Coronavirus: its effect on the travel industry

The International Hospitality Investment Forum (IHIF), planned to take place between 2nd and 4th of March 2020 in Berlin, has been rescheduled for a later date in early May.

Questex Hospitality Group, organisers of the event, reported it had “become clear that the most prudent action for the industry and the greater public health” was to take action and postpone the three-day conference.

A survey of more than 400 Global Business Travel Association (GBTA) member companies last week found that two-thirds of respondents reported cancelling meetings, and almost one in five had cancelled “many”. All in all, the coronavirus could cost the global business travel industry £37 billion ($47 billion) a month.

As it spreads across the globe, coronavirus has been creating major insecurity in its wake. Global stocks have fallen, governments have closed borders, and everything from rideshares to clothing stores have seen major dips.

With the UK Foreign Office continuing to add travel warnings and with the World Health Organisation (WHO) upgrading the global risk of the outbreak to “very high”, the idea that the coronavirus’ impact can be limited to just Asia is thus null. As hotel chains announce their financial earnings reports, the extent of the situation becomes evident.

Cleveland Research Company (CRC) has reported that Marriott has suffered at least $60 million of headwind to quarter one, stating that any impact from now through to the end of the quarter – in regions related to Europe, the US, or other key areas – would be incremental to this figure.

Marriott’s management also noted that the virus could delay signings in China, with minimal desire to open hotels – even ones that are ready in the near-term.

Similarly, approximately 70 per cent of Wyndham Hotels & Resorts’ properties in China remain closed, and openings under the brand scheduled for the first quarter will likely be postponed.

CRC also reported that Hyatt China’s RevPAR is running down ~90 per cent for February month-to-date, and the impact on other Asia markets is also severe, with RevPAR running down 30 per cent +.

Hilton has closed about 150 hotels totalling 33,000 rooms in China, anticipating a $25 million to $50 million impact to full-year 2020 adjusted EBITDA. 

In Europe, many of the largest coronavirus outbreaks are either within hotels or in tourist hotspots. Italy, primarily its populous northern regions, are the largest infected sites in Europe, with a hotel in Tenerife still under quarantine

Staycity’s York aparthotel, housing the UK’s first recorded case, has since reopened for business with its two patients having left the hospital earlier this month. Yet as recent warnings by Public Health England (PHE) render widespread transmission in the UK as “highly likely” anxieties rise along with it.

Gerard Nolan, of Gerard Nolan and Partners, believes that the global hotel industry is to see major changes in hygiene moving forwards. When asked how the infection will affect the market, he said: “[Coronavirus] will slow the market for sure. Pessimists are talking about it (kicking off a recession) because the market has been so strong for so long. And it’s going to make people pause on their transactions – certainly if they’re going to buy an existing business… you now know it’s not going to make the same return.”

“Having said that, once it’s over, the market will bounce back strongly. There may be more staycations – hotels that contribute to local business (as opposed to international destinations like London, Manchester and Edinburgh) are the ones that will benefit from this.”

The rise of the staycation is a likely prospect given that the first cancellations of international flights are taking place. British Airways have begun cancelling trips to destinations including New York, France, Austria, Belgium, Germany and Ireland, and other airlines are drawing back their routes due to decreased demand.

The BBC recently reported that airline Flybe is on the “brink of collapse” and is looking for a £100 million government loan if the company is to survive.

It is estimated that the global airline industry would lose $30 billion due to the coronavirus outbreak. This is put into perspective when compared to the SARS outbreak in 2003, where the airline industry lost $6 billion.

Stocks supporting the travel industry have also plummeted. Air stocks are down across the board, with Ryanair falling 20 per cent in response to the disease’s spread. Experts are worried this slowdown in air travel may be difficult to reverse. 

Even general markets have fallen around the world, with the Dow Jones Industrial Average (DJIA) having dropped 1200 points last week – the worst one-day drop in its history. Indexes thus suffered the biggest weekly losses since the 2008 financial crisis.

The United States has started ramping up its own protections, with the Centers for Disease Control and Prevention (CDC) considering an expansion of airport health checks. The latest news from the US reports six fatalities, and a total of 100 cases nationwide.

Most affected is the Asia market, however, with China – one of the largest markets for incoming and outgoing tourists – grinding to a halt. Tourism Economics has estimated that should the stoppage continue, $73 billion worth of tourist spending may be lost.

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