Tourism tests positive for COVID-19

INTRODUCTION

A worldwide known fact is that COVID-19 erupted in Wuhan city of China but has reached almost all the countries in the world due to the movement of people from one place to another. There’s no wonder to the fact that it will be a long span of time after which people will eventually want to start travelling again. Thus, this decrease in travel- both domestic and international, is likely to impact the Tourism Industry hugely. It certainly accounts for a huge economic and financial losses because the Tourism industry is a major part of the Tertiary sector. Here’s a piece of information discussing the impact on the tourism industry- both domestically and internationally.

GLOBAL IMPACT ON TOURISM

The Tourism Industry, which currently accounts for 10% of the global Gross Domestic Product is likely to be adversely impacted by COVID-19. According to the United Nations World Tourism Organization (UNWTO), this impact will be worse than the global economic crisis of 2009. Once the outbreak is over, it could take up to ten months for the Tourism Industry to recover.

The COVID-19 pandemic will lead to a decrease in international tourist arrivals by approx. 290-440 million owing to postponement or cancellation of events and conferences like Olympic Summer Games, Wimbledon, Grand Prix, Dubai Expo 2020, the Met Ball, Coachella Music Festival, and expected cancellation of business and leisure trips. As a consequence, this will lead to a decrease in tourism exports by 350-400 billion USD (UNWTO).

The effect on International Tourist Arrivals is displayed as follows:

In the month of January, this pandemic was more or less confined to China but very soon cases started appearing in various parts of the world. Consequently, travel bans were imposed and borders were sealed in most of Europe (which represents 50% of international tourism) and in the United States of America, Africa, and the Middle Eastern Countries.

Considering these latest developments (quarantine measures, travel bans & border closures in most of Europe, which represents 50% of international tourism, and in United States of America, Africa, and the Middle East), the evolutions in Asia and the Pacific and the patterns of previous crises like 2003 SARS and 2009 global economic crisis, UNWTO estimates international tourist arrivals could decline by 20% to 30% in 2020.

Moving further, the above-stated loss in arrivals will consequently lead to lower-incomes and that would induce the tourism industry to cut loose many people from their jobs, especially the low-income staff like waiters/waitresses, etc. The hospitality sector of the tourism industry will suffer the most from this. Such workers are likely to be paid either very low wages or are suffering from the fear of being fired from their jobs (because of no work). Also, this excessive supply of labor will cause the already low level of wage rate to fall even further.

As seen in the above diagram, a fall in labour demand causes a leftward shift in the demand curve, causing a fall in both the equilibrium wage rate and the equilibrium quantity of labour.

The World Travel and Tourism Council estimated that the pandemic could cut 50 million jobs worldwide in the travel and tourism industry. Of the 50 million jobs that could be lost, around 30 million would be in Asia, seven million in Europe, five million in the Americas, and the rest in other continents.

Expecting cuts in footfall, airlines are expected to reduce the no. of airplanes operating to reduce their maintenance cost which will lead to a rise in the airfare.

As seen in the diagram, the decrease in supply will lead to a rise in the airfare and a decline in the equilibrium quantity.

It is also of great importance to look at the correlation between tourism and the spread of COVID-19. Following are the countries that significantly depend on international tourism and now have a huge no. of cases of COVID-19.

IMPACT OF COVID-19 ON INDIAN TOURISM AND TRAVEL INDUSTRY

According to various travel sites, the best time to visit India is from October to March. But this time, the outbreak of Coronavirus has had a significant impact on the Tourism industry of India. As per the data from the Ministry of Tourism and Bureau of Immigration (BOI), the number of foreign tourist visits during the period January-February 2020 registered a growth of only 1.919% when compared with the data of the same period of the previous year, whereas this growth rate was 6.9% during January - February 2019. The month of December 2019 witnessed a growth in the visitors by 6.824%, as compared to December 2018. But as the coronavirus cases started to increase around the world, the foreign tourist visits started decreasing. The number of foreign tourist visits witnessed a significant decrease in February 2020 from January 2020 by 8.419 %. February 2020 witnessed a decline in foreign tourist visits by 3.467% as compared with previous year data.

The following graph denotes the number of foreign visitors to India-

According to WTTC 2020 annual research, the Travel and Tourism industry has contributed INR 13,681.1BN (USD 194.3BN) to the GDP of the country in 2019 which amounts to 6.8% of the total economy of the country. Lockdowns and banishment of international flights are going to hit hard the formal sectors (hotels, travel agencies, etc) and as well the informal sector ( taxi drivers, craft makers, etc).

Confederation of Indian Industry estimates that the organized sector will suffer an estimated loss of 1.58 lakh crore. According to the Federation of Association on Indian Tourism and Hospitality (FAITH), the total losses may be in the range of Rs. 5 lakh crore covering all aspects of the industry (a significant loss to the country).

“The tourism and travel industry indirectly provides income to the informal sectors that are going to suffer a great loss. If looking through the expenditure approach of National Income Accounting lockdowns decrease the consumption of tourism services that will make the GDP contribution by the industry down.”

As per WTTC, the contribution of travel and tourism to the employment of the country in 2019 was 8.0% of total employment of the country i.e. 39,821,800 jobs. According to a report by the KPMG, one of the big four consulting organizations, India's employment through the travel and tourism industry suffers a loss of around 70% of the total workforce. It is because 4 of the top 10 countries (the US, UK, China, and Germany ) which contributed 65% of India's FTAs (foreign tourists arrivals) has the maximum number of COVID-19 cases and lockdowns in those countries will negatively affect the FTAs and the jobs created by them. The effects can also be seen due to no domestic tourism as the states went under lockdown.

The travel, aviation, and hotel sector collectively make the loss of 85 billion due to restrictions imposed on travel and cancellations of flights (IATO). Thus, COVID-19 is going to hard-hit the travel and tourism industry of India.

CONCLUSION

As it is evident from the above analysis, the outbreak of COVID-19 has the potential to disrupt the entire economy, especially the Tourism Industry. The damage caused to the tourism industry will have ravaging consequences for the global economy as a whole as a result of the share it houses in the overall GDP of various countries, consequently the Global Economy.

The tourism sector not only forms a part of the economic indicator but also serves as the backbone of various other sectors, thus indirectly affecting the economy. The measures taken during the lockdown, in the short run will lead to disruption of the economy as the entire activity in the cycle comes to a standstill. In the long run, the loss of lives and a general fear among the public will have serious consequences for the countries which have a higher Marginal Productivity of Labour such as the United States of America, Australia where there is a low population as compared to the capital that has been put to investment, which has been for ages - a serious issue.

As a result, we must look at the progression and find out ways to stop this ravage by developing the infrastructure in such a way that the entire travel process can become contact-free, if not with perfection then at least 90% of the process. For this, the efforts of the airline industry have been commendable to an extent. The measures will mean that a portion of the revenue will be sacrificed and the economy will not operate at the most efficient level, but these steps in the current situation can save the millions of losses coming our way.

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