- Team ProMiller
Impact of Pandemic & Geo-Political Risks on Tourism
Tourism plays a more vital role in a country’s GDP and Economic growth than we give it credit for. Countries which provide extra-ordinary tourism experiences attract higher Foreign Direct Investment, indirectly creating several job opportunities, resulting in higher revenues and over-all progress of the nation through the income transfer between a developed nation to a developing one. This is a step towards balancing out the inequality in income levels between several countries. Several policy-makers, as well as many hotel management companies in India, have started to shift their focus on improving the tourism sector due to its several economic benefits. It should not come as a surprise that countries with a developed tourism sector attract a higher influx of tourists and hospitality business investors than those countries with a weak tourism sector or prevailing risks in the said industry. The same is usually treated as a principle by the hospitality consultants across the globe for taking big-picture decisions.
Like any other commerce, Tourism is highly sensitive to risks and can be fragile in an imbalanced environment. Many investors research and observe over a long duration before investing in a country’s tourism sector to ensure that the economy is more or less economically and politically stable.
It is to ensure that it can safe-guard itself from several risks that may adversely affect the inflow of international tourists or alter the behavior of domestic tourists. In other words, the demand of tourism related activities greatly depends on how vulnerable a country is towards various kinds of threats and adversities. Speaking about risks, these can be divided into risks made by humans and naturally occurring risks. Natural-disaster like Hurricanes, Tornadoes, Floods, Volcanic Eruptions are not usually in the hands of the people and may or may not be predictable. Those caused by man can include wars, terrorism, political issues and pandemics can have a more intense impact on tourist behavior and demand levels as compared to natural-risks.
In the recent years, Geo-Political Risks (GPRs) are on the rise due to several nations suffering from political tensions causing volatility and brittle economies. Geo-Political Risks are a measure of tension between nations. This leads to a shift in the tourist’s choice of destinations where those countries that have a history of a safe and steady economy and prevailing strong policies with least unrest and guaranteed security are often preferred over those where wars and riots may escalate. It can have cataclysmic impact on those nations which depend on tourism for majority of their income since GPRs can lead to restrictions involving visas and travel. If a traveler feels unsafe, they might not consider the nation dealing with instability as a destination, further causing a drop in the income through the tourism sector which eventually leads to unemployment and the reduced investment from the government in developing that sector. The most recent example of this being the war raging between Russia and Ukraine. According to UNWTO, Outbound Tourists from these nations contributed to approximately $14 Billion USD which accounts for 3% of global spending. This is a substantial amount that has now been lost due to the on-going crisis which an unforeseen future. Additionally, the travel costs have rocketed due to the inflation and increase in oil prices indirectly making these destinations unfavorable for many. On similar lines, hotel revenue management companies in India have been dealing with these ups & downs and coming up with new-age solutions to combat it.
However, European air travel has seen a steady growth along-side increase in flight bookings. This has been the result of easing the travel restrictions but the military unrest has been an obstacle in reinstating confidence in international travel.
In addition to the military and political unrest causing hesitation amongst tourists, the world also experienced the Pandemic resulting in the strictest travel restriction and fright amongst many. COVID19 not only affected the lives of many but had been a major factor which led to the Hospitality and Tourism industry to come to a stand-still. Each nation shut-off their borders, air-travel was restrained and a major revenue loss was incurred. The UNWTO states that 1 in 10 jobs in developed and developing nations could be related to the tourism industry which leads us to understand just how much the effect of COVID19 could have been towards the livelihood of citizens of those nations. The ramifications were also borne by the biodiversity and cultural conservation practices which relied on income via tourists and the activities they indulged in.
It has been indicated by the International Monetary Fund that the revenue generated by tourism may not recover to the stage it was at in 2019 until 2023. It also mentioned that COVID19 caused a 65% reduction in tourist movement as compared to SARS epidemic causing only a 17% fall. The current rate of inflation, the Ukraine -Russia War and labor shortages are causing a delay in complete recovery of the industry.
However, the UNWTO has announced the removal of all international travel restrictions in 45 nations leading to a steady upward rise in travel. The hotel occupancy rates around the globe are increasing but many struggle with the workforce shortages due to the number of layoffs during the pandemic. Although 31 countries in Europe have lifted any restriction of travel, the war is causing an increase in the fuel prices and the aviation industry still struggles to attract international tourists who may also have lost confidence due to the tension between the two nations.
It is undeniable that both the Pandemic and the GPRs have had a visible and global impact on the Tourism Industry. Nations and their governments are currently recovering from the ill-effects of these two phenomena.
The circumstances that the world has encountered gives us a renewed opportunity to reconsider our priorities and start adapting more conscious efforts, support renewable energy, encourage governments to restructure the tourism sector and prepare policies that can be implemented during such occurrences. Artificial intelligence can play a fundamental part in making travel easier and safer with the introduction of e-visas and a superior biometric process for identity verification and travel eligibility (Macchiarelli, 2022). The G20 in Rome has suggested Crisis Management, green energies and investment in better infrastructure to cope with the current situation and make the road to recovery a little easier. International Cooperation is the key to transform the tourism sector, creating harmony amongst nations to support each other, create employment opportunities, rejuvenate the local cultures and create harmony to build the confidence amongst tourists once again. This is also being echoed by the top hospitality consulting firms in India and beyond.
Written by Vylaica S.