Malta

The collapse of tourism during the COVID-19 pandemic

As any of us knows all too well, the COVID-19 pandemic and resulting government efforts to control the spread of the virus has led to sharp reductions in the use of various services, including restaurants, hotels, entertainment venues and travel. This has been true domestically in many countries and has been even more obvious when one looks at international travel and tourism.

In a news release from the UN World Tourism Organization (“UNWTO”) on 28 April 2020, the toll on global tourism is reviewed, and the facts are shocking. See https://webunwto.s3.eu-west-1.amazonaws.com/s3fs-public/2020-04/200428%20-%20Travel%20Restrictions%20EN.pdf. The news release is copied below and is followed by the full report (embedded).

“100% OF GLOBAL DESTINATIONS NOW HAVE COVID-19 TRAVEL RESTRICTIONS, UNWTO REPORTS

Madrid, Spain, 28 April 2020 – The COVID-19 pandemic has prompted all destinations worldwide to introduce restrictions on travel, research by the World Tourism Organization (UNWTO) has found. This represents the most severe restriction on international travel in history and no country has so far lifted restrictions introduced in response to the crisis.

“Following up on previous research, the latest data from the United Nations specialized agency for tourism shows that 100% of destinations now have restrictions in place, of these, 83% have had COVID-19-related restrictions in place already for four or more weeks and, as of 20 April, so far no destination has lifted them.

“UNWTO Secretary-General Zurab Pololikashvili said: ‘Tourism has shown its commitment to putting people first. Our sector can also lead the way in driving recovery. This research on global travel restrictions will help support the timely and responsible implementation of exit strategies, allowing destinations to ease or lift travel restrictions when it is safe to do so. This way, the social and economic benefits that tourism offers can return, providing a path to sustainable recovery for both individuals and whole countries.’

Tracking Restrictions by Time and Severity

“As well as a general overview, the UNWTO research breaks down the type of travel restrictions that have been introduced by destinations in all of the global regions, while also plotting the evolution of these restrictions since 30 January – when the World Health Organization (WHO) declared COVID-19 a Public Health Emergency of International Concern. The latest analysis shows that, of 217 destinations worldwide:

“• 45% have totally or partially closed their borders for tourists – ‘Passengers are not allowed to enter’

“• 30% have suspended totally or partially international flights – ‘all flights are suspended’

“• 18% are banning the entry for passengers from specific countries of origin or passengers who have transited through specific destinations

“• 7% are applying different measures, such as quarantine or self-isolation for 14 days and visa measures.

“Against this backdrop, UNWTO has been leading calls for governments worldwide to commit to supporting tourism through this unprecedented challenge. According to Secretary-General Pololikashvili, the sudden and unexpected fall in tourism demand caused by COVID-19 places millions of jobs and livelihoods at risk while at the same time jeopardising the advances made in sustainable development and equality over recent years.” (emphasis and italics in the original)

TravelRestrictions-28-April

UNWTO data show roughly 1.5 billion arrivals of travelers around the world in 2019 following a long-term growth record in arrivals, accounting for 10% of global jobs and $1.5 trillion of international tourism receipts. See https://www.unwto.org/healing-solutions-tourism-challenge. The UNWTO in late March projected a decline in international tourism receipts for 2020 of 20-30% from 2019 (or $300-450 billion). See https://webunwto.s3.eu-west-1.amazonaws.com/s3fs-public/2020-03/200327%20-%20COVID-19%20Impact%20Assessment%20EN.pdf. The situation is likely more precarious as we enter May with the continued global economic harm flowing from government actions to address the continued strong expansion of number of confirmed cases worldwide and deaths. As noted, every government with international tourism has introduced and continues to maintain travel restrictions. Stay at home orders have closed restaurants (other than take out or delivery), hotels, entertainment venues and more.

While all countries and territories are adversely affected by the toll on international tourism from the pandemic, the harm is greater to island nations and poorer countries where tourism is a high percentage of total GDP. Even for advanced countries, the importance of tourism can be critical to a functioning economy. In the EU, a recent article indicates that 10% of GDP is from tourism with some countries (Greece and Malta) having much higher percentages (20-25%). See https://www.dw.com/en/when-and-how-post-coronavirus-travel-in-the-eu-is-up-in-the-air/a-53273416

Commitments for tourism and travel services under the World Trade Organization

Many World Trade Organization Members have undertaken tourism and travel-related service commitments. As noted on the WTO webpage on Tourism and travel-related services, https://www.wto.org/english/tratop_e/serv_e/tourism_e/tourism_e.htm, more than 125 WTO members have made services commitments in the tourism area (hotels, restaurants (including catering), travel agencies, tour operator services tourist guide services, etc.). A note from the WTO Secretariat in 2009 provides information on commitments undertaken by Member (at that time, more countries have joined the WTO in the decade since the note) as well as providing other information on travelers by country and receipts. See S/C/W/298 (8 June 2009) embedded below.

