Recovery Process For Travel And Tourism Remains Painfully Slow
The travel industry’s recovery from the pandemic is slow-going. Many travel bans remain in place 18 months after the COVID-19 pandemic was officially declared, and The Conference Board’s “Trade Risks: Travel Bans” report suggests the travel services industry may recover to only 50 percent of 2019 levels by the end of 2021.
“For much of the world, the travel bans enacted as emergency measures in 2020 remain in place,” says Dana Peterson, chief economist of The Conference Board. “The continued emergence of new virus variants and stubborn vaccination challenges—whether due to supply, logistics or hesitancy—are understandably prompting governments to extend policies that heavily restrict the movement of people across borders. But with no certain end in sight, pandemic-era travel bans risk transforming longstanding expectations around the free movement of goods, services, cash and people—and becoming a perpetual headwind holding back global economic potential.”
The report found that business travel is down dramatically and may be slow to return. Companies are cutting costs by forgoing travel as ongoing pandemic restrictions—63 percent of governments have either a total or partial ban on foreign visitors—appear to be accelerating a long-term trend toward virtual meetings. The Conference Board suggests that over the long term, this shift may threaten industries that thrive on in-person connections that drive innovation and/or sales and customer relationships.
Travel bans on foreign tourists are an even greater risk to economies worldwide. Tourist spending accounts for 87 percent of total global exports of travel services—which collapsed worldwide in 2020. The ongoing negative impacts of this collapse have extended beyond tourist industries directly affected by travel bans, to pummel adjacent sectors like entertainment, amusement and food services, as well as national and regional governments dependent on tax revenues from visitors. Tourist hubs in Asia and the Caribbean have felt the brunt of these challenges, but even some of the world’s largest and richest economies—including Germany, Italy, Mexico and Hong Kong—face outsized exposures to continued restrictions.
The uncertainty surrounding the ongoing travel bans means there are several different paths to recovery for the travel and tourism sector, and which of these paths will impact global GDP growth as a whole. In an ideal outcome, the flow of people internationally would return to pre-pandemic levels by the end of 2021 or early next year. However, as coronavirus variants spread, such a return to normalcy is highly dependent on the degree to which individual governments roll back travel bans, and people regain confidence in the safety and reliability of international travel.
The Conference Board also notes that travel bans threaten to sour relations between economies that choose to reopen borders quickly, and those that do not. Even before the pandemic, rising geopolitical tensions were already fueling a surge in tariffs, sanctions and protectionist sentiments. As governments choose different paths to reopening their borders, travel restrictions may become the next front for international trade friction and another prime risk to the future of globalization.