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  • Writer's pictureAccountant High Wycombe

The Effects of the Coronavirus on the World Tourism Industry

Updated: Dec 12, 2020

The tourism economy has been hit hard by the coronavirus pandemic (COVID-19) and by the measures that have been adopted to limit the spread of the virus. According to revised scenarios, this shock could cause the international tourism economy to contract by 60% to 80% in 2020, depending on the duration of the crisis. Beyond immediate measures to support the tourism sector, countries are preparing stimulus actions. They work in particular to lift travel restrictions, restore confidence among travelers and adapt the tourism sector to future realities.

World Tourism Industry

The Impact Of the Coronavirus (COVID-19) On The Tourism Economy

The coronavirus pandemic (COVID-19) has thrown the tourism economy into an unprecedented crisis, under the effect of the brutal and immense shock it has caused for this sector. COVID-19 will lead to a 60% decline in international tourism in 2020, according to revised EUROPEAN estimates. This decline could even reach 80% if the recovery does not occur until December. International tourism is expected to rebound first within specific geographic areas (the European Union, for example).

The domestic tourism, which accounts for about 75% of the tourism economy in the EUROPEAN countries, is expected to recover more quickly. This is the main lever that can be used to promote recovery, especially in countries, regions and cities where the tourism sector represents a lot of jobs and businesses.

The Repercussions Of The Crisis

The repercussions of the crisis are being felt throughout the tourism ecosystem and, to reopen and adapt destinations, a joint approach will be necessary. Currently, businesses and workers in the tourism sector are benefiting from support measures adopted for the economy as a whole, and many countries are also in the process of establishing support measures specific to tourism. For now, the authorities are pursuing the following priorities, alongside professional associations in the sector:

• Lift travel restrictions, and collaborate with tourism professionals so that they benefit from liquidity aid, apply new health protocols aimed at making travel safer and diversify their markets.

• Restore confidence to travelers and stimulate demand by relying on new safety and health certifications, applications to inform visitors and internal tourism promotion campaigns.

• Prepare comprehensive tourism recovery plans to adapt destinations, encourage innovation and investment and rethink the tourism sector.

These actions are essential, but in order to revive the tourism economy and business activity, it is necessary to go further, in a coordinated manner, because tourism services are very interdependent. Professional associations in the travel and tourism sectors and public authorities should continue to strengthen their coordination mechanisms in order to support businesses, especially the smallest ones, as well as workers in the tourism sector. They will also have to take a very close interest in the most sensitive or vulnerable destinations during the recovery phase.

Effects of the Coronavirus on the World Tourism Industry

The Measures To Be Adopted

The measures adopted today will shape the tourism of tomorrow. The public authorities must already reflect on the implications of the crisis in the longer term. At the same time, they must make a success of the digital shift, support the transition to low carbon and promote the structural transformation that is necessary to forge a stronger, more sustainable and more resilient tourism economy. The crisis is an opportunity to rethink the future of tourism.

Tourism is an important economic sector in many countries, and the brutal and immense shock that the COVID-19 pandemic has caused in this sector is being felt in the rest of the economy. To contain the spread of the virus, countries around the world have taken unprecedented measures. However, the restrictions thus imposed on travel, the operation of businesses and individual interactions have brought the tourism economy to a halt. Now countries are entering a new phase of fighting the virus to protect their tourism. The task is complex and arduous, and it is difficult to quantify the impact of this new phase on the tourism economy.

Future Scenario

Five months after the onset of the crisis, the situation continues to evolve, and the future remains uncertain. We now expect a later and slower recovery than expected. It is likely that travel restrictions and containment measures will continue, and that they will only be lifted gradually, while being able to be reinstated in the event of further waves of infection. Even once tourism supply chains start functioning again, putting in place new health protocols will mean businesses will not be operating at full capacity. The recovery will also take time on the demand side, given the entanglement of the consequences of the economic and health crises and the gradual lifting of travel restrictions. At the same time, the confidence of consumers and their travel will be all the more affected as the pandemic continues. This will have indirect consequences for many national economies.

Based on the revised scenarios, the shock could translate into a 60% to 80% decline in the international tourism economy 1 in 2020 , depending on the duration of the crisis and how quickly travel and tourism will restart. The initial assumption has not changed, since tourist flows remained extremely small until June, but these new estimates reflect the revision of two previous scenarios for international tourist arrivals in the EUROPEAN area, as well as the addition of a third scenario, in which a real recovery would only occur in 2021.

• Scenario 1 (revised): international tourist arrivals start to pick up in July, and gradually strengthen in the second half of the year, but at a slower pace than expected (- 60%)

• Scenario 2 (revised): international tourist arrivals start to pick up in September, and gradually strengthen over the last quarter, but at a slower pace than expected (- 75%)

• Scenario 3 (new): international tourist arrivals start to pick up in December, as part of a limited recovery in international tourism before the end of the year (- 80%)

In the short term, domestic tourism is considered to offer the best prospects for stimulating recovery and helping the tourism sector. Domestic tourism is important, accounting for around 75% of tourism-related economic activity in EUROPEAN countries. This domestic tourism has also been severely affected by travel restrictions, but it is expected to recover more quickly once containment measures are lifted. Domestic tourism is, however, unlikely to be sufficient to offset the decline in international tourism, especially in destinations highly dependent on international markets. Significant macroeconomic repercussions can therefore be expected in countries, regions and cities where tourism supports many workers and businesses.

Beyond the tourism economy, the pandemic has caused a global economic crisis, and many countries are entering recession. In early macroeconomic estimates 4 , the EUROPEAN indicated that for every month of strict containment, annual GDP growth could be expected to decline by around 2 percentage points. She also estimated that if the lockdown continued for three months, and in the absence of any offsetting measures, annual GDP growth could be 4 to 6 percentage points lower than it would have been otherwise. However, the outlook has darkened since then, which will have consequences for the recovery of tourism.

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