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Wish you were here: how the pandemic harmed tourism-dependent economies

Before COVID-19, travel and tourism had become one of the most important sectors in the world economy, accounting for 10 percent of global GDP and more than 320 million jobs worldwide.

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In 1950, at the dawn of the jet age, just 25 million people took foreign trips. By 2019, that number had reached 1.5 billion, and the travel and tourism sector had grown to almost too-big-to-fail proportions for many economies.

The global pandemic, the first of its scale in a new era of interconnectedness, has put 100 million jobs at risk, many in micro, small, and medium-sized enterprises that employ a high share of women, who represent 54 percent of the tourism workforce, according to the United Nations World Tourism Organization (UNWTO).

Tourism-dependent countries will likely feel the negative impacts of the crisis for much longer than other economies. Contact-intensive services key to the tourism and travel sectors are disproportionately affected by the pandemic and will continue to struggle until people feel safe to travel en masse again.

“There is no way we can grow our way out of this hole we are in,” Irwin LaRocque, secretary-general of the Caribbean Community (CARICOM), said at a virtual event in September.

From the white sand beaches of the Caribbean, Seychelles, Mauritius, and the Pacific to the back streets of Bangkok, to Africa’s sweeping national parks, countries are grappling with how to lure back visitors while avoiding new outbreaks of infection.

The solutions range from wooing the ultrarich who can quarantine on their yachts to inviting people to stay for periods of up to a year and work virtually while enjoying a tropical view.

Tourism receipts worldwide are not expected to recover to 2019 levels until 2023

Thailand’s deserted beach. Surin beach in Phuket. Photo : Khaosod

In the first half of this year, tourist arrivals fell globally by more than 65 percent, with a near halt since April—compared with 8 percent during the global financial crisis and 17 percent amid the SARS epidemic of 2003, according to ongoing IMF research on tourism in a post-pandemic world.

The October World Economic Outlook projected the global economy would contract by 4.4 percent in 2020. The shock in tourism-dependent economies will be far worse. Real GDP among African countries dependent on tourism will shrink by 12 percent. Among tourism-dependent Caribbean nations, the decline will also reach 12 percent. Pacific island nations such as Fiji could see real GDP shrink by a staggering 21 percent in 2020.

Nor is the economic hit limited to the most tourism-dependent countries. In the United States, Hawaii saw one in every six jobs vanish by August. In Florida, where tourism accounts for up to 15 percent of the state’s revenue, officials said it will take up to three years for the industry to recover.

Among G20 countries, the hospitality and travel sectors make up 10 percent of employment and 9.5 percent of GDP on average, with the GDP share reaching 14 percent or more in Italy, Mexico, and Spain. A six-month disruption to activity could directly reduce GDP between 2.5 percent and 3.5 percent across all G20 countries, according to a recent IMF paper.

Tourists at Suvarnabhumi airport
Thailand, a “Covid star” in 2020 with almost zero local transmissions, is battling second-wave surge in 2021
Tourists at Suvarnabhumi airport

Managing the revenue gap

In Barbados and Seychelles, as in many other tourism-dependent nations, the pandemic brought the industry to a virtual standstill.

After successfully halting local transmission of the virus, the authorities reopened their island countries for international tourists in July. Still, arrivals in August were down almost 90 percent relative to previous years, drying up a vital stream of government revenue.

Barbados had gone into the crisis with good economic fundamentals, as a result of an IMF-supported economic reform program that helped stabilize debt, build reserves, and consolidate its fiscal position just before the crisis struck. The IMF augmented its Extended Fund Facility program by about $90 million, or about 2 percent of GDP, to help finance the emerging fiscal deficit as a result of plummeting revenues from tourism-related activity and increasing COVID-related expenditures.

“The longer this lasts, the more difficult it gets to maintain,” says Kevin Greenidge, senior technical advisor to Barbados Prime Minister Mia Mottley.

“What we don’t want to do is operate policy-wise in a manner that will jeopardize the gains in terms of the fundamentals that we have made.”

On the other side of the world, Seychelles, a country that entered the crisis from a similar position of strength, will still be challenged to return to medium-term fiscal sustainability without significant support. Just before the crisis struck, the government had rebuilt international reserves and consolidated its fiscal positions. Even so, the ongoing pandemic struck the Indian Ocean island nation very hard as tourism revenues fell while COVID-related expenditures increased.

