Pandemics adversely impacts global tourism: ICRA

The 21st century has been breeding ground for three pandemics so far. First SARS (severe acute respiratory syndrome) in 2003 followed by MERS (Middle East respiratory syndrome) in 2012/2015, and now in 2019, novel-Coronavirus (n-CoV), originating from Wuhan in China.  Each of these pandemics, has adversely impacted the global tourist volumes – the deadliest of these has been SARS whereas some have been more localised in nature like MERS and Korea during 2015. In so far as the full impact of the n-CoV is concerned, the same is yet to be played out.

During the 2003 SARS outbreak, international tourist arrivals (ITAs) shrank by 1%. ITAs have globally shrunk only twice in the last 20 years – during 2003 and again during the 2009 global economic meltdown. According to International Air Transport Association (IATA), it took about nine months for international airline passenger traffic to revert to pre-crisis levels during the SARS and MERS pandemics.

In response to the latest n-CoV pandemic, China has locked down the infection epicenter. Travel within China has been curtailed with several cities closing even public transport in and out of cities with high outbreaks. Group outbound travel from China has been banned. Numerous tourist sites in China and Tibet have been closed. Global travel advisories to avoid travel to China have been issued by many countries. Global airlines too are suspending flights from China.

As per ICRA note, the high-spending Chinese are the biggest group of outbound travellers globally, accounting for ~12.2% of all outbound global travel, with countries like USA and Australia being heavily dependent on Chinese tourists. As far as India is concerned, the country has not been a target destination for the Chinese. Though the Chinese are the 8th largest source of foreign tourist arrivals (FTA) to India they account for less than 3% of the total FTAs; a sizable chunk of which could be for business purposes.

Source: UNWTO; ICRA research

However, apart from the direct hit of sharp fall in Chinese travellers to India, the impact of this potential pandemic cannot be viewed purely on regional dynamics as CY2020 is bound to be a year of weakness in global travel. The domestic impact of n-Cov can be far reaching as witnessed during the 2003 SARS period when the Indian hospitality industry also witnessed a slump. This comes at a time when the Indian hospitality industry is already reeling under muted demand conditions owing to the ongoing economic slowdown and the civil unrest in various parts of the country. Domestic passengers’ travellers (airlines) grew by a meagre 3.7% (PY: 18.7%) while FTAs to India grew by 3.2% during CY2019 (PY: 5.2%) – a decadal low. CY2020 could well be another year of subdued demand for the Indian hospitality industry.

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Neel Achary is the editor of Business News This Week. He has been covering all the business stories, economy, and corporate stories.