Global tourism to take a US$80 billion hit and a year to shake off the effects of coronavirus outbreak
- Chinese outbound tourism will not recover to pre-coronavirus levels until the second quarter of 2021, says Economist Intelligence Unit
- Asean will be hurt the most as the number of Chinese tourists to these destinations will drop by 30 to 40 per cent and cause revenue losses of US$7 billion
The coronavirus outbreak could cost the global tourism industry about US$80 billion in lost revenue, with players warning that the sector is unlikely to recover for at least one year.
With millions of Chinese cancelling travel plans, or delaying future holidays over safety fears because of the disease, now called Covid-19, online travel companies like Expedia and Tripadvisor are already forecasting a drop in revenues, which could ripple into everything from hotels to retail outlets abroad.
According to estimates by the Economist Intelligence Unit (EIU), Chinese outbound tourism will not recover to pre-coronavirus levels until the second quarter of 2021, and will cause a global loss of about US$80 billion.
EIU benchmarked current data against that from the severe acute respiratory syndrome (Sars) outbreak, which struck the mainland in late 2002, according to China analyst Dan Wang. She said that while China lifted its travel ban in July 2003, outbound tourism industry did not recover until early the next year.
“The biggest collective damage will happen for the Asean countries,” said Wang, as they are all among the top 20 destinations for Chinese outbound tourists. She estimated that this year, mainland tourists to the Association of Southeast Asian Nations will drop by about 30 to 40 per cent, leading to a loss in tourism revenue of US$7 billion.
The impact on the tourism sector in Europe and the US will be milder as Chinese tourists account for just 4 per cent of their total visitors, EIU noted.
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After travel restrictions were put in place in China, booking trends changed “dramatically in a very short period of time”, said Oliver Ponti, vice-president of Spanish travel analytics company ForwardKeys.
As of January 26, Chinese outbound flights booked worldwide from January 21 to February 17 fell 13.8 per cent compared to the year before, according to ForwardKeys. Bookings for March and April are already down by more than half, and consumers are delaying travel plans for the summer.
“[The] Chinese are traditionally energised and excited after Chinese New Year, but they are not planning … that is the biggest risk to our industry,” said Ponti.
US-based online travel company Expedia Group said the Covid-19 outbreak was already adding pressure to business and could cost the firm around US$30 to US$40 million this quarter, with impacts potentially extending throughout the year.
“The exact amount will depend on how long it takes for travel trends to normalise,” said chairman Barry Diller, on Friday morning.
Acting chief financial officer Eric Hart said most of the impact was centred in the Asia-Pacific region, with a bit of weakening also felt in North America and Europe.
Rival Tripadvisor may see a “low single digit” hit to its business, said CEO Steve Kaufer, on Thursday. “We do see some unexpected or new cancellation levels in Asia, but we’re not that exposed to Asia as an overall part of our business. So we’re watching it closely,” he said.
Hotel revenues have decelerated in the first month of 2020, compared to the fourth quarter of last year, due to a drop in overall travel spending and the impact of the coronavirus outbreak, according to Ernst Teunissen, chief financial officer. The hit further weighs on revenues that were already declining in the fourth quarter.
As travel falls, many luxury hotel chains have waived fees to change or cancel bookings in China, with some extending the service worldwide.
On Tuesday, Chris Nassetta, CEO of Hilton, said he expects hotel closures and a lack of outbound tourism from China over the coronavirus, to impact business for as long as six to 12 months. It could cost Hilton US$25 to US$50 million, he said, and knock half a percentage point off net growth for the full year.
Hilton has already closed 150 of its hotels in China.