“It is too early to determine whether the crisis represents a permanent shock and how it will shape the tourism industry going forward,” says Boriana Yontcheva, the IMF’s mission chief to Seychelles. “Given the large uncertainties surrounding the recovery of the sector, innovative structural policies will be necessary to adapt to the new normal.”It is too early to determine whether the crisis represents a permanent shock.

All over the world, tourism-dependent economies are working to finance a broad range of policy measures to soften the impact of plummeting tourism revenues on households and businesses. Cash transfers, grants, tax relief, payroll support, and loan guarantees have been deployed. Banks have also halted loan repayments in some cases. Some countries have focused support on informal workers, who tend to be concentrated in the tourism sector and are highly vulnerable.

An analysis of the tourism industry by McKinsey & Company says that multiyear recovery of tourism demand to 2019 levels will require experimenting with new financing mechanisms.

The consulting firm analyzed stimulus packages across 24 economies totaling $100 billion in direct aid to the tourism industry and $300 billion in aid across other sectors with significant involvement in tourism. Most direct stimulus was in the form of grants, debt relief, and aid to small and medium-sized enterprises and airlines.

The firm recommends new ways to support the industry, including revenue-sharing mechanisms among hotels that compete for the same market segment, such as a stretch of beachfront, and government-backed equity funds for tourism-related businesses.

Development challenge

The crisis has crystallized the importance of tourism as a development pathway for many countries to decrease poverty and improve their economies. In sub-Saharan Africa, the development of tourism has been a key driver in closing the gap between poor and rich countries, with tourism-dependent countries averaging real per capita GDP growth of 2.4 percent between 1990 and 2019—significantly faster than non-tourism-dependent countries in the region, according to IMF staff.

Smaller, tourism-dependent nations are in many ways locked into their economic destinies. Among small island nations, there are few, if any, alternative sectors to which they can shift labor and capital.

Seychelles, for example, has benefited from increases in tuna exports during the COVID-19 period, which have somewhat offset tourism losses, but these additional earnings remain a fraction of tourism receipts. The government is also carrying out a plan to pay wages to displaced tourism-sector workers while offering opportunities for retraining.

Meanwhile, the government in Barbados is trying to maintain social spending and reprioritize capital spending to create jobs, at least temporarily, in nontourism sectors such as agriculture and infrastructure development.

The Caribbean Hotel and Tourism Association has projected that as many as 60 percent of the 30,000 new hotel rooms that were in the planning or construction phase throughout the Caribbean region will not be completed as a result of the crisis.

Still, the crisis is being viewed as an opportunity to improve the industry in the medium and long term through greater digitalization and environmental sustainability. The UNWTO has encouraged support for worker training in order to build digital skills for harnessing the value of big data, data analytics, and artificial intelligence. Recovery should be leveraged to improve the industry’s efficient use of energy and water, waste management, and sustainable sourcing of food.

“In a sector that employs 1 in 10 people globally, harnessing innovation and digitalization, embracing local values, and creating decent jobs for all—especially for youth, women, and the most vulnerable groups in our societies—could be at the forefront of tourism’s recovery,” says UNWTO Secretary-General Zurab Pololikashvili.

Adjusting to a new normal

As the immediate impact of lockdowns and containment measures eased during the second half of 2020, countries started looking for a balance.

Thailand, Seychelles, and other countries approved programs that would admit tourists from “lower-risk” countries with special quarantine requirements. Fiji has created “blue lanes” that will allow seafaring visitors to arrive on yachts and quarantine at sea before they unleash “the immense economic impact they carry aboard,”

Prime Minister Frank Bainimarama declared on Twitter. St. Lucia requires a negative COVID-19 test no more than seven days before arrival. Australia created a “travel bubble” that will eliminate quarantine requirements for travelers from New Zealand. CARICOM countries have also created a “regional travel bubble” that eliminates testing and quarantine for people traveling from countries within the bubble.

In a new era of remote work, countries and territories such as Barbados, Estonia, Georgia, Antigua and Barbuda, Aruba, and the Cayman Islands offer new long-term permits, lasting up to 12 months in some places, to entice foreign visitors to bring their virtual offices with them while spending in local economies.

Japan, which had seen its international arrivals triple from 2013 to 2018, started lifting border closures for travelers from certain countries at the end of October. To accommodate a post-pandemic tourism rebound, an IMF Working Paper recommends that the government continue a trend of relaxing visa requirements, draw visitors away from urban centers to less populated regions of the country, and complement a tourism comeback with improvements to labor resources and tourism infrastructure.

