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Tourism In The Post-Pandemic World

A joint team from the IMF Asia Pacific and Western Hemisphere Departments recently completed a Departmental Paper analysing the impact of the COVID-19 pandemic on tourism.

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Pradeep Chamaria
Pradeep Chamaria
I am a photojournalist. Love to travel to unknown and unexplored vistas. Since 1992, I make places desirable for other travelers through experiential Travel Writing.

USA: A joint team from the IMF Asia Pacific and Western Hemisphere Departments under the guidance of Kenneth Kang and Krishna Srinivasan recently completed a Departmental Paper analysing the impact of the COVID-19 pandemic on tourism in the Asia Pacific region, Latin America, and Caribbean countries. The paper was released on 22 February 2021 through a 45-minute IMF Policy Dialogue.

Key stakeholders discussed the impact of the pandemic and the future of tourism in the “new normal”, including key policies and reforms to mitigate the impact on output and jobs while facilitating the safe reopening of economies. The empirical analysis drew lessons from past epidemics and finds that the impact of infectious diseases on tourism flows is much greater in developing countries than in advanced economies.

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Role of tourism in the global economy

Tourism is one of the world’s most important growth engines, accounting for more than 10 percent of global GDP directly and indirectly and 300 million jobs in 2019. During the last decade because of rising incomes, falling travel-related costs like aviation and accommodation, and an increasing range of available tourist activities, the world saw a significant increase in the number of travelers and related spending. Many other sectors linked to the tourism sector, namely accommodation and dining, retail and marketing, and transportation and aviation which form a complex tourism supply chain also gained significantly.  

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Tourism plays a pivotal economic role, particularly in the Asia-Pacific and Western Hemisphere regions. On average, tourism directly accounts for about 3½ percent of global GDP. According to the World Travel and Tourism Council, interlinking with other sectors that deal directly with tourists, like hotels, travel agents, airlines and others, restaurants and leisure industries is very important and makes the figure higher than 10 percent.

COVID-19: a shock to tourism like no other

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The COVID-19 pandemic had devastating repercussions on travel. The virus outbreak prompted extensive containment measures to slow its spread. Long quarantine requirements and the potential for unexpected health costs deterred travelers by making trips longer and costlier. Although countries have moved toward a gradual sector-based relaxation of measures, restrictions depending on the contact intensity, hotels, retail, and indoor gatherings remain. Air travel remains constrained, and there remain entry restrictions on countries with high caseloads. The risk of sudden policy changes around visas and quarantine requirements also remains.

There has been an unprecedented decline in tourism activity. International tourist arrivals dropped by 98.7 percent year over year in the third quarter of 2020. As a result, direct employment in the tourism sector also declined. Overall, economic activity in the tourism sector also was estimated to decline by over 40 percent in 2020.

The shock to international travel and tourism is generating significant macroeconomic and social challenges. It is feared that as the pandemic protracts, liquidity problems can transform into solvency ones. The severity of this pandemic is also impacting large players like international hotel and restaurant chains, global and low-cost airlines, and packaged tour operators.

Recovery status

Despite the recent approval of COVID-19 vaccines in major advanced economies, confidence effects, including a looming uncertainty toward the likelihood of future epidemics still persist. Vaccinating the entire world will take time. Therefore, it could lead to staggered recoveries between regions dependent on whether people are still afraid to travel to particular regions, or particular regions are reluctant to reopen their borders if incoming tourists are not vaccinated or the virus is still rampant.

Tourists’ preferences could permanently change because of lingering concerns related to COVID-19 or future pandemics. Under this scenario, tourists are assumed to differentiate among destinations based on the quality of healthcare available.   

Policy options toward a new normal

The recovery of tourism during the pandemic may involve the use of a “travel bubble.” A travel bubble is an arrangement in which regions with low (or no) incidence of COVID-19 allow the free flow of tourists between their regions to the exclusion of the rest of the world.

The paper examines policy options to navigate the post-pandemic world. Although tourism bounced back relatively quickly from the impact of past epidemics like SARS, the COVID-19 pandemic could create long-term scarring effects. How tourism recovers will depend on the availability and distribution of an effective vaccine and policy choices made during the pandemic, specifically:

  • Phase 1, Crisis mitigation: In response to the COVID-19 shock, many countries have provided financial support to buttress demand for the industry and preserve jobs and there is scope for better designed fiscal stimulus to support the most affected sectors.
  •  Phase 2, Reopening: As countries reopen their economies and borders, special attention should be devoted to health and hygiene protocols. During this transition phase, domestic tourism is being restarted in several countries through attractive offers from hotels and tour operators and the tourism sector is being integrated into governments’ reopening strategies.
  • Phase 3, Recovery: As the recovery takes hold, a shift to eco-sustainable tourism services with lower density, higher value-added and greater digitalisation may allow countries to reduce the health risks potentially associated with mass travel, and foster a greener recovery.

Read Also: The Traveler’s Pandemic

Author

  • Pradeep Chamaria

    I am a photojournalist. Love to travel to unknown and unexplored vistas. Since 1992, I make places desirable for other travelers through experiential Travel Writing.

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