How Will Emerging Economies Reliant on Tourism Survive the Crisis?

How Will Emerging Economies Reliant on Tourism Survive the Crisis?

A little more than six months into the pandemic, the rosy projections of a return to normalcy for tourism by the fourth quarter have all but vanished. Indeed, few will disagree now that Covid-19 is a long-term disruption, and the recession it will bring will likely go on for even longer.

While no two countries will emerge from a post-Covid world in the exact same shape, there are several factors that make some particularly vulnerable to a long-term upset — so much so that they may have to turn to a new economic growth strategy.

An analysis done by Hasnain Malik, head of equity research at Tellimer, separates emerging markets into two main categories: defensive and vulnerable. The former includes nations that have a high domestic tourism contribution to gross domestic product pre-pandemic (more than 5 percent) coupled with a less than 5 percent of GDP coming from international tourism. Countries in this category include China and India.

The vulnerable category are countries that have a low domestic tourism contribution to GDP, and high international contribution, using the same 5 percent threshold. Examples of this category include Morocco, Mauritius, Croatia, Turkey, Iceland, Jamaica, and Barbados.

But even for countries that fall into the defensive category, Malik writes, it won’t be easy. “Of course, from an economic growth and balance of payments perspective, domestic ‘staycationers’ are a poor substitute for visitors from overseas. Typically, their trips are shorter in length, they spend less and they spend almost entirely in local currency … Nevertheless, until the world has put Covid-19 behind it, it is better to have the domestic tourist segment than not.”

The impact will no doubt be deep up and down travel and tourism’s extensive economic supply chain in these countries, some parts less visible than others, from linen suppliers to hotels to baggage handlers at local airports to t-shirt and souvenir hawkers working the beaches.

An International Monetary Fund report in August said that countries that could see tourism losses exceed 2 percent of GDP in dollar amounts include Thailand, Greece, Portugal, Morocco, Turkey, and Costa Rica. China may be set to see a modest gain, because Chinese tourists normally spend more money overseas than visitors to China do. 

Dimitrios Buhalis, a professor of tourism at Bournemouth University, told Skift that countries which can temporarily divert their tourism workforce to other industries, such as to agriculture or fishing, may be able to weather the storm and see their tourism economies pick up where they left off, eventually. He pointed to the example of Bali, Indonesia, where the tourism workforce has largely shifted to more traditional economic means — certainly not without hardship.

But, Buhalis said, “where it’s more difficult is where tourism is 60, 70, 80 percent of the local economy and where you don’t have a local domestic market. Places where the country is small, geography does not support easy accessibility, and the social classes are very structured.” He noted that some Greek islands and countries such as the Maldives fall into this category.

Conversely, Buhalis said the emerging markets that will fare the best during Covid are those that have a large domestic population, an income distribution which means a sizeable percentage of locals can afford to travel, and the geography and infrastructure that allows them to do so.

Though he believes that tourism will recover — “we’ve seen how many people are desperate to travel” — he thinks the current moment represents something of a “fallow period” for tourism, one where governments who have already invested in tourism economies should continue to build up infrastructure and make industries more efficient for what he sees as tourism’s inevitable return.

“Apart from the health crisis we’re about to experience a major global recession beyond belief and that will damage tourism and will create a range of initiatives to prepare us for the next day,” Buhalis said. “We need to improve efficiency and we need to improve the way that we manage tourism.”

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