Is the Tourism Industry Really Suffering?

CURRENT STATE

Empty airports, deserted hotels, and docked cruise ships – the impact of the COVID-19 pandemic can be seen around the globe. The way people interact with one another, go about their daily lives, and assess health risks have all changed over the last several months. The spread of COVID-19 has not only impacted things like the world’s healthcare systems and education systems but has also had a significant impact on one of the pillars of the world’s economy – the tourism industry.

With the implementation of travel restrictions, curfews, and social distancing practices, days of visiting tourist attractions, attending festivals and exploring new places are few and far between.

In an April 2020 survey conducted by Revinate, 40.4% of respondents had cancelled travel plans while 29.7% had postponed planned trips. Additionally, 71% of travelers surveyed had not even considered booking future travel plans.

According to the World Travel and Tourism Council, travel and tourism accounts for one in 10 jobs worldwide and generates 10.3% of the global GDP. The council stated in May 2020 that as many as one third of these jobs, more than 100 million positions, and about $2.7 trillion in GDP are at risk due to the current crisis.

INDUSTRY PERSPECTIVES

Airline Industry

In the latest Industry loss reports released by IATA, airlines are expected to lose $84.3 billion in 2020, resulting in a net profit margin of -20.1%. The IATA expects to see revenue fall by 50% to $419 billion from $838 billion seen in 2019. IATA’s Director and CEO stated, “Financially, 2020 will go down as the worst year in the history of aviation. On average, every day of this year will add $230 million to industry losses. In total, that’s a loss of $84.3 billion.”

Cruise Industry

As noted in an article by Financial Times, the three main cruise line operators are searching for ways to obtain cash. In May, Norwegian used two cruise ships and two islands as collateral for part of a fundraising effort to raise $2.4 billion. Norwegian stated the $2.4 billion will help the company remain stable for 18 months without cruises. Competitor Carnival, on the other hand, was able to raise $6.4 billion but still has plans to lay off some employees and cut pay for others. In May, Royal Caribbean raised $3.3 billion via equity against 28 cruise vessels and intellectual property.

Hotel Industry

AHLA’s latest report on COVID-19’s impact on the hotel industry shows the industry is experiencing historically low occupancy levels with eight in 10 rooms being empty, a decline in revenue by 50%, and layoffs or furloughs of 70% of employees. The report indicates the impact of COVID-19 on occupancy rates and unemployment is worse than the recessions of 2007-2009 and following 9/11.

CONSUMER EXPECTATIONS

What lies ahead for the travel and tourism industry depends heavily on how travelers feel about the current pandemic. Travelers need to feel like they are not a risk. They must consider not only their travel destinations but also the transportation methods they can use to get there. People are reviewing restrictions, studying COVID-19 trends, and making weighted decisions around future travel plans.

Almost half (45%) of US adults have indicated a vaccine would need to be widely available before they would consider international travel, and 20% stated everyone wearing masks and gloves would allow them to feel more comfortable traveling internationally.

While research shows people do plan to resume traveling in the next 12 months, research also suggests a large portion of travel will be domestic. Revinate reports that 73% of travelers plan to travel in some capacity within the next 12 months. Of those planning travel in the coming months, 21% plan to stay within their own state or province while nearly half report their travel will remain in-country.

The ability to take a personal vehicle seems to be driving the preference for domestic travel. In a survey shared by eMarketer, 77% of US adults indicated they would feel comfortable using a personal vehicle for travel while only 10% said they would feel comfortable traveling via airplane.

FUTURE STATE

Like many aspects of the COVID-19 pandemic, the future of the tourism industry is largely unknown. Erika Richter, Senior Communications Director of the American Society of Travel Advisors, says, “Until the virus is under control and efficient systems are in place to restore confidence in travel, it’s simply too soon to tell when people can expect to start booking again.”