Remember your high school economics? Neither do I, except for graphs with all kinds of confusing lines, and something about supply and demand.
It turns out that one such graph looks like a hockey stick. It shows a situation where demand for a certain product or service stays the same for a while and then explodes.
This is the potential dilemma that is feared by the tourism sector. 2020 revenue from global tourism is estimated to have dropped by approximately 75%, which is the equivalent of USD 1.1 trillion, and remains on a downward trend.
This drop represents the short part (blade) of the hockey stick, showing that demand is basically zero. Once things return to normal – and “when?” is the $64,000 question – it’s very possible that demand for tourism will rise exponentially. That’s the long part (handle) of the hockey stick.
Too Much of a Good Thing
But isn’t that what the industry wants? Not really. Unlike many other industries, tourism can’t ramp-up so fast. If someone wants to visit a hotel or attraction that has been mothballed for months due to COVID 19, it takes time to get the site ready. Cleaning up, rehiring staff, and ordering supplies are just a few of the things that need to be done if a tourist business wants to maintain its reputation, or even merely function. And that means, if a tourist (who has been vaccinated, of course) wants to visit your hotel next weekend, you might need to tell them “sorry”.
It’s not just the tourism industry that stands to be disappointed by this situation. Travel is the activity that is missed most by, for example, the US population. Waiting for the entire industry to gear up and get going will be a long and frustrating process for essentially everyone.
There are many projections about the recovery of the tourist industry. For example, McKinsey & Co believes that, in a worst case scenario, global tourism in 2021 will reach 60% of 2019’s levels, and at best, 85% of 2019’s levels, with full recovery by 2023.
However, it is also expected that most tourism in the near future will be domestic.
A major tourism limitation factor will be air travel. Many countries have implemented travel restrictions so that it is not even possible to fly to remote holiday destinations. If there are attractive and easily-accessible destinations in the local market, it is more likely that travelers will simply drive to them instead. Tourists will also be worried about hygienic and infection conditions in unfamiliar countries, which will boost domestic travel.
The use of hotels will similarly suffer because they are closed spaces containing lots of people. The extent of COVID prevention at some hotels amounts to measuring temperature upon check-in and giving people latex gloves in the dining room. Such steps don’t inspire confidence, so Air BnBs, rentals, and the homes of relatives will be used as substitutes.
But once travel picks up, the industry might experience what is already being called “revenge tourism”, as people try to make up for lost time by splurging on trips. As an example, 2021 bookings for cruise ships are on the increase, with 50% of cruise ship lovers planning to take a trip this year. Of course, these bookings are supported by no-hassle cancellation policies that anticipate passengers staying at home due to lockdowns.
It’s even possible to see a country’s COVID measures as a competitive advantage over others that are slower to reduce the infection rate and vaccinate the population. The topic of “green passports”, as they are called in Israel, is a good illustration of this. Various countries, including Greece, Denmark, and Spain, want to allow citizens who have had their COVID shots to travel. However, countries such as Germany and the UK see this as a kind of discrimination and encouragement of an “elbow mentality” (we in Israel call this “chutzpa”) which could lead to civil unrest.
One More Graph
Perhaps a different indicator of the rebirth of tourism is yet another graph showing vaccination rates across the world. Although there are many stories about side effects of COVID vaccinations, they are the best tool we have for returning to normalcy, with an apparent 95% efficacy rate. Not to boast, but Israel currently leads the rest of the world by far in vaccinations per capita.
As other countries increase their vaccination rates, we can expect more tourism from them, so carefully watching which nations have high vaccination rates can act as a notice to the particular industries that host their tourists. This may also provide a solution for the hockey stick problem, because vaccination is occurring gradually, and the revival of global tourism might follow the same pattern.
In other words, get your shot and book that trip!