A GLOBAL CHALLENGE FOR

TOURISM AND THE ACTIVITIES

OF TOURISM ENTERPRISES - THE
COVID-19 PANDEMIC.

Name: Francisco José Fernández Martínez (Erasmus Student)

Professor: Jacek Drążkiewicz
Course: Economics of Tourism Enterprices
 COVID-19 AND THE TRANSFORMATION OF TOURISM

Tourism provides livelihoods for millions of people and allows billions to

appreciate their own and different cultures as well as nature. It represents
more than 20% of the gross domestic product (GDP) of some countries and,
in general, is the third most important sector of the world economy in terms of
exports. Tourism is one of the sectors most affected by the coronavirus
disease pandemic (COVID-19), which has impacted economies, livelihoods,
public services and opportunities on every continent. While maintaining
tourism-dependent livelihoods must be a priority, rebuilding the sector also
offers an opportunity to transform it with a focus on leveraging the impact it
has on the destinations visited and building more resilient communities and
businesses through innovation, digitization, sustainability and partnerships.

ECONOMIC REPERCUSSIONS
According to available data, by 2019, tourism generated 7% of world trade,
employed one in ten people worldwide, and, through a complex value chain of
interconnected sectors, provided livelihoods to millions of people in developed
and developing countries. As borders and hotels were closed and air travel
drastically reduced, in the first five months of 2020 international tourist arrivals
fell by 56% and $320 billion in tourism exports were lost, more than three
times what was lost during the global economic crisis of 2009.

Governments are having difficulty recovering the lost revenues needed to

finance public services, including social and environmental protection, and to
meet debt repayment schedules. According to industry assumptions, the
number of international tourists could fall by 58-78 percent in 2020, resulting
in a drop in spending by these tourists from $1.5 trillion in 2019 to $310-570
billion in 2020.

This puts more than 100 million direct jobs in the sector at risk, many of them
in micro, small and medium enterprises (MSMEs) that employ a high
proportion of women and youth. Informal workers are the most vulnerable. No
country has escaped from its tourism sector, from Italy, where tourism
accounts for 6% of GDP, to Palau, where it generates almost 90% of exports.
This crisis has been a major shock to developed economies and an
emergency for the most vulnerable people and developing countries.

The impact on small island developing states (SIDS), least developed

countries (LDCs) and many African countries is worrying. In Africa, the sector
accounted for 10% of exports in 2019.

In 2019, international tourist arrivals reached 1.5 billion, a 4% increase over

2018 and the consolidation of a record decade in which tourism grew faster

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than the global economy as a whole. Domestic tourism added another 8.8
billion arrivals. The sector generated $1.5 trillion in exports and employed one
in ten people directly or indirectly.

Tourism came to a standstill in mid-March 2020. In the first months of the

year, international tourist arrivals fell by 56% and by May they had dropped by
98%. That translates into the loss of almost $320 billion in exports, more than
three times what was lost during the entire global economic crisis of 2009.
Forward-looking scenarios suggest that international tourism arrivals and
receipts could fall by 58-78 percent by 2020, depending on the speed at which
the pandemic is contained, the duration of travel restrictions and the gradual
reopening of borders, which has already begun but whose future remains
uncertain.

That immense shock could mean a decline of between 850 million and 1.1
billion international tourists and a loss of between $910 billion and $1.2 trillion
in export earnings from tourism, putting at risk between 100 million and 120
million direct jobs in the sector. The situation is especially critical because
about 80% of tourism companies are micro and small enterprises.

There are considerable challenges ahead, including uncertainty about how

the pandemic will evolve and how consumer confidence will be restored. The
global economy is expected to contract sharply by 4.9% in 2020, although it is
expected to recover by 2021, according to the International Monetary
Fund.While countries and international organizations have taken a number of
measures to mitigate the socio-economic effects of the COVID-19 and
stimulate the recovery of tourism, the magnitude of the crisis requires
additional efforts and continued support.

