Coronavirus on the global economy

Coronavirus on the global economy | Travelers report

The World Travel and Tourism Council has warned the COVID-19 pandemic could cut 50 million jobs worldwide in the Travel and Tourism industry and once the outbreak is over, Coronavirus on the global economy could take up to 10 months for the industry to recover. The tourism industry currently accounts for 10% of global GDP.

Coronavirus on the global economy

The coronavirus epidemic is putting up to 50 million jobs in the global Travel and Tourism sector at risk with travel likely to slump by a quarter this year and according to the World Travel and Tourism Council(WTTC), Asia is the most affected continent in the world.

Impact on Coronavirus on the global economy

This impact would depend on how long the epidemic lasts and could still be exacerbated by recent restrictive measures such as those taken by the U.S. administration on travel to Europe.

Around 850,000 people travel each month from Europe to the United States equivalent to a $3.4 billion monthly contribution to the U.S. economy and 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.

The equivalent to a loss of three months of global travel in 2020 could lead to a corresponding reduction in jobs of between 12% and 14%, the WTTC said, also calling on governments to remove or simplify visas wherever possible, cut travel taxes and introduce incentives once the epidemic is under control.

Coronavirus on the global economy – Airlines

By sector, airlines and cruise ships were currently being more impacted than hotels. The tourism industry accounts for 10% of the world’s GDP and jobs. The WTTC official defended the confinement of certain towns as is currently happening in Italy and Spain if health officials recommend it to contain the outbreak but only in specifically targeted areas or for certain age groups. Messina estimated that once the outbreak is under control, it would take up to 10 months for the tourism sector to return to its normal levels.

How coronavirus had affected the travel worldwide

Since December, novel coronavirus has spread to more than 20 countries from the Chinese city of Wuhan. The 2003 SARS outbreak accounted for a drop in international tourist arrivals into China of almost 9.4 million and a loss of between $30 billion and $50 billion. The spread of infectious diseases is invariably linked to travel. Today, tourism is a huge global business that accounts for 10.4%of global Gross Domestic Product(GDP) and 10%of global employment.

Nothing seems to slow its growth as year-over-year increase outpace the economy. The United Nations World Tourism Organization (UNWTO) is predicting further growth of 3%-4%in International tourist arrivals for 2020 with International departures worldwide particularly strong in the first quarter of this year. But that was before a new coronavirus formally known as 2019-nCoV hit China and then very rapidly started spreading to the rest of the world with 20 countries and counting isolating cases.

Officials in China and those in the rest of the world have been much quicker to take more drastic action after learning bitter lessons from the SARS outbreak in 2003 which also started in China.

The impact on travel to and from China of this new coronavirus, however, has been devastating. Airlines, including Air Canada, have canceled all and or significantly reduced the number of flights in and out of China. Russia closed its land border to passenger travel with China and Hong Kong shut down its borders, cross-border ferries and railways as well. How does the impact of 2019-nCoV differ from that of SARS, which also affected tourism dramatically?

The World Health Organization (WHO) confirmed 8,096 cases and 774 deaths in 26 countries as a result of the SARS coronavirus. First detected in late February 2003, it had run its course five months later.

The coronavirus first appeared in December 2019 but has already surpassed the total number of SARS cases just in two months. Infectious disease experts expect it to last for several months yet with tens of thousands afflicted before it runs its course. SARS accounted for a drop in International tourist arrivals of almost 9.4 million and a loss of between US$30 billion and $50 billion but in 2002, China’s role as both a travel destination and a source country was relatively minor receiving fewer than 38 million tourists and sending about 17 million tourists abroad. When you compare that to 2019, it is estimated China received 142million inbound tourists and Chinese made 134 million trips abroad and 5.5 billion trips domestically.

The severe travel restrictions imposed by the Chinese government on its citizens and the stern warnings from Foreign Affairs offices including Canada to avoid all non-essential travel to China and all travel to Hubei province. Wuhan is its capital and largest city which means that the economic impact of this coronavirus will be felt in every corner of the world and almost every sector of the economy. The market response has been swift with share prices of major airlines, cruise lines and tourism companies dropping several percentage points.

With the World Health Organization declaring the coronavirus a public health emergency of global concern, Gloria Guevara the president and CEO of the World Travel and Tourism Council (WTTC) fears that this escalation could have a damaging and lasting economic impact on the sector. She has expressed serious concerns that airport closures, flight cancellations and shuttered borders often have a greater economic impact than the outbreak itself.

Deaths

These concerns are well justified when one considers that between 291,000 and 646,000 people worldwide die from seasonal influenza-related respiratory illnesses each year which does not lead to any of these warnings or drastic measures.

Canada saw251 SARS cases and 43 deaths but it cost the Canadian economy an estimated $5.25 billion and 28,000 jobs. At the time, China was a Canadian tourism market of less than 100,000 visitors annually that dropped by 25% due to SARS.   Today, China is Canada’s second-largest overseas market accounting for close to 800,000 arrivals and its highest spending market with more than $2,800 per trip.  

Depending on how long the restrictions and warnings are in place, losses could easily double those in 2003. The pain will be felt in every industry as tourism’s supply chain involves everything from agriculture and fishing to banking and insurance. The hardest hit will be its core industries of accommodation, food and beverage services, recreation, entertainment, transportation and travel services.

Refunds and cancellations

While Air Canada will refund fares for canceled flights to and from China, other airlines may only extend change fee waivers or provide credit towards future flights but this may not be the case for connecting flights from Beijing or Shanghai, the city’s most commonly served by North American airlines.

A growing number of hotels are also waiving changes and cancellation fees for bookings in China scheduled for the next few weeks but many travelers to or passing through China may not be able to recover all their money even if they bought insurance. That’s because most basic travel insurance plans do not cover epidemics as a reason for cancellations.

Book Now