewhere across the Asia-Pacific. But given the state of the pandemic in places such as the U.S. and South America, he doesn’t know when he’ll take a long-haul trip.

“If you asked me two months ago, I would have been optimistic about plans later this year. But currently, given the situation now … knowing that the Western part of the world it (the virus) hasn’t been contained, I don’t think there will be any plans to go there.”

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