COVID-19 AND IMPACT ON GLOBAL TOURISM INDUSTRY

It is becoming evident everyday that the impacts of the Coronavirus COVID-19 will have a very serious impacts to the global tourism, travel, transportation, hospitality industry. It is evident that Coronavirus will discourage people from traveling for a short period of time, particular to and from places that are badly affected such as China, South Korea, France, Germany, Italy, Spain Iran, Japan and others. The Coronavirus prompts a crisis for the airline and travel industry as airlines count cost of cancellations.

As travellers are become very concerned about travelling in the short term there is already a wave of requests for cancelation and refunds. Many travellers are now keen to change, cancel, or not book future travel plans for the short to medium term. Often refunds have outweighed sales placing reverse cash flow pressure on many travel organisations. China has banned its cituzens from booking overseas tours and purchasing overseas hotels and flight packages.Airlines have cancelled schedules to affected areas and there is a reduced transportation capacity. There is a serious decline in demand. Cancelations, non-shows and reduced booking forced airlines to give staff unpaid leave, freeze pay and parking aircraft. BA cancelled more than 200 flights to countries including Italy, Germany and the USA; Ryanair cut short-haul flights to Italy by 25% whilst Lufthansa and easyJet had similar cancelations. 50% of the Cathay Pacific fleet is sutting in parking lots and 75% flights for March 2020 are cut. Cathay said 75 per cent of staff, or 25,000 employees of the group, would take unpaid leave.

Many major events such as the ITB in Berlin, Salon Μondial du Τourisme in Paris, the annual Geneva International Motor Show, the Barcelona Mobile World Congress, the International Hospitality Investment Forum and many conferences including PATA Annual Summit have been cancelled or postponed. Cancellation ITB Berlin affected the confidence of tourism and event organisers dramatically. The International Federation of Exhibition and Events Services estimates that more than 3 million square meters of showrooms have been cancelled. In March and April 2020 it was expected that 614 short and world-wide exhibitions would take place but were cancelled due to governments and health authorities restrictions. It is estimated that an event cancelled 2 weeks before its official launch will lead exhibitors to losses equal to 75% of their total attendance costs due to service providers costs such as kiosks, promotion agents and catering and more. Assuming 1500 cancellations are affected by cancellations in Europe, then we are talking about half a million euros per company on average and there have been cases where one company has lost 3.5 to 4 million of its sales.

Many organisations have banned business and corporate travel to affected areas as part of their business continuity strategies. Disney has closed Disneyland Hong Kong, Shanghai, Tokyo for a period of time. Many sporting events may be cancelled and Japan is concerned about the upcoming Olympics and Paralympics. Demand for cruising is freezing following the Diamond Princess fiasco with 700 confirmed COVID-19 cases. Travel intermediaries both online and on physical outlets are inundated with requests for information, cancelations and postponements of travel. Governments are also issuing travel bans and advisories against traveling to affected area resulting in reduced bookings and many cancelations. Travel insurance will also play a critical role in this with premiums increasing and urgent discussions of what is a force majeure that can void insurance policies. 

As a result, many airlines, hotels and tourism attractions have felt already the impact and slowed down their operations. Often organisations are asking staff to take unpaid leave and reduce their schedules, force annual leave or make drastic changes to staff arrangements to deal with the unexpected downturn. Many destinations and particularly China, Korea, Italy will suffer a major downturn in both incoming and outgoing tourism, slowing down their economies and bringing huge challenges to regions that depend on tourism for their income and regional development. Many tourism destinations will experience a dramatic reduction of activity, in the short term, and will need to find alternative ways to support their local communities. Unfortunately, it is at times of crisis that the true value of tourism and its contribution to regional development and the lifehood of peripheral and insular areas becomes obvious. It is becoming obvious everyday that there will be several months before we return to “normality” and will take the best part of the year 2020 to recover the damages. This crisis will have major economic, political and socio-cultural impacts. It will also change best operational practices and change global strategies. In the meanwhile, there is an urgent call for resilience in the industry to ensure that we ensure business continuity.

On Monday, the EU’s industry chief said the tourism sector was losing around €1 billion a month because of the virus. European tourism has seen a drop off in two waves, firstly as the virus began to take hold in China, curtailing the number of travellers from that country, and secondly as the virus has spread around Europe, leading to visitors staying away from impacted areas, and governments to close tourist attractions and cancel events to prevent further outbreaks. Italy for which tourism makes up 13 percent of the economy has seen hotel cancellations rates reaching up to 90 percent in some areas, according to the government.

Note

European travel and tourism stocks are being crushed by the coronavirus outbreak as investors bet trips for business and pleasure will be scaled back.

Airlines

The first affected by the virus outbreak were flagship carriers exposed to travel to and from China, such as Air France-KLM and Deutsche Lufthansa AG, and British Airways parent IAG Group SA, as some long-haul routes to the country were halted. But short haul and discount carriers are also in the spotlight now that the virus is spreading in Europe. Other airlines to watch include Ryanair Holdings Plc, EasyJet Plc and Wizz Air Holdings Plc, along with Turkish Airlines, which flies to 322 destinations, and Aegean Airlines in Greece could also be in focus.

Airport Operators

In terms of airports themselves, operators like France’s Aeroports de Paris, Germany’s Fraport AG and Austria’s Flughafen Wien AG have all seen their share prices fall by double-digit percentages this month. Closely-held Heathrow Airport in London is concerned about the global impact but doesn’t expect a material negative impact on its financial results.

Hotels

Accor SA, InterContinental Hotels Group Plc, NH Hotel Group SA and Melia Hotels International SA are among European hotel chains that may be affected by the epidemic, along with U.S. peers Hilton Worldwide Holdings Inc. and Marriott International Inc.

Cruises

Cruise operators have been roiled by the virus outbreak as a number of ships full of holidaymakers have been quarantined. Stocks to watch include Carnival Corp., which has lost more than a quarter of its value year-to-date, along with Norwegian Cruise Line Holdings Ltd. and Royal Caribbean Cruises Ltd. Greek-listed Piraeus Port Authority SA could see a decline in the number of cruise ships using its ports, while Cyprus’s Louis Plc may be vulnerable as it has hotel and cruise operations in Greece, Cyprus and the East Mediterranean.