It
is one of the largest industries in the world, with $5.7 trillion in revenue.
It is responsible for an estimated 319 million jobs, or roughly one in 10
people working on the planet. And no sector is more at risk from the novel
coronavirus.
The
travel industry has already taken a huge hit due to travel restrictions and cancelled
trips for both business and pleasure, but that's just the beginning. It could
be the worst crisis for the industry since the September 11 terrorist attacks
on the United States, according to some experts.
The
hit to the travel industry has the potential to become a major drag on the
global economy if the coronavirus continues to spread around the world. And Chinese
nationals have become the most frequent global travellers in the world, with
180 million holding passports, compared to the 147 million Americans who have
passports. Travel by the Chinese has virtually come to a halt due to the
crisis.
The
falloff in travel has expanded beyond the Chinese market. Several major
conferences expected to draw more than 100,000 visitors each were cancelled
even if their location has yet to experience an outbreak. That's because people
traveling from around the world could bring the virus to the event, and infect
people. Cancelled conferences include the Mobile World Congress in Barcelona,
the leading show for the mobile phone industry, the Geneva Motor Show,
Facebook's (FB) F8 conference, and the ITB Berlin, the leading trade show for
the travel industry itself. It was expected to draw 160,000 participants.
But
it's not just the big shows being cancelled. All kinds of business trips are
being cancelled or put on hold because of companies' concerns with exposing
employees to unknown risks. Major companies such as Amazon are on record
discouraging non-essential travel for employees. According to a survey of 400
businesses by the Global Business Travel Association, nearly half of businesses
have already cancelled or postponed at least some meetings or travel. Up to 37%
of business travel is at risk of being lost.
It's
not just business travel. Americans who were busy making plans for spring and
summer trips are also thinking twice. A survey of 1,200 US adults by the Kaiser
Family Foundation found that one in eight have already changed their travel
plans due to concerns about the virus. The overall impact depends on how long
the outbreak continues. Past health crises, such as SARS epidemic, indicate
people will be willing to start traveling as normal again soon after there is a
sense that is safe to do so.
So
far there has not been deep job cuts announced in the travel industry. But
millions of workers could lose their jobs, or have their hours cut, if the
demand for travel continues to be depressed. That is especially true for lower
paid service jobs such as housekeeping at hotels and waiters and waitresses at
restaurants.
And
as those workers are forced to cut back their own spending, the impact of the
slowdown will ripple through the broader economy.
"Lower
income workers will be hit harder," said Sung Won Sohn, professor of
business at Loyola Marymount Unviersity. "They'll have to cut back their
spending immediately. That has a significant multiplying effect throughout the
world." A drop of USD 1 trillion is anticipated.
Experts
don't believe that the hit to the travel industry is enough to spark a global
recession by itself. But the virus is having a widespread effect on the global
economy.
There
has been a steep plunge in financial markets and the resulting wealth
destruction, the disruption of global supply chains for manufacturers and
retailers around the globe, the drop in energy prices and production due to
reduced consumption All those things could combine with the hit to the travel
industry to bring about a global recession. The worst is yet to come!
Reference:
1. The travel industry is suffering its
worst shock since 9/11 because of coronavirus, 2 March 2020, CNN
2. Coronavirus live updates: Asia markets
down as Trump suspends travel from Europe, 11 March 2020, CNBC
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