What Does the Coronavirus Mean for the Hospitality Industry?

What Does the Coronavirus Mean for the Hospitality Industry? main image

With the Japan Summer Olympics and the Qatar FIFA World Cup fast approaching, 2020 was supposed to be a good year for hospitality in Europe and the East.  

However, this is bound to change with the spread of the Covid-19 virus epidemic, which has already killed 1,380 people and infected some 63,000, mostly Chinese citizens.

On February 13 2020, Chinese officials added almost 15,000 new cases to the infected tool in the Hubei Province alone – while symptoms have also been reported in 28 other countries.

More than 60 nations, including the US, Australia and Japan, have imposed travel restrictions on all arrivals from China. EU countries like Italy, the UK, France and Germany have also taken harsher precautionary measures and are screening all passengers arriving from the region.

As a result, on January 27 2020, Chinese authorities announced the cancellation of all group travel from the country.

Xu Xiaolei, marketing manager at CYTS Tours, told the Global Times: “To prevent and control the viral epidemic, we respect such arrangements from other countries. But as China is the largest country in terms of the number of outbound travelers, the ban on Chinese visitors will bring great loss to those foreign countries.”

Xiaolei isn’t wrong.

According to official government figures, Chinese tourists accounted for 150m overseas trips in 2019, 130m more than in 2003.

In 2018, Chinese expenses abroad – which included travel, accommodation and local shopping sprees – amounted to US$130m (£99.7m), a 13 percent increase from the previous year.  

The Lunar New Year holiday is a particularly profitable time for the hospitality industry, as people around China take advantage of public holidays and tend to take more trips overseas.

But this year’s Lunar New Year has seen a severe fall in trips overseas, with 73 percent fewer bookings compared to 2019.

As the fallout spreads, Chinese tourists are choosing to stay home – and understandably so. But how will this affect global tourism and the hospitality industry?

In neighboring countries

China’s neighboring countries – Japan, South Korea, the Philippines, Vietnam, Thailand and Cambodia –are being hit hard by the effects of the coronavirus.

Similarly, Southeast Asian economies are bound to feel the strain; since these economies have come to rely on the Chinese travel market as a response to the remarkable growth of the Chinese middle class during the 2000s.

In Thailand, tourism accounts for 20 percent of the country’s GDP. In 2019 alone, 11m Chinese people visited the country – a number that is expected to fall by at least 2m in 2020, causing a revenue drop up to US$3.05bn (£2.28bn).

Similar figures apply to other countries. Vietnam is expected to lose between US$5.9bn (£4.5bn) and US$7.7bn (£5.3bn) in profits from Chinese tourism. The Philippines and Cambodia – which had quadrupled their tourism targets for 2022 – are expected to suffer millions of cancellations in the upcoming months.

While these are just estimates for now, businesses are already taking a real-life blow.

In Macau, the world’s largest gambling center and a popular destination among Chinese citizens has seen a fall of 78 percent in Chinese visitors compared with 2019 after deciding to shut its casinos for the month of February.

Hong Kong, which has already suffered a substantial loss in bookings because of the past year’s anti-government protests, is reporting a slump from 2019 – as are Japanese businesses.

Analysts have predicted that the effects of Covid-19 will impact Asian economies for up to six months from now.

Stuart McDonald, founder of the independent travel guide for Southeast Asia TravelFish, told TIME: “If this [virus] lasts for three or six months, it will be catastrophic for the [local] tourism industry.”

In Europe

European countries are also set to feel the negative effects of the coronavirus, as Chinese travelers spend substantially more money in the continent compared to visitors from other nations.

Italy – the most popular destination for Chinese tourists in Europe – will likely be hit the hardest, as Chinese travelers account for nearly 30 percent of all tax-free shopping.

Bookings in Venice, one of the top cities for hospitality revenue, have already decreased by 30 percent.

The President of the Venice Hotel Association told the Guardian that the potential damage of COVID-19 to the already-fragile Italian economy could amount to €4.5bn (£3.7bn).

In Paris, where the average Chinese tourist spends 60 percent more than people from other nationalities, hotels and businesses predict to lose hundreds of millions of euros.

Loses will also be felt in England too, with tourism slowing down significantly in popular destinations such as the luxury shopping outlet Bicester Village and Buckingham Palace.

On February 12 2020, British Airways made the executive decision of halting flights between the UK and China by 50 percent until the end of March – which is likely to prolong the effects of the hospitality slump until at least the summer.

The future

While it’s difficult to predict how the Covid-19 epidemic will progress, analysts have warned travel agents, operators, hoteliers and businesses to brace themselves for the next few months, if not until next year.

However, data suggests that the coronavirus will likely impact hospitality well into 2021.

But there’s a silver lining: Covid-19 isn’t the first outbreak to occur in recent years, and global economies have already recovered from severe diseases like SARS, Chikungunya and Ebola.

As Jack Ezon, founder and managing partner of luxury travel agency Embark and Beyond told Bloomberg: “Once the news cycle moves on, people will forget. Just like everything else, it’ll bounce back.”

Written by Linda Mohamed

Linda is Content Writer at TopMBA, creating content about students, courses, universities and businesses. She recently graduated in Journalism & Creative Writing with Politics and International Relations, and now enjoys writing for a student audience. 

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