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!
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