That which is measured matters
English economist William Petty unknowingly developed the concept of Gross Domestic Product (GDP) in the 1600s to investigate high taxation on landowners. The modern concept of GDP was developed by American economist Simon Kuznets in 1934 as a tool to measure the economy.
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How the grinch stole holidays
A collaboration with The Economics Of Blog
Bad as it is missing out on travel during your summer/winter holidays this year, and probably next, imagine working in tourism right now. COVID-19 and the associated containment measures have devastated the industry. In Auckland, New Zealand (NZ), we are currently at alert level three, but alert level two in other parts of NZ. This means Aucklanders can’t travel to other parts of NZ. The rest of NZ is of course grateful having tried to get rid of Aucklanders for years. This post will talk about the impact of COVID-19 on tourism.
Many organisations hampered by the restrictions to people mobility have transitioned as best they can to COVID-19 offering delivery or online formats. That's not easy in the travel industry. Their services cannot be replicated in the same way for consumers due to the importance of actually being at a location (e.g. for accommodation or adventure experiences). You can't have the Mona Lisa delivered to your doorstep.
Where are all the tourists? At home
The United Nations World Tourism Organization (UNWTO) World Tourism Barometer shows a 56% year-on-year drop in tourists between January and May. That's 300 million tourists and $320 billion of spending lost. A lot of lost income. As of July 2020, 53% of tourist destinations maintain closed borders of which half rely on air travel. Travel restrictions enacted following the WHO's declaration of COVID-19 as a public health emergency in January 2020 have played a big role in this. The economic impact on GDP and jobs is massive.
Containment measures have put a halt on domestic tourism too with governments imposing restrictions on movement within their country. Typically, domestic tourism would be a buffer against falling visitor numbers, accounting for three-quarters of the tourism economy in the OECD. Internal travel restrictions are devastating to the industry. In the UK, an early estimate of the fall in domestic tourism spending is 24%, or GBP 22 billion. The fall in tourists due to containment restrictions will vary depending on strictness.
However, it's important to recognise that some of the fall in tourism from COVID-19 will be because people choose not to travel rather than because of government restrictions. Tourism has been hit with a double whammy of restricted mobility plus a reduced desire to travel in the first place.
Typically tourism contributes ~7% of employment in OECD countries. Many of those jobs are now on the line. The International Air Transport Association (IATA) expects 2020 to be the worst year in history for airlines with a net loss of $84.3bn. Though perhaps its better to say the worst year in history so far, 2021 could also be shocking. They estimate 32 million jobs supported by aviation are at risk. Globally job losses in travel and tourism are estimated at ~100million. Some of these people will find alternative employment, but governments will still need to step up with support. It’ll be interesting to see whether these employees return to the industry after COVID-19.
Every cloud has a silver lining
Many governments are pinning part of their recovery hopes on a surge in domestic tourism following containment. It’s likely that domestic tourism will pick up faster than international tourism due to the inherent risk of air travel. Finland is running the “100 reasons to travel in Finland” campaign to support domestic demand. Japan, Czech Republic and Bulgaria are using vouchers to encourage tourism. In NZ, Jacinda Ardern floated the idea of a four-day workweek to encourage more people to take long weekends away. NZ also initiated the Strategic Tourism Assets Protection Programme to protect vital domestic and international tourism assets. Bringing international tourists back is going to be a tougher task.
The environmental benefits of reduced tourism from COVID-19 are already encouraging a more sustainable industry - though the financial implications are clearly severe. The UNWTO’s Global Tourism Crisis Committee released the One Planet Vision in May 2020 which supports sustainable tourism recovery in line with Sustainable Development Goals and the Paris Climate Agreement. The best practices introduced in this vision are closely related to trends in public health, such as using epidemiological indicators as the basis of restrictive tourism policies and discouraging health protocols that are excessively harmful to the environment. One Planet also promotes solutions that reduce disease and associated health system costs e.g. improving air quality. CO² emissions are estimated to have declined by 8% in 2020 due to COVID-19.
With the timing of a vaccine still in doubt, it’s difficult to know when tourism will be able to properly recover. As of August 10th, there are 34 vaccine candidates beyond pre-clinical studies. Even with compressed timelines, a vaccine is still far away. Mid 2021 would be optimistic, though apparently, Russia has been trialing a vaccine already. Long-term we can expect that COVID-19 will change how we see tourism. Perhaps it's viewed as more of a luxury. Perhaps people will think twice before jumping on a plane and decide to go somewhere local. Only time will tell what the long-term effects are. It’s an awful consolation prize, but at least in the meantime, we can check out the Mona Lisa using virtual tours.