Unfriendly Skies Loom as Travel Industry Faces Long Road Ahead: Expert

Economist offers grim forecast for tourism sector, knocks 'vaccination passport' talk, and says that air travel in '2021 has started off worse than 2020 ended.'
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Major cities from New York to Tokyo -- and several major industries -- have been hit hard by the drop in tourism over the past year. The pandemic has beaten once-bustling airlines, cruise lines and hotels bloody. Restaurants the world over have been picked off like fallen soldiers. 

But, now, with vaccines getting into the arms of millions of people around the globe every day, the end of COVID-19 appears finally in sight.

So, just how quickly can the world expect to see the battered travel and tourism industry get out of the emergency room, bandaged up and wounds healed? 

Not for several years -- possibly as far out as 2024.

That's according to a new report by trade-credit issuer Euler Hermes, which shows that the bleeding won't likely stop for some time. In fact, the pandemic will continue to disrupt tourism worldwide, even whacking world events like the delayed Tokyo Olympics, despite chatter of so-called "vaccination passports." 

This is bad news for many. Just survey some of the casualties of COVID: More than half the world's pilots are no longer flying, according to a poll conducted earlier this year by GOOSE Recruitment and FlightGlobal. Airlines are scraping by, with Cathay Pacific saying recently it's still in "survival" mode, while American Airlines  (AAL) - Get Report has labeled 2020 the "most challenging year" in the company’s history.

For insight into when the tourism industry should be fully recuperated, TheStreet spoke with Euler Hermes' economist Marc Livinec, who authored the report, "Tourism: Europe Will Be at the Frontline of the Recovery, But Only in 2024." 

The following was conducted by email has been lightly edited for clarity and brevity.

TheStreet: Many people are talking about this pent up demand for travel that would suddenly explode as the pandemic winds down. That doesn't appear to be the case set out in your report, does it?

Livinec: Indeed, we do not expect a quick recovery in travel demand, even if the pandemic seems to wind down. The two main factors that are weighing on any real recovery in the tourism industry are the effectiveness of vaccines in preventing the transmission of the virus and the absence of a common approach by countries around the world. In other words, many states still depend on a personal approach to tackling the outbreak.

TheStreet: It sounds unlikely then that airlines and cruise companies can expect a normal return to business for quite some time, too, right?

Livinec: It does -- and yet they do everything they can to lure tourists back onboard. The International Air Transport Association's latest data show that forward bookings in February for the Northern Hemisphere, summer travel season trips were 78% below levels in February 2019. In a nutshell, 2021 has started off worse than 2020 ended, in spite of rolling-out vaccination programs. New COVID variants are unfortunately leading some governments to increase or to protract travel restrictions. The uncertainty around how long these restrictions will last also has an impact on future travel.

TheStreet: You say Europe could see a faster tourism recovery than the U.S. and Asia Pacific? Why is this, given their later time frame for expected herd immunity?

Livinec: The main reason is that Europe suffered the largest drop in international tourist arrivals, plummeting to 227 million tourists in 2020 from 744 million in 2019. So the rebound is going to be stronger than elsewhere in the world, as lifting of travel bans are getting closer. We also think that EU countries' commitment to finding a common solution of exiting travel bans at the same time could help international tourism recover in a better way across the region.   

TheStreet: Japan has the delayed Olympics planned and has been building up its tourism industry for years before the pandemic. When do you see its tourism industry returning to normal and how do you think the Olympics would be affected?

Livinec: Japan's population is expected to reach herd immunity by the end of summer 2022. The Olympic Games are scheduled for this summer. So these Olympics are poised to be strongly affected, no matter what by this pandemic. And they are unlikely to help the tourism industry recover, as Japan has just decided to stage these Olympics without overseas spectators due to public concern over COVID-19 and the detection of more contagious variants abroad. Besides, there is a growing risk that a few countries might decide not attend these Olympics eventually out of fear for the health of the athletes. The odds of any cancellation or further postponement at the last minute cannot be excluded.

TheStreet: Talk of so-called tourism "vaccination" passports has been making headlines now. But in your view, is it realistic globally? What are some of the challenges?

Livinec: It is a difficult question. It eventually comes up against rules governing freedom of movement between and across each country. Creating a tourism passport might appear difficult to implement in the end, because it requires the same database to be shared worldwide.... Moreover, unless vaccines against COVID-19 are mandatory, how would a "tourism passport" deal with people who are not vaccinated, either because they are too young or they do not want to be? A person without a vaccine being denied the same freedom of movement as others both domestically and internationally may be very tricky to deal with. I do not even take into account the possibility of seeing the efficacy of current vaccines (weaken against new variants). From that point of view, would a tourism passport be of any use?      

     

TheStreet: How does all of this ripple out to business travel -- meetings, conventions, conferences?

Livinec: It has put a lot of pressure on the business travel segment as we do not see it recover to its pre-crisis levels before a very long time. Working remotely enables people to attend meetings, conventions and conferences without being physically present. According to the U.S. Travel Association's statistics, travel spending for domestic business in the U.S. plummeted from $300 billion to $130 billion between 2019 and 2020. Its forecast for 2021 amounts to $160 billion only. We think that leisure travel will lead the way as business travel will be subdued.  

TheStreet: Finally, this is all the best-case scenario, isn't it? This pandemic has taught us not to take anything for granted hasn't it?

Livinec: As this pandemic can be considered as a type of crisis that the modern world has never seen before, we might say that indeed. I can't help but think that flexibility and pragmatism should guide further progress in ensuring countries to come through this very challenging period.