The world is currently in the throes of the COVID-19 pandemic, resulting in a global crisis for the tourism and hospitality sectors. With international travel bans affecting over 90% of the global population, accompanied by social distancing measures, tourism effectively ceased in March 2020.
Public health measures implemented between March 2 and 29, 2020 may have averted 3.1 million deaths across 11 European countries. Measures implemented in China, South Korea, Italy, Iran, France, and the US prevented/delayed circa 530 million infections.
Most countries worldwide are coming out of lockdown. However, because of decreased connections, inflight social distancing etc, there will be huge tourism declines in 2020 with trillions of dollars in revenue losses as international tourism is set to plunge by 80%. This threatens the livelihoods of 300 million people and almost 10% of global GDP.
So far, in order to assist economies and thereby attempt to avoid a recession of the sort witnessed in the 1930s during the Great Depression, developed countries have pledged various stimulus packages, such as a $1 trillion stimulus/assistance package for the European Union.
Most countries have instituted varying levels of lockdown, and such measures naturally impact each country’s economy, an effect which is measured as a GDP contraction. The Organisation for Economic Co-operation and Development (OECD) has forecast that the world economy will shrink by 6% in 2020. Virtually all countries are scrambling in damage control efforts so as to (to put it crudely) minimize the impact on their GDP.
At the time of writing, several countries are barely in control of COVID-19, while others (such as Malta) have been in very good control from the outset, with effective lockdowns. Sweden has been a European outlier in an attempt to reach herd immunity with minimal measures.
In the absence of a vaccine for COVID-19, 60% of the population would have to become infected (and recover permanently) from COVID-19 in order to achieve herd immunity. Sweden has not fared well. By June 3, deaths in Sweden, Denmark, Finland, and Norway per 100,000 population were 44, 10, 6 and 4 respectively.
Despite the high infection and mortality rate, only about 7.3% of the population in Stockholm (the most severely impacted town in Sweden) developed COVID-19 antibodies. The outcome at the time of writing is that Nordic countries are in the process of opening borders to each other – but not to Sweden. And still, Sweden’s GDP will fall by 7-10%, on par with the rest of the world.
As lockdowns are raised, infections will rise again, followed by declines as lockdowns (in various degrees) are re-imposed, and so on, leading to successive waves whose amplitudes are determined by various factors including herd immunity and stringency of applied lockdowns.
It is thus important to keep in mind that a country’s failure to dampen a first wave or the recurrence of COVID-19 in a second wave will both serve as disincentives for potential tourists.
Governments must therefore play a balancing act between reviving economies and morbidity/mortality from COVID-19. Health issues are particularly relevant as it has been estimated that in developed countries, if GDP drops to circa 6%, more years of life would be lost due to recession than would be gained through lives saved. There is a link between GDP and life expectancy since affluent countries are able to spend more on healthcare, safety and the environment.
There is thus a trade-off between lifting lockdowns and restarting economies so as to dampen economic recessions as this will result an upsurge in numbers of infections that preferentially negatively affect the most vulnerable. As averred by Nobel Prize-winning economist Paul Krugman, “how many will die for the Dow?”.
Some countries have started to apply local stimuli to their hospitality industries. Staycations are important for each individual country as while borders open, as the anticipated flow of tourism is expected to be low, domestic tourism is an essential component for economic recovery.
Plans in development in Japan include incentivising domestic tourism with cheap travel and discounts offering up to $184 a day in subsidies and vouchers. A proposal in Switzerland could give every citizen $200 to spend on holidays at home. These two proposals will cost the respective countries circa $12.4 and $1.17 billion.
Even then, with family budget constraints due to loss of earnings, vacations may be shorter and vacationers may economise on specific attributes of their holiday as a consequence of the global negative economic shock.
International tourist destination choice depends not only on “distance to the destination” and “prices of the destination” but also on tourist motivations at the moment of choosing a destination. Furthermore, these additional motivations may have a direct (increasing the dissuasive effect) or inverse (reducing the dissuasive effect) moderating effect on these choices.
It is therefore anticipated that apart from the usual factors that decide where holidays are taken, decisions will also be influenced by two factors additional, incentives to woo visitors even in the presence of COVID-19 and perceived destination safety, both of which will need to overcome the more onerous airport experience which will accommodate the tenets of social distancing.
With regard to traveller incentives, these are varied and inventive. Some travel companies are already cutting prices by up to 2/3 so as to restore confidence and entice holidaymakers.
A more practical (albeit less glamorous) tack, which may not only prevent incoming infections but also reassure potential tourists, is testing on arrival. The Portuguese island of Madeira as well as Iceland are offering free coronavirus tests to visitors when its borders reopen to international tourists on July 1. Some beaches are also preparing physical social distancing measures in an effort to increase their attractiveness.
For these reasons, websites have already sprung up purporting to provide information vis-à-vis countries’ added value in terms of price and perks and relative safety. One website pragmatically claims: “We have selected for you some of the destinations least affected by COVID-19… These destinations also benefit from proximity to hospitals and have a higher number of hospital beds per inhabitant than the majority of European countries.”
Persistent first waves that extend into July will put off tourists and further significantly reduce tourism revenues and accelerate job losses and bankruptcies in affected countries. These countries will need to restrain COVID-19 spread very quickly in order to benefit from summer 2020 tourism. Countries that have COVID-19 relatively under control and who experience second waves will manifest the same negative effects.
Governments and public health must act in unison so as to exit lockdown as speedily and as safely as feasible, with COVID-19 rises that are as low and brief as possible. This may be possible by maintaining social distancing, hygiene and the rigorous use of face masks in public areas: ‘my mask protects you, your mask protects me’.
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This is an abridged version of a research paper that is currently at pre-press stage. Read the full paper.
Victor Grech is a consultant paediatrician, Peter Grech is an accounting and economics student and Stephanie Fabri is a lecturer within the Faculty of Economics, Management & Accountancy at the University of Malta.
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