SCW298

But, as with trade in goods, trade in services has general exceptions which permit Members to adopt or enforce measures “necessary to protect human, animal or plant life or health” as long as such measures “are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail, or a disguised restriction on trade in services”. GATS Article XIV(b). Measures adopted in response to the COVID-19 pandemic restricting travel (and resulting effects on other services) have not been challenged at the WTO and would be likely found permissible even if challenged.

Many of the actions governments are taking to keep supplies of medical goods and food moving are only tangentially relevant to tourism in the broad sense, though of assistance to those needing to travel or moving goods. Removal of restrictions will likely occur over time and tourism’s return will also depend on confidence of consumers in the safety of travel, of dining out, of staying in hotels and of attending entertainment events. That confidence is likely going to flow primarily from the adequacy of testing, tracking and quarantining of those found to be infected, and ultimately with the development and widespread availability of a vaccine.

UNWTO recommendations for actions to address the pandemic and accelerate recovery

In a publication released on April 1, 2020, the UNWTO identifies 23 actions they seek governments to embrace broken into three topics:

1, “Managing the crisis and mitigating the impact” (1-7);

2. “Providing stimulus and accelerating recovery” (8-16)’

3. “Preparing for tomorrow” (17-23).

The 23 action recommendations are listed below. The full UNWTO document is embedded after that. As the list of action recommendations reveals, some of the action recommendations are included in actions already taken by major countries including China, the EU and its members, the United States and others. Actions reviewed in earlier posts by the IMF and others may permit some of these action recommendations to be implemented by some of the developing and least developed countries. Many of the recommendations will likely not be addressable in the near term but may encourage collective activity post pandemic.

“1. Incentivize job retention, sustain the self-employed and
protect the most vulnerable groups

“2. Support companies’ liquidity

“3. Review taxes, charges, levies and regulations impacting
transport and tourism

“4. Ensure consumer protection and confidence

“5. Promote skills development, especially digital skills

“6. Include tourism in national, regional and global economic
emergency packages

“7. Create crisis management mechanisms and strategies

“8. Provide financial stimulus for tourism investment and
operations

“9. Review taxes, charges and regulations impacting travel and
tourism

“10. Advance travel facilitation

“11. Promote new jobs and skills development, particularly
digital ones

“12. Mainstream environmental sustainability in stimulus and
recovery packages

“13. Understand the market and act quickly to restore
confidence and stimulate demand

“14. Boost marketing, events and meetings

“15. Invest in partnerships

“16. Mainstream tourism in national, regional and international
recovery programmes and in Development Assistance

“17. Diversify markets, products and services

“18. Invest in market intelligence systems and digital
transformation

“19. Reinforce tourism governance at all levels

“20. Prepare for crisis, build resilience and ensure tourism is
part of national emergency mechanism and systems

“21. Invest in human capital and talent development

“22. Place sustainable tourism firmly on the national agenda

“23. Transition to the circular economy and embrace the SDGs.” (Sustainable Development Goals).

COVID19_Recommendations_English_1

Conclusion

As the world is exploring ways to reopen individual economies as the worst of COVID-19 (at least phase 1) passes, governments will be under enormous pressure to reopen as quickly as is responsible to do. As data from the UNWTO demonstrate, travel and tourism is a labor intensive sector which has outgrown overall economic growth in the last decade and which can help facilitate recovery when economies are able to reopen.

There are huge challenges in the short- and medium-term for the sector including the depth of the decline, the fragility of many of the businesses financially and the challenges to restoration of consumer confidence. With the United States alone having recorded nearly 30 million people filing for unemployment over the last six weeks, the size of the economic challenge globally is obviously massive. The UNWTO recommended actions address an array of certain needs for many players. For those businesses that survive the pandemic, restoring consumer confidence and having governments withdraw restrictions safely will become the biggest challenges to forward movement. Government actions during the pandemic to provide safety nets for businesses and workers will influence how many businesses and jobs remain when markets do reopen.