The initial data points have been as sobering as the
mounting coronavirus headlines would indicate.
Hotel occupancy in China has dropped 75%. The U.S. is
forecast to lose more than $10 billion in spending by Chinese visitors. And
Disney could lose nearly $300 million in operating income from just the closure
of its China and Hong Kong theme parks for two months.
On the flip side, however, the impact of the virus on
outgoing U.S. travel appeared to be confined to China itself. And the latest
pandemic fears could be a boon, at least in the short-term, for adventure
travel, domestic travel and other vacations that insulate travelers from global
tourism hot spots and crowds in general.
Those were some of the predictions that began trickling out
last week as the industry scurried to assess the potential fallout from the
deadly coronavirus outbreaks that shut down all but emergency travel into and
out of China, the world’s largest outbound travel market.
The reality, however, is that it’s just too soon to know and
just about impossible to predict.
On Royal Caribbean Cruises Ltd.’s (RCCL) fourth-quarter
earnings call Feb. 4, chairman Richard Fain said, “Unfortunately, no one knows
how this outbreak will play out, and we don’t know how it will impact us. There
are still too many variables and uncertainties to give an estimate of the
Tourism Economics, an Oxford Economics company, last week
predicted that the ban on inbound travel from China would result in a 28% drop
in Chinese visitors to the U.S. in 2020 and $5.8 billion less in spending. Over
the next four years, it predicted, the U.S. would lose more than $10 billion in
spending from Chinese visitors.
The company said it based its forecast on the timeline of
the SARS outbreak in 2003, which lasted about four months. The full recovery in
tourism to the U.S., the company said, took about four years.
Meanwhile, STR said hotel occupancy in China dropped from
70% to 17% between Jan. 14 and 26.
Both Tourism Economics and STR said they were still working
on projections for how the virus would impact travel globally, although STR
said hotels around the world are expected to see a pronounced impact, given the
rise in Chinese outbound travel in recent years.
Clayton Reid, CEO of the travel marketing and research firm
MMGY Global, said Australia, Asia, the Pacific Rim and Europe would be hit
harder than the U.S., because they draw a higher number of Chinese travelers.
At RCCL, Fain said the impact last week was still regional.
And while the company has canceled eight cruises from China,
CFO Jason Liberty said this year’s Wave season was off to an “excellent start.”
He said the second week in January was a record-breaking week for bookings
overall, with pricing ahead of last year. Bookings were especially strong from
the U.S. and Europe, the company said.
For U.S. airlines, there are uncertain signals about whether
the impact is extending beyond China to the rest of Asia. An analysis of online
flight searches over the past five weeks conducted by the booking platform
Hopper found that demand by U.S. travelers to visit areas in Asia outside of
China appeared to be stable.
However, an ARC and IATA analysis found that refunds on tickets
originating in the U.S. and going to Asia were up 215% year over year between
Jan. 22 and Jan. 28. For tickets from the U.S. to China during that period,
refunds were up 534%. Sales to China alone were down 59% year over year that
week, and sales from the U.S. to all of Asia, including China, were down 18%.
Still, the cancellation of flights by U.S. carriers to China
and Hong Kong affected just 1% of United’s flights and 0.5% of Delta’s and
American’s frequencies, according to the flight data analytics provider OAG.
And while Reid said the short-term impact of the virus was
obvious, MMGY’s research of traveler reaction to past pandemic scares and other
global crises suggested that travelers rebound from crises relatively quickly.
“We have noticed those peaks and valleys have actually
shallowed over time,” he said. “In our view, people are becoming more
accepting, unfortunately. But as a result, they tend to move on more quickly.”
Reid said the biggest difference between the current
outbreak and the SARS and H1N1 outbreaks in 2003 and 2009, respectively, was
the increased influence of social media and the role it played in amplifying
“I traveled from San Francisco yesterday, and the number of
people wearing masks, I have never seen before,” he said.
But he said that once the spread is contained, he expects
people to resume their usual travel trends fairly quickly.
“My read would be that once April comes, this will begin to
subside, and people will get back to their traditional travel patterns,” Reid
In a blog post, Chris Davidson, global vice president of
research and insights for MMGY, wrote, “If there’s one thing we know, it’s that
people will always travel.”
He went on to speculate that “other forms of travel may
actually experience a concurrent uptick, even as news of this health crisis
As an example, he said, “Our data revealed a significant
spike in road trips in America as a form of travel experience over the past
five years. ... This trend could actually accelerate when travelers are
concerned about crowds and confined spaces.”
Reid wondered if the market for isolated individual travel
would grow in response to the virus.
“Adventure travel, trips where people get back to nature and
away from crowds and confined spaces, might well experience growth in times
like this,” he said. “We also know from research that travelers are now more
likely to avoid tourism destinations and experiences that are increasingly
overcrowded in favor of more local, authentic experiences. Might a global
health pandemic like coronavirus impact and accelerate this trend, too?”
Roger Dow, CEO of the U.S. Travel Association, said that the
U.S. should take advantage of the many travelers who are canceling trips to
“Travel moves very quickly from one place to another,” he
said. “People are not going to stop traveling, they are going to go somewhere
else. ... There’s a plus side, and that’s that the people who planned to go to
those areas will seek to go to other areas, and the U.S. could benefit greatly
Indeed, while travel agents reported the widely anticipated
cancellations to China and Asia, none indicated any real panic about travel in
Jerry Saxe, president of Los Angeles-based Carlisle Travel
Management, a Travel Leaders Network agency that attributes about 15% to 20% of
its business to Asia travel, said his agency was working on a lot of refunds.
“Companies don’t want to take the risk,” Saxe said. “It is
about duty of care for their employees. If they have a booking with multiple
stops that includes China, they will just cancel the whole trip altogether. No
one seems frustrated; it’s just part of doing business for them.”
Otherwise, however, he said business overall has been
“January was a stellar month for us -- more
so than usual,” Saxe said. “The first two weeks came really strong. The third
week of January took a slight dip, but then it increased in the fourth week.
Because the economy is good, our business is on pace despite these
But he also added: “The cancellations potentially could
impact business if it continues for many months.”
Becky Powell, president of Protravel International, said her
advisors, too, were seeing cancellations, “but in a lot of cases people are
rebooking to other destinations or postponing the trip for a period of time
until they see how quickly this clears up. With corporate travel, it’s a whole
different story, and a lot of that will just stop until all the travel
advisories are lifted.”
What remains important, Dow said, is “to make sure the
message doesn’t become confused with ‘Don’t travel at all.’ That would cause
huge economic damage.”
Communication, he said, is the most important thing any
government can do to prevent wide travel losses.
“One thing we don’t do well in this country is give the ‘all
clear,’” Dow said. “We are quick to talk about something going on, but we can
recover much more quickly if people know the facts.”
Jamie Biesiada, Johanna Jainchill, Christina Jelski and
Robert Silk contributed to this report.