After the terrorist attacks on September 11, 2001 Cebr was commissioned by the air travel trade association ABTA to analyse the impact on the travel industry. Our prediction at the time of a negative impact of about 8% on the volume of world travel in the following year has proven consistent with the recorded 7.4% fall over two years that emerges from World Tourism Organisation’s statistics.
We have continued to monitor the tourism industry and its economic impact and so this week we are looking at the impact of President Trump’s travel ban and the impact of the disruption caused by coronavirus.
President Trump has banned any travel from the Schengen area (26 countries including most of mainland Europe) to the US for a thirty day period starting 13 March excluding US citizens, health professionals, travel crew and diplomats. It does not cover cargo but will impact on air freight since most such freight travels in the hold of passenger flights and it is unlikely to be economic to send the freight in planes empty of passengers (Cebr reports for Heathrow Airport say 95% of airfreight from Heathrow travels in passenger planes, while for total air freight the figure is about 50%).
Even before the ban, travel from European airports was down 14% in Q1. Late February travel appears to have been down about 40% from usual in Europe and by about the same amount in Asia.
The world travel and tourism industry is a huge business, generating 10.4% of world GDP ($8.8 trillion) and a roughly equivalent proportion of jobs according to the World Travel and Tourism Council. Our modelling of the impact on the sector is a likely decline of around 50% in Q2; fortunately a smaller decline of about 30% during the critical holiday season in Q3; a 10% decline in Q4 and back to something like normality by Q1 2021. Clearly, this is very rough and ready and depends on many assumptions which might well have to be updated. After allowing for seasonality, this would generate a 28% decline in tourism in 2020, costing the global economy $2.5 trillion or about 2.8% of world GDP. Obviously, since to some extent if money isn’t spent on tourism it can be spent on other things, it is not necessarily the case that world GDP will decline by that amount. On the other hand, there are other economic impacts of the disease.
The economics of tourism are that tourist facilities typically have high fixed costs. So the damage to the industry will be massive as has been reflected in share prices. And the damage to economies dependent on tourism, often amongst the poorest economies, will also be serious. Government and international organisations will need to think how to cushion these heavy blows.
Doug McWilliams email@example.com Mobile 07710 083 652 or 0207 324 2860