More than 353,272 people in 188 countries have been affected by the new and deadly pandemic, COVID-19, which originated in the Chinese city of Wuhan, at the turn of the year. More than 15,000 people have lost their lives. While this virus, has put the entire globe at a halt, it has undoubtedly taken a large toll on many industries and humans, in several ways. As the pandemic crisis intensifies, pulling the world economy towards recession, it’s clear that the travel and tourism sector is in the center of the maelstrom.
China was soon expected to displace the US, as the world’s largest aviation market. China has seen a proliferation of airlines, including low-cost carriers – up to almost 30 carriers. Analysts say that even if the flight disruptions and losses due to diminished traffic are not significant enough, both the aircraft manufacturers -Airbus and Boeing- are have taken a hit, as the airlines of the region stop or delay new plane deliveries.
According to the International Air Transport Association (IATA) global revenue losses, for the passenger business in 2020 can range between $63 billion and $113 billion. Chinese air traffic has taken a toll. The number of weekly international seats between China and the rest of the world fell by 80% during January and March 2020, according to CAPA data. Outbound, inbound and domestic travel have come to a standstill. China’s aviation regulator announced that Chinese airline passenger numbers have slumped by 84.5%, which has caused a 21bn Yuan revenue loss.
The Civil Aviation Administration of China said that it will provide subsidies to Chinese airlines, and give additional funding for international flights. Take-off and landing charges are also being reduced to help carriers cut costs during the downturn, while airport infrastructure spending will be increased by 100bn yuan during 2020.
Airlines from across Europe have been unnecessarily burning their way through thousands of tonnes of fuel flying near-empty planes at a time when takings are down and are expected to plummet further. Beyond Italian routes, the third-largest low-cost airline in Europe, Norwegian Air Shuttle plans to cut 15% of its capacity- about 3000 flights over the next three months- after a slump in demand. The company said it would also temporarily lay off a significant share of its workforce. Most Italian airlines are expected to be bankrupt by the end of May, which is a warning from Australia’s Centre for Aviation.
In India, the railways have been shut down for one week, till 31st March, which is expected to cost the national carrier Rs. 5000 crores. The railways’ daily earning is about Rs. 450 crores, of which passenger earnings are about Rs. 100 crores. By offering cancellation fees, the industry is expected to lose another Rs. 750 crores. Another area where the railways are expected to lose is the sale of platform tickets, estimating a revenue loss worth Rs. 150 crores.
Local terminals in China and Europe still remain on service. Nevertheless, China has seen a 95% drop in business travel since the outbreak and is expected to lose $404.1 billion in revenue from corporate travel, followed by $190.5 billion in the loss for Europe.
Roadways (Taxi service industry):
Prior to the Holi week, Ola and Uber’s rides were down by as much as 1/3rd, after large companies had advised their staff to work from home. In Bengaluru, a driver’s association had also urged the state government to persuade lenders to waive off loan repayments on taxis. Uber’s stock fell more than 12% to $23 on March, 12 at the New York Stock Exchange. “There has been a 10% drop in business pan-India” was reported by corporate transport solution providers MoveInSync, which clocks over 1 lakh cab trips per day. Incidentally, self-drive businesses including Bounce, Vogo, and Yulu remain financially less affected.
COVID-19 has already rocked the hospitality industry – with hotel cancellations and even closures. Hilton took the extraordinary steps of closing 150 hotels across China. It’s a black-swan event that the whole industry hopes to avoid. In China, rooms booked in January for a stay in February, March, and April were down by 75%. Hong Kong, a global financial hub that was already dealing with protests, over an extradition bill, saw its profit per room drop by 74.2% year-on-year basis. Shanghai was similarly impacted, with revenue down by 22.5% year-on-year.
The Hotel Association of Canada has also warned that the industry is going to be devastated, as travel comes to a halt in a bid to slow the spread of COVID-19. The association said that the industry has crashed in the past few weeks. The national occupancy average is below 10 percent and hotels are crossing across the country.
The cascading effect of the pandemic will cost the Indian hospitality industry losses worth Rs. 620 crores. According to BusinessLine, the overall business and summer holiday bookings are likely to be impacted by 25% on a year-on-year basis. The tourism industry makes about 10% of our GDP, a lot of this revenue is expected to dwindle, thanks to COVID-19.
The pandemic has affected the global food industry as governments closed down restaurants and bars to stop the spread of the virus. Closures of restaurants have also created a ripple effect among related industries such as food production, liquor, wine, and beer production, food and beverage shipping fishing and farming. The Brazilian association of bars and restaurants reported on March 24, that more than 3 million workers could lose their jobs over the next 40 days, given the ongoing losses and debt. National restaurants association of India on March 23 asked the Finance ministry for a bailout for the industry. The economic value of the industry is estimated at Rs. 4,23,865 crores.
According to the National restaurant association of the US, these closures are “the perfect storm” for the industry, saying the three primary challenges for restauranteurs, are short term access to cash, medium- and long-term access to credit and tax relief, when the closures are ended.
It is necessary to play our part, in dealing with the new enemy COVID-19, which presents as an immediate massive threat to humanity. Yet we also know, that no matter how serious this crisis is, the business will eventually restart, and all industry activity will have to be reset to respond accordingly. It may take a year or more, but when the end comes, we will be ready to pick up the pieces, adapt our socio-economic patterns and get on with life. Travel and tourism will reignite, and will hopefully continue to be a pivotal part of our global socio-economic development.