The OECD’s International Trade Pulse, updated September 2020, released on September 18, shows the continued recovery of merchandise trade by OECD members and China, although only China has recovered to levels achieved in 2019. Canada, the United States, Germany, Japan and Korea are roughly 90% of 2019 levels in July; Brazil is slightly above 90% in August; China was about 110% in August. See http://www.oecd.org/sdd/its/international-trade-pulse-oecd-updated-september-2020.htm.
The OECD information on services shows for certain major countries the percent growth or contraction over 2019 broken into three categories — transport, travel and other. Data are provided for China, France, Japan and the U.S. for both services exports and services imports. For all countries reviewed, travel services are from 40% to over 60% below 2019 levels through the first seven months of the year. Total trade in services for Australia, Brazil, Canada, China, France, Germany, Japan, Korea, Russia, United Kingdom and the United States is provided in Table 2 of the September International Trade Pulse.
The UNWTO’s latest World Tourism Barometer
The global challenge shown in data from the OECD International Trade Pulse on travel services is confirmed with significantly more detail in the UN World Tourism Organization’s World Tourism Barometer, Volume 18, Issue 5, August/September 2020, https://www.e-unwto.org/doi/epdf/10.18111/wtobarometereng.2020.18.1.5.
The UNWTO publication reviews data through June 2020 and in some cases partial data for July and August. The publication notes that global international tourism is down some 65% in the first half of 2020 for a loss of 440 million international arrivals and some USD 460 billion in export revenues. Page 1. Based on preliminary estimates the UNWTO has for international travel in July and August, the publication forecasts a full year decline of some 70% with some recovery in 2021 but not returning to 2019 levels for 2 1/2 to 4 years. Id.
All regions of the world have seen massive declines in international travel and tourism. As measured by international tourist arrivals, the region of Asia and the Pacific saw the greatest decline in the first half of 2020, 72% below 2019 levels. Europe was down 66%; Africa and the Middle East were down 57%; and the Americas were down 55%. Id. at 3. On a sub-regional level, North-East Asia had the largest decline, 83%, while Southern/ Mediterranean Europe had the second largest decline at 72%. Id. at 4. For all regions and sub-regions, the decline in the second quarter of 2020 exceeded 90%, ranging from 90.3% for North America to 99.5% for Subsaharan Africa. Id. at 6.
Some regions have started to ease travel restrictions for travel from some countries which has resulted in some improvements in levels of international tourists in June and from press reports in July and August.
Europe has seen both the largest loss of international tourist arrivals (213 million through June) and also engaged in easing of travel restrictions in June, though the resurgence of cases in July to the present has resulted in some reversals on travel openings. Id. at 7.
The UNWTO report also provides the latest data from international organizations that monitor international passenger demand, international air capacity and hotel occupancy, revenue per available room and average daily rate. Id. at 5. The International Air Transport Association (IATA) has reported a decline in global air passenger demand of 67% for the first seven months, with July being down 92% vs. June of -97%. Id. The International Civil Aviation Organization (ICAO) has indicated that international air capacity worldwide was down 59% in the January-July 2020 period versus 2019, with July being down 75% vs. June -88%. However, load factors were 46% lower than 2019 levels despite the drastic reduction in capacity. Id. Airlines around the world are in financial difficulties. In the United States, major airlines have indicated that major layoffs will occur in October without additional government relief. Despite a House bill providing additional stimulus support having been passed months ago, there has been no agreement with the U.S. Senate and White House on an additional stimulus package. With the White House and Senate focused on a highly divisive effort to race through a nomination and confirmation of a new Supreme Court Justice following last week’s death of Justice Ruth Bader Ginsburg, it is highly unlikely that another stimulus package gets approved ahead of the election with the likely result of tens of thousands of additional layoffs in the airline industry come October (and potentially hundreds of thousands of layoffs of state and local government employees as states reduce employment without additional relief). The U.S. stock market has reacted today to the likely lack of an additional stimulus package with declines in the markets.
On the hotel front, the UNWTO report includes information from Smith Travel Research (STR), an organization that prepares reports tracking supply and demand data for the hotel industry. Data reported by the UNWTO report indicates that globally hotels are suffering “double-digit declines in the three metrics, namely revenue per available room (RevPAR), average daily rate (ADR), and occupancy, with performance at low levels across all world regions in July 2020. Occupancy in July reached record lows of 17% in Africa, 19% in Central and South America, 27% in Europe, 35% in the Middle East, 46% i Asia and the Pacific and 47% in the United States.” Id.
While another major part of travel and tourism is not covered by the UNWTO World Tourism Barometer, restaurants and bars are also in deep distress in many parts of the world with many countries requiring the closure of bars and restaurants or dramatically reduced capacities or hours of operation. Because of the large number of small businesses in this sector, job losses are high and the likelihood of massive closures a continuing high risk.
Efforts to lift travel restrictions
The UNWTO’s Seventh Report on COVID-19 Related Travel Restrictions, A Global Review for Tourism (as of 10 September 2020), https://webunwto.s3.eu-west-1.amazonaws.com/s3fs-public/2020-09/200909-travel-restrictions.pdf, provides detailed information on the status of countries who have either reopened in part or whole, who remain shut down. The Seventh Report shows some significant movement by countries to reopen or ease restrictions on international travel (a total of 115 countries, up 28 countries from July, now 53% of all destinations). The easing of restrictions are typically partial. Europe has the most countries which have eased restrictions since the start of COVID-19 and the initial lockdowns (44 countries). The Americas has seen liberalization in 27 countries (including 18 Small Island Developing States (SIDS). Africa has seen easing in 26 countries. Asia and the Pacific has seen easing in 13 countries including 5 SIDS. And there have been easing of restrictions in five countries in the Middle East. There are also 93 countries that have complete closure of their borders to international tourism travel including 26 SIDS.
What doesn’t exist are internationally agreed rules for when international tourism should be resumed and hence restrictions eased, what trade policies would facilitate reopening, what infrastructure needs may exist for SIDS and for many developing countries to be able to reopen safely and what assistance international organizations whether the WTO, WHO, IMF, World Bank, regional development banks or others can provide. Development of vaccines and therapeutics are obviously an important part of helping all nations get the virus under long term control. And how quickly and equitably vaccines and therapeutics can be made available to all peoples when approved remains a critical aspect of global control of the virus and improved consumer confidence to travel if restrictions are eased. But greater coordination and cooperation ahead of the availability of these medical products could provide important relief to hundreds of thousands of small businesses around the world.
Conclusion
The largest drag on the global economy from COVID-19 appears to be the extreme contraction of international travel and tourism (along with reduced domestic travel and tourism).
With the projections from the UNWTO being that the world will not regain the level of strength in the global travel and tourism sector for a number of years, there is an urgent need for all nations and the international organizations to up their game to prevent the massive dislocations that are occurring and likely to occur otherwise in the sector.
Terence Stewart, former Managing Partner, Law Offices of Stewart and Stewart, and author of the blog, Current Thoughts on Trade.
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