COVID-19: How it has impacted travel and tourism?

Boosting travel and tourism in the post-COVID scenario through innovative stimulus packages. Read on

COVID-19: How it has impacted travel and tourism?

The coronavirus pandemic impacted virtually every single human on the planet by upending routines, even as life virtually came to a standstill. Businesses are now slowly emerging out of the shadow of the virus-enforced lockdown, and attempting a rebound in these testing times. 

The global pandemic and the ensuing lockdown affected different businesses in different ways. The biggest impact was undeniably on sectors that thrive when life is celebrated through socialising, travelling, and dining out. Governments have rightly identified the need for intervention to sustain the travel and tourism industry and to drive demand. 

Here’s an overview of the impact of COVID-19 on travel and tourism, and the various measures proposed by governments around the world.

Narrative by the numbers

The global travel and tourism industry is expected to shrink by as much as 35% from the original estimated revenue forecast. This is huge; and as we look at various subsets of data, the figures reveal the impact at different levels. The Asia Pacific region is expected to be hit the hardest, accounting for 63 million job losses in the sector out of a total of 100 million jobs lost globally. Occupancy rates in the hospitality segment is down by as much as 96 % in certain European locations, while elsewhere the figures are equally dismal.

The hardest part of the lockdown and its impact on the travel and tourism sector is not the ability to earn revenue, but the time needed to turn a profit. The recovery time for profitability vis-a-vis revenue is expected to double. In other words, businesses that resume functioning will find that it takes twice as long to earn profits from revenues.

Related: Aftermath of COVID-19: Which sectors will struggle, which won’t 

Mitigating the impact

The road to recovery is clear, with a single choice – support. Governmental support to the industry is essential to mitigate the problem and create sustainable growth. Here, results from initiatives are expected to differ, with innovative and result-oriented support initiatives expected to result in desired outcomes. 

The types of support presently announced/rolled out include tax breaks for commercial properties, rental concessions, reduction of fares, part payment of salaries by the government, and discounts to boost travel. For instance, Japan intends to stimulate the sector through vouchers and discounts of up to ¥20,000 to cover half of the domestic travel and tourism expenses. This is designed to give a push to the domestic sector as Japan opens up its economy.

The US has earmarked USD 321 billion to bail out small businesses and retain employees. France has rolled out direct financial support for employees, in addition to offering exemptions in tax and social security contributions for the travel and tourism sector. The UK has deferred VAT payments and rolled out special ‘coronavirus business interruption loans’ that are designed to help businesses overcome a liquidity crunch. 

Assistance by Government of India

In India, a slew of measures has been announced by the government and various state governments. Most of the efforts are presently focussed on curbing the spread of the virus and assistance to help sustain sections of society that have been impacted. Plans are afoot to boost domestic tourism, through “Dekho Apna Desh” – a programme intended to encourage Indians to travel more to domestic locations, considering the probable impact on international inbound tourist footfalls. A National Tourism Task Force has been constituted, which is looking into various suggestions for sops to help the sector. Presently, various state governments are supporting individuals who were key to the tourism sector – drivers of cabs, three wheelers, and helping employees in the hospitality industry head back home. At the other end of the lockdown, more initiatives that will directly help the industry are expected to be announced.

Related: 5 Money mistakes to avoid once the lockdown is lifted

Last words

Governments are attempting to ensure greater liquidity while offering tax concessions, tax holidays, and direct cash payouts to stimulate the sector. Policy responses indicate that governments are facilitating expenditure on tourism through direct cash payouts and discounts to citizens, which will generate cash revenue and boost the sector. Together with deferred taxes and liquidity to handle expenses, businesses in travel and tourism can hope to slowly recover from the crippling shutdown enforced by the pandemic.

Increased footfalls and tourism inflows into various global and domestic tourism hotspots will help kickstart the industry, which was initially expected to contribute USD 712 billion to the global economy. Firing up the sector is expected to have a cascading effect on various industries that support travel and tourism. Entire communities depend on travel and tourism, and global policy responses are presently headed in the right direction, which will help with the great rebound. Is it a good idea to buy travel insurance online? Read this to clear your doubts.

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