The novel coronavirus (COVID-19) pandemic has already cost tourist destinations three times more than the 2008 Global Financial Crisis (GFC), according to the Institute of International Finance (IIF).
On the back of an assessment by the UN’s World Tourism Organization (UNWTO), the IIF added that the downside risks clearly dominate the outlook as COVID-19 infections rise rapidly once again around the world.
In its latest report on tourism, in which it made use of the UNWTO data, the IIF noted that tourism will likely be among the last sectors to recover from the shock of the global health crisis.
The recovery has been slow and uneven, and further warning signs are emerging, the report said. It illustrated that the data for the period between June and September 2020 supports the assumption of a weak pickup, and even points to further storm clouds on the horizon.
The IIF also said that, following a comparatively fast recovery over the summer, tourist arrivals have begun to decline once again year-on-year in a number of countries in Eastern Europe. This reflects the start of a strong second wave of COVID-19 infections in most of Europe in recent months.
While over 40% of countries had loosened travel restrictions by the third quarter (Q3) of 2020, it is now more likely than not that the world will see stricter measures in the coming months. This may possibly include renewed border closures and lockdowns as cases in the second wave rise.
The IIF believes that a full recovery in international travel is unlikely until a COVID-19 vaccine is widely distributed.
“According to current projections, this may not be the case before the second half (H2) of 2021,” the IIF report said, “Even then, consumer behaviour may have been permanently altered, with a preference for domestic travel and less crowded attractions. Given the slow and uneven economic recovery, a considerable loss of disposable income will also continue to weigh on tourism revenues.”
The IIF continues to expect a 60%-70% drop in tourism revenues in its baseline scenario. It mentioned that, while some countries explored “travel bubbles” and were able to contain virus outbreaks over the summer, infections are rising sharply again in Europe and the US.
“While many governments are hesitant to impose renewed lockdowns due to the dramatic economic consequences of such policies earlier in the year, pandemic dynamics may not leave them any choice,” the IIF added.
In this case, additional meaningful government support for the tourism industry, including hospitality and transportation, will likely be needed for an extended period of time. International support for the tourism sector will also be critical, and both the EBRD and the UNWTO are working on such programs, the report said.