By: M.S.

Kimi Pautu|GCU0719BATH644|
BATH 2ND SEMESTER

Report on the impact

of COVID 19 on the
tourism and travel
industry
TPPP 4th Assignment
Report: Coronavirus disease (COVID-19) is an infectious disease caused by a newly
discovered coronavirus. Most people infected with the COVID-19 virus will experience mild
to moderate respiratory illness and recover without requiring special treatment. Older
people, and those with underlying medical problems like cardiovascular disease, diabetes,
chronic respiratory disease, and cancer are more likely to develop serious illness. The best
way to prevent and slow down transmission is be well informed about the COVID-19 virus,
the disease it causes and how it spreads. Protect yourself and others from infection by
washing your hands or using an alcohol based rub frequently and not touching your
face. The COVID-19 virus spreads primarily through droplets of saliva or discharge from the
nose when an infected person coughs or sneezes, so it’s important that you also practice
respiratory etiquette (for example, by coughing into a flexed elbow).At this time, there are no
specific vaccines or treatments for COVID-19. However, there are many ongoing clinical
trials evaluating potential treatments. WHO will continue to provide updated information as
soon as clinical findings become available.

By infecting more than 1 million people and claiming over 50,000 lives across the globe so
far, the COVID-19 pandemic has hit the whole world hard. With more than one-third of the
global population being put under restrictions of one kind or the other, the fact that the world
is staring at an economic recession is a no-brainer. Recently, Moody's—a global rating and
research agency—slashed India’s GDP growth forecast sharply from 5.3 per cent to 2.5 per
cent for the year 2020 and further cuts are likely.

While economists may argue about the intensity of the slowdown ranging from being
temporary to a long-term recession, they are unanimous about the fact that the slowdown
would have a severe impact across various sectors of the economy. Foreign tourism and
travel industry is clearly one of the worst-hit sectors and the ban on international flights has
all but shut down this segment entirely. While the pain in sectors such as aviation and
hospitality are widely discussed, there are several travel related industries such as foreign
exchange, which are even more impacted than aviation and hotels, and are often overlooked
entirely.

Currency exchange is a niche market and it is deeply integrated within the foreign travel
ecosystem. As per CII’s estimates, the April to July summer holiday season in which
maximum number of people travel abroad (especially to Europe, the US and Australia) could
witness an unprecedented drop of 80-100 per cent.

With rising affluence and increasing disposable incomes, an increasing number of Indians
had been travelling abroad for leisure over the past years, resulting in the creation of a vast
ecosystem of businesses that supported such travel. This year, all these businesses are going
to have to fight just to survive. It is hard to imagine people travelling abroad for the next six
months even after the lockdown due to the extremely fearful environment. Further, economic
conditions are likely to leave less disposable income in the hands of the people and restrict
spends to only essential purchases.

Furthermore, even if the lockdown ends in India and other business get back to normal, it is a
possibility that foreign travel will remain restricted, leaving the forex industry crippled for
several months, even while other sectors show signs of recovery.
The large players in the currency exchange market are struggling to stay afloat due to high
capex costs owing to large fixed costs associated with renting several high-street stores that
are manned by a large number of staff. Even by the most conservative estimates, these
companies have already lost over 90 per cent of their business due to the coronavirus
lockdown. At the same time, the future of small mom-and-pop moneychangers also hangs in
limbo. There are more than 2,000 Reserve Bank of India (RBI)-authorized full-fledged money
changers in India that have at least one branch. With almost zero income, these forex dealers
will have no option but to rely on their personal savings to sail through this crisis.

Going even by the most conservative projections, things are unlikely to look up for this
segment anytime soon. The harsh realities of businesses shutting down and pink slips being
handed out are very much on the horizon. According to an estimate of the Federation of
Associations in Indian Tourism and Hospitality, the Indian tourism industry could be staring
at 38 million job losses which are about 70 per cent of its total workforce due to COVID-19.

Government intervention is desperately needed to alleviate the bloodbath that this sector will
be seeing in the near future. While relief packages are being considered for the main
stalwarts of the tourism industry, it is critical that the government also extends similar
support to other supporting businesses that are equally impacted. While countries such as the
UK, Australia, UAE and Thailand have already come out with a set of directives to provide
some relief to the tourism sector, India is yet to take such steps. As the entire travel industry
has been pushed to the verge of collapse, the government must come out with a set of
measures to aid and revive the sector.

India’s hotel and hospitality industry’s occupancy has declined sharply in the first quarter of
2020, as the COVID-19 outbreak impacts various segments of the sector, according to a
report by JLL India.
Coming off a high-performance base in 2019, the Covid-19 outbreak and the containment
measures introduced by the Centre have resulted in a severe drop in foreign and domestic
travel, across both the tourism and business traveller segments.
“In the third week of March 2020, at an all India level, the hotels’ sector witnessed a decline
of more than 65 per cent in occupancy levels as compared to the same period of the previous
year. As travel restrictions around the world intensified further, second and third quarters of
2020 are likely to be similarly impacted,” according to the report.
The report estimates that at least 30 per cent of hotel and hospitality industry revenue could
be impacted if the situation doesn’t improve by the end of June 2020. With more than 60 per
cent of organised hotels in India already shut and several others operational with single-digit
occupancies, recovery will be gradual.
Industry estimates indicate that in India, branded and organised hotels annual revenue
is ₹38,000 crore ($5 billion). Corporate businesses will be left with less money to spend on
travel, lodging and entertainment. Behavioural changes will lead to a reduction in
socialising, which in turn will impact F&B in hotels.
All this will impact GOPs and further reduce yields to hotel owners. It is also indicated that
the working capital of hotels will be stretched this year. Cost optimisation at all operational
levels will be the key.
“FF&E Reserves would need to be cautiously utilised. Operators would need to support the
hotel owners more than ever,” the report added.
“As the sector navigates turbulent times through the pandemic, growth and development of
hotels in India is also likely to be impacted in the next two years. Any dry powder that is
available today will focus more on buying operating assets rather than building new ones,”
Ramesh Nair, CEO and Country Head, JLL India said.
Whilst, 2019 witnessed a shifting of concentration to mid-scale and affordable branded hotel
segments, more established developers such as Prestige Group, Chalet Hotels and owner-
operators such as Lemon Tree Hotels activated their existing land banks and announced
expansion plans across key corporate markets in India.
The report indicates that the strong performance of the office sector was the key to robust
hotel market performance across the top 7 business cities of India.
Tourism has always been a significant contributor to employment generation and a huge
source of foreign exchange earnings for the country. This sector not only employs workers in
cities but also provides livelihood to people across social strata in rural areas.