Tourism in trouble

Empty airportLabor Day weekend, usually one of the busiest revenue-generating periods for the tourism industry in the US, was expected to generate drastically lower tourist activity this year. The travel industry is arguably one of the worst hit industries by the healthcare and economic consequences of the current pandemic. According to the United Nations World Tourism Organization, in their efforts to curb the spread of the coronavirus, 217 countries and territories across the globe have imposed a wide variety of travel restrictions for both domestic and international travelers. While there isn’t one specific value chain or set of products that make up the tourism industry, many of its sectors and millions of people employed by them have had to bear the brunt of the direct and indirect effects of Covid-19.

The woes of the airline industry have been the center of attention ever since social distancing guidelines and lockdown requirements were implemented. Most large cruise ships have been nonoperational since mid-March. Summer months that usually witness most tourist activity, however, have highlighted the true damage to the suffering companies. Owing to health safety concerns, domestic travelers are opting to substitute traveling by air or other modes of transportation such as trains and buses with the low-contact alternative of driving by car. Substantially lower oil prices this summer have helped boost this trend. With an uncertainty regarding the end of this pandemic, travelers are even wary of making advance trip bookings. To maintain themselves financially, companies in this sector have had to rely on their cash reserves which further raises concerns regarding their viability.

For similar reasons, hotel occupancy rates have fallen dramatically since the beginning of the pandemic. Consequently, major hotel chains have announced layoffs, wage cuts, or furloughs for thousands of its employees. Airbnb, which was growing in popularity as an alternative to traditional lodging and accommodations for travelers, along with similar businesses, has had to face losses due to canceled reservations, low demand, and even local restrictions with regards to short-term rentals in some places. This has thwarted Airbnb’s plan of going public in 2020. Online traveling companies such as Expedia and other platforms have also been on the receiving end of this blow to the hospitality and tourism industry. However, despite the initial downward spiral, people looking to travel to places and opting for extended stays at rentals with limited contact with other people could prove to be the saving grace of this suffering sector.

Aside from the major sectors of the tourism industry – travel and hospitality – many small businesses that provide services such as food and beverage, shopping, entertainment, and guided tours in travel destinations have also been negatively impacted. To keep up with safety precautions, the expenses of these businesses have risen, while income has dwindled. Many of these businesses sustain themselves all year round by the economic activity during peak tourist seasons. Low business during the summer will have a long-term impact on the operations and sustainability of these smaller entities. It might be in the best interest of these businesses to avail themselves of low-interest federal loans from the US Small Business Administration to stay afloat for the duration of the pandemic.

According to the World Travel & Tourism Council, the tourism industry contributed to almost 10 percent or about 9 trillion USD of global GDP. This statistic indicates the importance of the tourism industry to the world economy. It implores us to understand and support government efforts to soften the blow to the various sectors of this industry and the livelihood of millions of workers that it employs. While governments have been minimally involved in the tourism industry dynamics in the past, efforts towards providing financing options, employment incentives, and technical support could help the tourism industry recover from the devastating economic losses and rebuild itself sustainably.

Sejal Naik

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