The World Tourism and Travel Council in a report on the future of the industry said the pandemic has shifted travelers’ focus to domestic trips or nature and outdoor destinations. Travel will largely be “kickstarted by the less risk averse travelers and early adopters, from adventure travelers and backpackers to surfers and mountain climbers,” the report says.

Leisure travel will lead the comeback in the tourism and travel sector. Business travel, a crucial source of revenue for hotels and airlines, could see a permanent shift or may come back only in phases based on proximity, reason for travel, and sector.

In the end, the return of tourism will likely hinge on what will be a deeply personal decision for many people as they weigh the risk of falling ill against the necessity of travel. The private sector backed by some tourism-dependent nations is developing global protocols for various travel industries, including a call for more rapid testing at airports to boost confidence in traveling.

“The fact is people do not feel comfortable traveling. We have not put in the necessary protocols to give them that comfort,” St. Lucia Prime Minister Allen Chastanet said at a September virtual event. “After 9/11, the TSA [Transportation Security Administration] and other security agencies around the world did a fantastic job of developing protocols that regained the public’s confidence to travel, and sadly with this pandemic we haven’t done that.”

ADAM BEHSUDI is on the staff of Finance & Development.

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Tourism

Can border reopening revive tourism in South-East Asia?

In Thailand, where pre-pandemic tourism accounted for 11-12% of GDP, the country lost an estimated $50bn last year as Covid-19 restrictions led to an 82% fall in arrival numbers.

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Ko Samed deserted pier

After 18 months of travel restrictions, a number of countries in South-east Asia have begun opening their borders to foreign visitors to stoke recovery in their respective tourism industries.

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Tourism

Thailand to lift quarantine for vaccinated visitors from low-risk countries from November

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Thailand to lift quarantine for vaccinated visitors from low-risk countries from November

Bangkok, 12 October, 2021

Thai Prime Minister General Prayut Chan-o-cha in a nationally televised broadcast last night announced that Thailand planned to allow fully vaccinated foreign visitors to enter Thailand by air with no quarantine requirements from 1 November.

In the initial phase, Thailand will allow fully vaccinated travellers from at least 10 low-risk countries, including China, Germany, Singapore, the UK and USA. The list will be expanded from 1 December, and further enhanced to a very extensive list from 1 January.

Under the plan, fully vaccinated foreign visitors from the approved countries will need to show that they are COVID-free at their time of travel with an RT-PCR test undertaken before they leave their home country, and do a test in Thailand, after which they will be free to move around Thailand in the same way that any Thai citizen can do, the Prime Minister said.

Visitors from countries not on the list, will, of course, still be much welcomed, but with quarantine and other requirements.

In addition, the Prime Minister said consumption of alcoholic beverages in restaurants as well as the operation of entertainment venues under appropriate health precautions would be allowed from 1 December.

Below is the full speech by the Prime Minister.

National Address of the Prime Minister of Thailand

“THAILAND WILL WELCOME QUARANTINE-FREE VISITORS”

Monday 11 October, 2021

My fellow citizens, brothers and sisters:

In the last one-and-half years, we have lived with some of the greatest peacetime challenges our country has ever faced in its history, brought about by the COVID-19 pandemic, and one that has left nobody untouched and no country in the world undamaged.

It has been one of the most painful experiences in my life, too: to make decisions that balance the saving of lives with the saving of livelihoods – a choice that is not always clearly separate, and where we may save lives, but commit those lives to the unbearable pain of trying to survive with little or no income; or where we may save livelihoods but commit one’s family, friends and neighbours to loss of life and the loss of their breadwinner.

In facing this terrible choice, it was my decision that we could not allow a slow, wait-and-see approach to confronting the pandemic and let it claim the lives of so many of our countrymen and women, as we, ultimately, saw happen in so many other countries.

As a result, I acted decisively on the advice of many of our outstanding public health experts to make our country one of the first in the world to move quickly with lockdowns and tight regulations.

With the collaboration of all sectors of society, and with everyone joining hands to face this crisis together, we have been among the most successful countries in the world in saving lives. 

But it has come at very great sacrifices of lost livelihoods, lost savings, and destroyed businesses – what we have all given up so that our mothers, fathers, sisters, brothers, children, friends and neighbours may live for today.

