Coronavirus casts shadow over hospitality industry
Hasnain Noorani
The spread of infectious coronavirus is invariably linked to travel and hospitality. Today, hospitality is a huge global business that accounts for 10.4 per cent of global gross domestic product (GDP) and 10 per cent of global jobs.
As global health officials rush to battle the virus, business leaders are preparing contingency plans. Hospitality and travel operators have been particularly hit hard in the areas where the virus has gained a foothold.
Hotels, and restaurants assets are bearing the brunt of the impact, but other asset classes are suffering tertiary effects.
This outbreak has already disrupted economies across Asia, Europe and even African, and it is likely going to bite out the earnings of the travel and hospitality industry players.
Businesses are increasingly slowing down, with international conferences and events being cancelled.
This has a bigger impact on premium traffic, which is a critical source of revenue for many network airlines and hotel chains.
The impact of the coronavirus is shifting daily, as the number of confirmed cases and deaths continues to rise.
The crisis has seen flights to and from various destinations suspended and events cancelled.
This is affecting travel brands across every sector from hospitality to air travel, cruise and tour operators.
For instance, Saudi Arabia has temporarily suspended entry for individuals seeking to perform Umrah pilgrimage in Mecca or visiting the Prophet’s Mosque in Madina, as well as tourists traveling from countries that are worse hit by coronavirus.
While the ultimate outcome is unknown, it is clear the economic impact will be significant.
Indeed, the losses are expected to be much bigger than those from the 2003 SARS outbreak, moreover, the spread of the illness, given China’s status as a business leader.
Amid a flurry of deep cleaning at their headquarters, hundreds of businesses, including multinationals such as British Petroleum, BMW, Orange and Estée Lauder, have suspended travel to countries with outbreaks of the virus and imposed quarantines on any returning from those regions.
Others such as Nestlé, which has 352,000 employees, and L’Oréal, which has 86,000 employees, have gone further cancelling all international travel for at least a month.
In 2018, the Chinese spent $277 billion in international tourism, and in 2019, it predicted around 166 million outbound travelers.
Thus when the Chinese are not traveling or restricted to travel, just assume during the first quarter of 2020, that means a loss of $69 billion and might be higher.
Ultimately, the global tourism industry will suffer. Hotels worldwide are already feeling the pinch.
The Mobile World Congress held in Barcelona each year since 2006, had been scheduled for February 24, but was cancelled after several big-name vendors withdrew over coronavirus concerns.
As a result, bookings in Barcelona hotels dropped an estimated 25 per cent.
The ITB Berlin, the world’s leading travel trade show, where Kenya was scheduled to exhibit, has been cancelled due to the rapid spread of the novel virus.
It is estimated that the global airline industry would lose $30 billion due to the coronavirus outbreak; comparing to what happened during the SARS outbreak in 2003, the airline industry lost $6 billion. —The writer is the CEO, PrideInn Group of Hotels. [email protected]
