How will Coronavirus affect hospitality?
Coronavirus in a hot topic at the moment and rightly so after all at the time of writing this piece we have seen a huge impact to stock markets and global supply chains. These effects will ripple across the market and especially impact the tourism and hospitality sector. Senator Joel Villanueva, chair of the senate labor committee said “We think the tourism sector will bear the brunt of our government’s travel ban due to the COVID-19 outbreak. The government should spur domestic tourism to assuage the impact of decline in foreign tourists,”
The senator’s statements show an interesting shift in the mentality of tourism during periods of economic uncertainty. Fears about pandemics and recessions create a situation where average spends on travel and tourism decrease dramatically due to financial uncertainty. Fears about a Coronavirus pandemic though are not just about the actual virus affecting people though. Coronavirus has silently begun to cause supply chain disruptions and investment income which have ripple effects on how much people can spend on non-essential activities like outdoor recreation.
Historical effects of financial uncertainty in tourism
To understand what happens during times of financial uncertainty the US Bureau of Labor produced several statistics on US average annual spend on travel during the last economic downturn. When we compare the year over year percentage change we can see a serious contraction in annual spending bottoming out in 2009.
This trend is also mirrored in a Boston and Cambridge look at the average occupancy of hotel rooms during the last financial crisis.
All of this combined shows a major contraction across the tourism sector with leisure travel being the hardest hit. The bottom line is that during times of economic uncertainty more people are staying home.
Domestic tourism during financial uncertainty
One of the most reliable measures of demand in tourism is numbers of travelers. So clearly financial uncertainty has a negative relationship on the demand for tourism, but this approach only looks at the big picture of trends in the US using the above data. When we look at the rafting industry during times of uncertainty we actually see a counter intuitive pattern emerge. Here is the use data compiled by America outdoors on East Coast Rivers:
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