The threat of a large scale, lethal spread of the virus in Thailand is now diminishing, even though the risk of resurgence is always there, and even though there are still serious constraints on our hospital and medical staff capacities. 

The time has come for us to ready ourselves to face the coronavirus and live with it as with other endemic infections and diseases, much as we have learnt to live with other diseases with treatments and vaccinations.

Today, I would like to announce the first small but important step in decisively beginning the process of trying to restore our livelihoods.

During the last weeks some of Thailand’s most important tourist source countries have begun to ease their travel restrictions on their citizens – countries like the UK, that now allow convenient travel to our country, as well as countries like Singapore and Australia that have started to ease travel restrictions on their citizens visiting other countries.

With these developments, we must act quickly but still cautiously, and not miss the opportunity to entice some of the year-end and New Year holiday season travellers during the next few months to support the many millions of people who earn a living from our tourism, travel and entertainment sectors as well as the many other related sectors.

I have, therefore, instructed the CCSA and the Ministry of Public Health to urgently consider within this week to allow, as of 1 November, international visitors to enter Thailand without any requirement for quarantine if they are fully vaccinated and arrive by air from low-risk countries.

All that visitors will need do is to show that they are COVID-free at their time of travel with an RT-PCR test undertaken before they leave their home country, and do a test in Thailand, after which they will be free to move around Thailand in the same way that any Thai citizen can do.

Initially, we will begin with at least 10 countries on our low-risk, no-quarantine list, including the United Kingdom, Singapore, Germany, China, and the United States of America, and enlarge that list by 1 December, and, by 1 January move to a very extensive list.

Visitors from countries not on the list, will, of course, still be much welcomed, but with quarantine and other requirements.

By 1 December, we will also consider allowing the consumption of alcoholic beverages in restaurants as well as the operation of entertainment venues under appropriate health precautions to support the revitalisation of the tourism and leisure sectors, especially as we approach the New Year period.

I know this decision comes with some risk.  It is almost certain that we will see a temporary rise in serious cases as we relax these restrictions.  We will have to track the situation very carefully, and see how to contain and live with that situation because I do not think that the many millions who depend on the income generated by the travel, leisure, and entertainment sector can possibly afford the devastating blow of a second lost new year holiday period. 

But if, in the months ahead, we see an unexpected emergence of a highly dangerous new variant of the virus, then, of course, we must also act accordingly and proportionately when we see the threat.  We know that this virus has surprised the world several times, and we must be ready for it to do so again. 

In mid-June of this year, I had set a 120-day goal for quarantine-free entry into Thailand and to accelerate our vaccinations.

I would like to take this opportunity to recognise the extraordinary achievements of our public health workers, other officials and all citizens for their response to my appeal in June.

After we adopted the 120-day goal, extraordinary efforts were made to increase our supply of vaccines and compete with many other countries to get deliveries.  And they were very successful.  Our vaccine deliveries jumped threefold, from around 4 million doses in May to almost 12 million in July… then to almost 14 million in August, and will now run at over 20 million a month until the end of the year, totalling over 170 million doses, far ahead of the goals I had set.

Similarly, our public health staff worked tirelessly to accelerate vaccinations to support our 120-day goal, and the public gave great cooperation to register for vaccinations despite the inconveniences that may have been caused in scheduling.  As a result, our daily vaccinations, which were running at around 80,000 doses a day in May, shot up immediately.  One month after our goal-setting, our public health team tripled the number of shots being administering a day, and they kept increasing that number until Thailand rose to be among the fastest ten countries in the world for administering shots!  Currently, they have frequently been administering more than 700,000 shots a day, and sometimes even exceeding one million shots a day.

Shortly after my address to the nation in mid-June setting our goal for quarantine-free entry into Thailand in 120 days, the world was struck by the highly infectious Delta variant.  Worldwide cases spiked up and peaked in August, just as they did in Thailand, and few thought that it would be possible to achieve any quarantine-free entry into Thailand this year.

The fact that we can begin quarantine-free entry in November, and despite many countries still trying to contain Delta variant infections with restrictions on the travel of their citizens is a great tribute to the unity of purpose and determined response to my appeal by the public health services, by many other government departments, by the private sector, and by the cooperation given by citizens in all matters.

Our nation has performed an extraordinary feat in the last months that we can all be very proud about everyone’s enormous contributions to those achievements.  These achievements, coupled with the gradual relaxation of other countries’ travel restrictions, now enables us to begin the process of quarantine-free entry into Thailand.

Thank you.

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