IMPORTANT INDIRECT EFFECTS ON THE ECONOMY AS A WHOLE

Due to the links of tourism with the supply of goods and services and its
strong multiplier effect, the crisis threatens sustainable development in both
developed and developing countries. It is estimated that the disruption of
tourism could reduce global GDP by $1.17 trillion (1.5%) under the most
optimistic scenario (a four-month standstill in tourism) and by up to $2.22
trillion (2.8% of GDP) under an eight-month standstill. Due to the sector's links
with the supply chain, losses due to the negative effects of COVID-19 on the
economy could be three times the loss of tourism income. There are countries
where unemployment could increase by more than 20 percentage points.

Tourism development promotes investment and openness to trade in goods,

as the tourism and related sectors require a wide range of goods and
services, many of which small economies do not have the capacity to

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produce. In SIDS alone, announced data on foreign direct investment (FDI) in
new facilities for the five-year period 2015-2019 show that travel, tourism, and
hospitality projects contributed to more than half of new investment, compared
to 16% for the previous five-year period.

According to forecasts, the COVID-19 crisis will cause a drastic drop in FDI in
2020 and 2021. Global FDI flows are expected to fall by up to 40% in 2020,
compared to $1.54 trillion in 2019, and by a further 5-10% in 2021.

According to the data on FDI in new facilities in the most recent World
Investment Report, travel, tourism and hotel and restaurant projects directly
affected by confinement are among the worst affected, particularly those in
the hotel and restaurant sector (-94%).

EXAMPLES OF MEASURES TO SUPPORT BUSINESSES AND PROMOTE

EMPLOYMENT

Deferment of payments due, such as taxes, rent or insurance

Egypt deferred all payments due from tourist and hotel establishments and
declared that all bazaars and cafeterias located on archaeological sites were
exempt from paying rent until tourism resumed safely.

In Bulgaria, the government helped companies (hotel establishments, travel

agencies and tour operators, restaurants, and fast-food establishments,
among others) by covering insurance payments due by employers.

Italy has also authorized the suspension of payment of taxes, security and
social benefits in the tourism sector and has extended the measure to cultural
enterprises.

In Mauritius, the training levy will be temporarily reduced from 1% to 0.5% for
operators in the tourism sector.

Direct support to companies

Serbia, Slovenia, and Slovakia have announced direct payments to

businesses (or a percentage of wages) that have been forced to close due to
the pandemic.

Jamaica announced that funding from multilateral partners and international

institutions would be made available to small and medium enterprises in the
tourism sector for COVID-19 response and recovery. This included loans,
initiatives for small tourism businesses to formalize, obtain permits and
comply with COVID-19 requirements, and donations of protective equipment.

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 Special conditions for loans
The Central Bank of Egypt offered tourism facilities low interest rate funds,
particularly to pay staff salaries, and launched a financing initiative to support
tourism. In addition to reducing the interest rate, banks can provide credit
facilities with a maximum repayment term of two years, as well as a grace
period of six months, from the date of granting.

Lebanon allowed economic institutions to lend money interest-free for five

years to help pay salaries, and Montenegro announced that April and May
salary subsidies would be granted to tourism entrepreneurs and SMEs (if
requested, tourism enterprises will receive salary subsidies).

Assistance for workers

In Greece, workers whose contracts are suspended will receive compensation
and the state will pay for their social and health insurance.

Similar flexibility with respect to social security contributions has been applied
in, among other countries, Argentina, Kuwait, Morocco, Mongolia, and
Samoa, as well as in Hungary, where the full payment obligations of
employers were cancelled, and the State will take over 70% of lost wages for
three months to assist part-time workers.

In Gabon, employees who are technically unemployed will receive a benefit of

50 to 70 percent of their gross salary. Botswana and the Republic of Korea
approved similar initiatives.

Cambodia offered retraining and upgrading programs to those who were laid
off and announced plans to pay 20 percent of the minimum wage to those
working in hotels, pensions, restaurants, and travel agencies. A short course
provided by the Ministry of Tourism is required before receiving government
support.

Namibia announced a wage subsidy for the most affected sectors and the
Government will provide a wage subsidy to help companies keep jobs in the
tourism, hotel, travel and aviation and construction sectors.

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