Impact of 2019 coronavirus outbreak on tourism and the economy (Part 1)

Up to last year or before the advent of the coronavirus, travel and tourism was seen as one of the most important and fastest growing economic activity in the world. It may not be anymore this year with the coronavirus fast spreading in China where it started, and globally, as it is transmitted worldwide by millions of Chinese who travelled around the world to celebrate the coming of the Chinese New Year, .

The Chinese New Year of 2020 was calebrated on January 25 with the festival lasting up to February 8 or about 15 days in total.  During this period, most Chinese will travel either back to their hometown from where they are presently working and residing.

For those, who have money, they will go out of the country to any part of the world, which many Chinese now can do because of the rapid increase in their per capital income in the last two to three decades.

Travel and Tourism

Travel and Tourism as described by World Travel and Tourism Council (WTTC) President and CEO Gloria Guevara Manzo is one of the largest and fast growing economic sectors in the world. It creates jobs, drives exports, and generates prosperity across the world. 

Travel and Tourism, she says, comprises a wide range of industries, which aims to serve and support domestic and international business and leisure visitors. It includes companies, large and small, in industries ranging from accommodation and transportation to food and beverage, retail and culture, and sports and recreation.

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In its annual report quantifying the global economic impact of travel and tourism, the WTTC reveals that the sector accounted directly and indirectly for 10.4 percent of global GDP (gross domestic product) and 10 percent of total employment in 2018. These have corresponded to a total of US $8.5 trillion in gross value added at current prices, and 319 million jobs have contributed to the global GDP and employment during the year, correspondingly.

The direct contribution of Travel and Tourism to GDP reflects the ‘internal’ spending on the sector by residents and non-residents for business and leisure purposes as well as the government ‘individual’ spending on the sector’s services directly linked to visitors, such as cultural (e.g. museums) or recreational (e.g. national parks).

The direct contribution of Travel and Tourism is felt greatly in businesses that involve accommodation services, food and beverage services, retail trade, travel and transport services, and cultural, sports, and recreational services.

The indirect impact includes all investment spending for hotels and restaurants facilities, transport facilities, and other structures made by the private sector. 

This also includes investment spending for land, air and sea transport, for example, and other facilities and  activities of the government to promote tourism, including other induced spending.

Contribution to global GDP

Based on the WTTC 2019 report, of the total US $8.5 trillion contribution to the global GDP, the direct contribution of Travel and Tourism to the GDP in 2018 was US$2.8 trillion (3.2 percent of the GDP).  This primarily reflects the economic activity generated by industries such as hotels, travel agents, airlines and other passenger transportation services. It also includes, for example, the activities of the restaurant and leisure industries directly supported by tourists. 

Of the total 319 million jobs contributed by Travel and Tourism to global employment in 2018, 122,891,000 jobs were directly created or 3.8 percent of the total global employment.

This also covers employment by hotels, travel agents, airlines and other passenger transportation services (excluding commuter services). Aside from that it also includes, for example, employment in restaurants and leisure industries directly supported by tourists.

As an industry, Travel and Tourism includes both domestic and foreign activities. In 2017, domestic tourism represented 73 percent of the total global tourism spend (US$3,971 billion). While there are significant variations between countries, domestic contributions to Travel  and Tourism reached 94 percent in Brazil and 87 percent in India, Germany, China, and Argentina, with China accounting for 62 percent of global absolute growth in domestic spending over the past 10 years.

This growth has enabled China to climb from fourth position in 2008 to the top spot in 2017, overtaking the USA to become the largest domestic travel market in the world. 

China’s domestic spending reached US$841 billion in 2017, followed by the USA with US$803 billion. Jointly, these two countries account for over 40 percent of the world’s total domestic Travel and Tourism spending. (To be continued)