The ongoing coronavirus pandemic has undoubtedly brought the whole world to a standstill. It should come as no surprise that the tourism industry suffered the most significant of blows. With most of the travel-related activities put on hold, one might wonder just how big of an impact COVID-19 will have on the future of global tourism.
In the last five years, the global travel and tourism GDP growth continued to exceed that of the global economy GDP. The chart below from the World Travel & Tourism Council (WTTC) shows that in 2015, growth was at its peak. We also notice early signs of decline towards the end of 2019, partly caused by the worldwide outbreak of COVID-19 at the end of the fourth quarter.
Source: The World Travel & Tourism Council (WTTC)
Much of the world has been in a state of lockdown since new cases of coronavirus began to emerge globally. UNWTO estimates that this “freeze” translates to a staggering loss of approximately $300–$450 billion in international tourism receipts (exports). In the worst-case scenario, this accounts for almost one-third of the $1.5 trillion generated globally in 2019. Still, given the volatility and unprecedented nature of this pandemic, we can not evaluate the full impact that COVID-19 will have had on this industry until it has passed.
How Will Coronavirus Affect the Future of the Travel Industry?
Although it will be difficult to predict the full consequences of the coronavirus pandemic until later this year, there is hope for tourism to make a recovery. For example, Mckinsey has devised multiple scenarios on the economic impact of this crisis, which can be used as a proxy for the travel economy.
While there is some truth to these scenarios, these can also be misleading since they are only two-dimensional. Namely, McKinsey’s scenarios do not account for, in Azeem’s words, “the structure of the economy driving the recovery” or a ‘z’ axis.
Thus, we might be better off directing our efforts toward examining the history of pandemics and the devastations caused for the global tourism industry. Only by doing this can we derive insights into what the path ahead may look like.
The graph below displays the percentage of real change in international tourism receipts (exports) for the past 20 years.
Source: The World Tourism Organization (UNWTO)
If there are any critical takeaways from the above graph, it is that the tourism industry has proved to be notoriously resilient. Simply put, history has continuously shown us that travel markets can survive, and even thrive following unfavorable events and external shocks.
A Glimmer of Hope for the Travel Industry’s Recovery
The tourism industry is the linchpin of the global economy, mainly because it is incredibly diverse. Aside from obtaining revenue from airlines and hotels, tourism also fuels economic growth in part, thanks to events, activities, technology, and retail. It is indeed a job-generating industry, especially for women and young people.
According to The World Travel and Tourism Council (WTTC), it may take more than ten months before the tourism market recovers. That said, travel restrictions are already lifting in many parts of the world. China, for example, has already taken away the requirement to wear masks in bars and restaurants. However, as for when it will be safe for the public to resume international traveling?
UNWTO and WHO predict that the industry will not see signs of recovery until Q2 or Q3 of 2021. One way for us to gauge a return in international tourism is by looking out for specific behavioral patterns online.
For example, Sojern examined flight searches made from Western European countries to the UK (data collected on April 14th, 2020). Their neat graph, shown below, demonstrates that spikes in travel intent occur as early as four months from now. However, many of those searches may have been done out of interest only.
European Flight Searches Made to Key European Destinations
Furthermore, looking at the latest hospitality industry reports, specifically RateGain’s second COVID19 report, we also see positive signs of recovery. From April 12th to April 18th, 2020, RateGain tracked future room reservations for more than 20 countries in North America, South America, Europe, Asia, and the Middle East.
According to the report, 18 out of 20 countries showed a week-over-week increase in reservations. This uptick gives comfort in knowing that, even though the coronavirus pandemic has caused the travel industry to come to a halt for a while, things are slowly starting to get back to normal.
Does This Pandemic Have a Silver Lining?
This pandemic has played a role in cultivating the consumers’ habit of using online platforms to satisfy their daily shopping needs. Small local retailers finally realize the value of utilizing digital operations.
This logic can be naturally extended to the tours and experiences sector, which is the third-largest growing segment within the travel industry, worth a staggering $159 billion annually, but with limited online penetration.
In fact, according to PhocusWright’s 2018 whitepaper, at least two out of five tours and activities suppliers do not accept online bookings. Moreover, almost 80% of global tours and activities are booked offline. It is also interesting to note that the Application Programming Interface (API) in this segment is far from mature. At Tickitto, we’re actively collaborating with the incumbents in the events, tours, and activities space to redefine the underlying infrastructure, so we can build back a better ecosystem that is standardized and intuitive.
Whilst the coronavirus outbreak is like a dark cloud passing over this industry, we anticipate that the calm after the storm will bring about a push toward some more tech-forward and efficient operations, which would have flexibility and transparency at their core.