Most countries in the world have been forced to enact nation-wide lockdowns in an unprecedented effort to halt the spread of the novel coronavirus. People are forced to stay indoors until the immediate threat posed by the new virus is cleared and international travel is banned in many places, with some exceptions.
There has been much talk about the economic fallout due to COVID-19. Most industries are affected, but none has been hit harder than tourism.
Overnight, both domestic and international tourists have stopped booking hotel rooms and airplane tickets, dooming thousands of small and medium-sized businesses that were already struggling.
According to a study released this week by the OECD Center for Entrepreneurship, global travel may be impacted by 25% in 2020, leading to the potential loss of up to 50 million sector-related jobs; and this is just the beginning.
The shock could amount to a 45-70 percent decline in the international tourism economy in 2020. This all depends on how long the coronavirus crisis will last and the ability of the industry to rebound after all of this is over.
The report goes on to mention that even if the pandemic is temporarily contained, tourism will continue to suffer because of the looming threat of another outbreak.
Some of the most affected businesses in this sector include holiday resorts, restaurants, business travel, culture and entertainment, tourist guide services, the short-term platform economy, and transport services providers including cruises, ferries, aviation, and railways.
Until a vaccine is ready for mass deployment — which might take at least 12-18 months by the most optimistic estimates — operators in the tourism industry will continue to face poor demand for their services, which might take years to recover. Thousands of businesses stand to default under these circumstances.
“The industry will recover, but it will take time. When consumers start to “perceive” that it is safe to travel, only then will we see an upturn. Domestic tourism is likely to be the first to recover. There will be plenty of pent-up demand, but travelers will initially be very cautious. Long-haul travel will take longer to recover,” said Simon Hudson, a professor of tourism at the University of South Carolina.
“I think the small and medium-sized businesses in this sector (and those without deep pockets) are most at risk, as are those who depend on tourism in the most affected parts of the world (e.g. Italy, Spain etc.). I think it will take 6-12 months for travelers to start surfacing, and for many we are looking at a whole summer without business — many businesses will not survive this without government support as it is a low-margin industry,” he added.
However, not all tourism sectors are impacted equally, and some might actually flourish when restrictions are loosened. For instance, those that offer remote rural accommodations and experiences to small groups of tourists and ‘digital nomads’ might actually stand a good chance at turning a profit, while traditionally successful large-scale operators such as hotel chains and popular resorts are confronted with year-round vacancies.
And while there is a great of uncertainty as to how long lockdowns and travel restrictions will last, companies that can afford it shouldn’t dump their advertising budget entirely.
“They say that during a recession you should continue to advertise so that when consumers start buying again, you will be top of mind. It is the same for travel, and I have already noticed some creative campaigns from destinations during this crisis. Greece, for example, has just launched a “Till Then, Stay Safe” campaign urging international travelers to “#staysafe” during these difficult times due to the coronavirus pandemic — while continuing to dream and plan an escape to the stunningly beautiful country of Greece. Quite clever. Portugal has a new domestic campaign along the same lines. I am actually just preparing a research proposal to look at how destinations can recover from this crisis, and I will be examining the success of such communication strategies in more detail,” Hudson said.