Tourism sector declines amid trade tensions and COVID-19 pandemic

WTOTourism

11 August 2020: The COVID-19 pandemic has given rise to the deepest economic downturn. Output has plummeted, while job losses pile up. Sectors such as global travel and tourism, has been severely disrupted. The pandemic has led to an unprecedented disruption in supply and demand for the global tourism sector, which is expected to see a further decline in tourist arrivals in 2020, according to the recent World Trade Statistical Review 2020, released by the World Trade Organisation (WTO).

The WTO Review states that Air travel and transport have collapsed as strict social distancing measures and travel restrictions have been imposed. Global commercial flights, including both passenger flights and air transport, were down by 74 per cent between 5 January and 18 April 2020. Flights have rebounded 58 per cent up to mid-June 2020, possibly indicating the beginning of a recovery as measures to counter the pandemic have eased.

According to the WTO Review 2020, Travel exports expanded by only 1 per cent in 2019, down from 8 per cent in both 2017 and 2018. This was due to a global decline in international tourist arrivals as a result of a lower disposable income for many consumers, currency depreciation in some countries, and many consumers choosing not to travel. In 2019, world travel receipts still accounted for close to one-quarter of global exports of commercial services, totalling US$ 1.44 trillion and representing 1.7 per cent of world GDP.

As reported, for the first time since the global financial crisis in 2009, the United States, the world’s largest travel exporter with a global share of 13.4 per cent, saw a decline (-2 per cent) in travel exports. In addition, China, the top travel spender with an 18 per cent share in world travel imports, saw its travel-related expenditure drop sharply, by 9 per cent.

Trade frictions between China and United States have mostly involved increased tariffs for goods. However, these tensions have spilled over into the services sector, hitting tourism, the least restricted services sector. Health-related travel and transport restrictions have had an abrupt impact on US travel exports and China’s travel imports. US travel exports were down by 73 per cent in April 2020, compared with April 2019, following a 53 per cent plunge in March, and China’s travelrelated expenditure dropped by over 60 per cent in both March and April 2020 year-on year.

The WTO 2020 Review, quoting U.S. Department of Commerce, National Travel and Tourism Office (NTTO), reported that Chinese tourist arrivals in the United States declined by 5 per cent in 2019, reflecting trade tensions between the two countries. With 2.8 million visitors in 2019, China ranks only fifth in terms of foreign tourist arrivals in the United States. However, China is still the main source of travel receipts for the United States, ahead of Canada and Mexico.

In April 2020, WTO economists estimated that world trade would fall between 13 per cent and 32 per cent in 2020 as the COVID-19 pandemic disrupted normal economic activity and life around the world. Subsequent tracking of trade developments suggests that the decline may be closer to the optimistic scenario but worse outcomes are still possible if there is a resurgence of the virus.