Will we be flying carefree again?
Author: Marina Nićiforović, Bachelor of Tourism, Marketing Manager, Novaston Marketing Consultancy
The COVID-19 virus pandemic presents a huge challenge for tourism. The overall situation has led to restrictions on travel, cancellation of events to avoid risks, which has left severe consequences on the travel and tourism sector - hotels, rent-a-car companies, cruisers, tourist attractions, and especially airlines. Thousands of airline flights have been canceled worldwide as airlines try to cope with falling demand.
The International Air Transport Association (IATA) has released an analysis of the economic impact on the aviation industry after the outbreak of the virus corona, where it predicts a loss of $ 314 billion.
Although COVID-19 is causing worldwide damage, one sector is booming - private jet operators, writes The Globe and Mail. Demand for private jets has skyrocketed in recent weeks, according to the magazine, as companies pulled their employees out of the region affected by the virus or rich travelers wanted to avoid other people at airports or commercial flights. Also, families rent private jets to protect their senior members or avoid layovers in different cities.
The founder of Jettly Inc., which functions as Uber for private jets, said the demand had doubled to about 6,000 a day.
When it comes to tourism, it is expected that SMEs (which make up about 80% of the tourism sector) will be particularly affected. It could influence the income of millions of people around the world, including vulnerable communities that rely on tourism as a driver of their development and economic inclusion. Managers of major hotels are already reporting significant layoffs. In the US alone, as of April 15, nearly 8 out of 10 hotel rooms were vacant and hotels lost more than $ 13 billion in revenue. This figure is rapidly increasing as hotels currently operating are losing more than $ 500 million in room revenue per day, based on current and future occupancy rates. This pace means a loss of $ 3.5 billion every week and will only further escalate as the situation worsens. Most hoteliers already report projected revenue losses of more than 50% in the first half of the year.
According to Milos Vukovic, CEO of Fidelity Consulting from Montenegro, this year on the coast we will drink the cheapest coffee. "We remind you that according to the IMF, Montenegro's GDP will fall by 9%, which is the largest drop in the region beside Croatia. Since we have a similar tourist offer (sun and sea, reliance on the peak of the season), Croatia will be our biggest competitor in attracting tourists from Serbia and Bosnia and Herzegovina who will play a key role in saving the tourist season. When it comes to domestic tourists, the situation is as follows: the share of overnight stays of domestic guests in the total number of overnight stays is around 5%, which means that domestic guests did not generate significant spending in tourism. They were not able to anyway: "with an average salary of 525 Euros (in the private sector significantly lower than in the public sector) and the decline in the purchasing power of the domestic consumer caused by the Corona virus, it would be very difficult to significantly increase consumption of the domestic guests in tourism," emphasized Milos Vukovic.
Based on current occupancy rate estimates in the near future, nearly 3.9 million jobs have either been terminated or will be in the next few weeks. Individual hotels and major operators estimate to have occupancy rates below 20% for the coming months. With such figures, hotels can simply close their doors, posing an immediate risk to 33,000 small businesses.
As for our country, according to the National Association of Travel Agencies' Director Aleksandar Senicic, this year's losses in the tourism sector could amount to roughly a billion euros - excluding those suffered by Air Serbia -- on account of the Covid-19 pandemic.
The World Tourism Organization (UNWTO) has strengthened cooperation with the World Health Organization (WHO). The two UN agencies met in Geneva to further advance a coordinated response to COVID-19. For its initial assessment, UNWTO takes the 2003 SARS scenario as a guideline, considering the magnitude and dynamics of global travel and current disturbances, the geographical spread of COVID-19 and its potential economic impact, and estimates that global tourist arrivals in 2020 could be reduced between 20-30%, which could convert into a loss of $ 300- $ 450 billion in international visitors spending. The World Travel and Tourism Council (WTTC) has warned that the loss of an estimated 50 million jobs worldwide in the travel and tourism industry, which currently accounts for 10% of global GDP. Asia is expected to be the hardest hit. After the pandemic is over, the recovery could take up to 10 months.
As for Croatia, according to Tourism Advisor Gordana Zagorec, MBA, for the unimpeded provision of tourist services in a broad sense it is necessary to open borders (with special controls at border crossings) and welcome tourists with all appropriate measures of hygienic-epidemiological protection. ‟Since we belong to countries (along with Greece, Albania, Iceland, Georgia) where tourism revenues exceed one fifth of GDP and are very significant for other related industries, I expect that the need to at least partly open the borders no later than June 1 will be recognized. I believe that the European Union will also recommend the establishment of regular air, land and maritime connections between its members where the epidemiological situation is under control. If that is the case, we can expect the first influx of foreign tourists already around June 15, at least from the nearby countries: Slovenia, Austria, Hungary, Czech Republic, Germany, even Italy. According to a traditional January survey by the Ministry of Tourism on tourism investments, the estimated value of investment this year in the hotel and tourism sector was € 1,76 billion. In the private sector, investments in hotels, camps, nautics and other types of accommodation, facilities and attractions have been announced, and in the public sector in visitor centers, beaches, walkways. It is uncertain whether these initiated investments will be realized at the planned pace, but they are unlikely to die out for a longer period, as was the case with the 2009 crisis. It could be postponed for 2021 or 2022, when the establishment / normalization between tourism supply and demand is anticipated, and the role of banks will then be extremely important in supporting the business activities of entrepreneurs, ‟ said Gordana Zagorec.
As before, UNWTO will provide guidance and support to its members, the private and public tourism sectors, including organizers of tourism events and fairs, through the recovery measures. How far these measures will manage to mitigate the consequences and compensate for the losses remains to be seen.
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