The travel industry is bracing for a potentially
serious downturn of unknown length as the coronavirus continues to spread,
forcing cancellations of flights, tours and cruises in China and threatening to
create a global tourism slowdown.
While most industry players said it was too early to predict
the ultimate impact, investment analysts said the growing number of travel
warnings and bans related to the virus, combined with election-year politics in
the U.S. and geopolitical tensions, were worrisome in terms of the financial
health of the industry in 2020.
“The tourism industry is already facing a number of
headwinds, including ongoing uncertainty over the terms of the U.K.’s upcoming
Brexit withdrawal and intensifying geopolitical tensions between a number of
powerful nations,” said Ben Cordwell, travel and tourism analyst at the U.K.
data and analytics company GlobalData. “These factors, combined with the
coronavirus outbreak, could mean a tough year lies ahead for the international
While some outbound tours and China-based cruises were
canceled, U.S. tour operators were mostly taking a wait-and-see approach,
noting that this is the off-season for travel to China; group travel and cruises
typically pick up in March.
Airlines felt the immediate brunt, with British Airways
becoming the first carrier to halt all travel to China and others following suit.
Austin Horowitz, senior aviation management consultant for
ICF, said that even in a best-case scenario, demand for air travel to China
would take a severe hit in the near term.
“The duration of how long this goes on until it is contained
will have a significant impact on how fast the recovery is,” Horowitz said of
A recent IATA analysis showed that pandemic outbreaks can
have a major impact on air service demand but that demand also recovers
quickly. The World Health Organization has not classified
coronavirus as a pandemic, but it is likely to do so.
During the most significant pandemic of this century, the
2003 SARS outbreak in southern China that killed nearly 800 people and
afflicted more than 8,000, Asia-Pacific airlines saw the number of monthly
miles traveled by passengers bottom out at 35% below pre-pandemic levels.
Over the course of 2003, revenue miles flown were down 8%,
causing $6 billion in lost revenue. However, monthly passenger numbers at
Asia-Pacific carriers had returned to pre-SARS levels within seven months of
the start of the crisis.
Other pandemics, such as the 2015 MERS flu outbreak in South
Korea, had a shorter-lived effect. The first month of the outbreak brought a
12% decline in travel to and from South Korea, IATA said. However, volume began
to recover after just two months.
“While there are risks that this outbreak could cause a
sizeable disruption, history indicates that any effect on air transport would
be temporary,” IATA said in a statement.
Cordwell, too, said that while it was hard to predict best-
and worst-case scenarios, “I do think the market is quite resilient. People are
not going to stop traveling. ... I do think the industry will definitely bounce
Travel advisors, meanwhile, were scrambling to deal with the
“It has been a horrible experience with travel plans,” said
Craig Hsu, vice president of Travel Design USA, which specializes in travel to
Asia. “The mood of our travelers [is] very concerned and worried. We have
canceled multiple trips, including a large group that was supposed to travel to
Wuhan in March. Luckily, the airlines and cruise lines worked with us for a
full refund to our clients.”
Although acknowledging that his advisors were inundated with
calls, he said the impact had been much greater in 2003. But he also pointed
out that U.S. consumer demand for travel to China was much higher back then.
“SARS was huge,” he said. “People were more interested in
traveling to China during that time versus now,” a shift that he attributed to
trade and political tensions between the U.S. and China.
Agents said they also were starting to see apprehension
about travel beyond China.
For example, Joan Novack, an independent advisor with a
Travel Edge affiliate in New York, said she has two clients, women in their mid-80s,
traveling to Southeast Asia with Abercrombie & Kent starting Feb. 24. One
of the clients still wants to take the trip, she said, but the other is
reluctant after hearing news reports about the spread of coronavirus.
ASTA advised agents against making any recommendations to
clients about whether or not to travel to affected areas, instead encouraging
them to direct clients to the Centers for Disease Control and Prevention for
the most up-to-date recommendations related to coronavirus.
“Ultimately, it is the traveler who must make that decision,
ideally doing so in an informed manner and in light of his or her own
individual risk tolerance,” ASTA said in a statement.
Cruise lines with China-based ships last week began
canceling departures through early February. And some lines implemented
stricter preboarding health screenings. Likewise, as of last week, more than 20
U.S. airports were screening passengers arriving from China.
As far as the long-term impact of coronavirus on cruise
lines, UBS financial analyst Robin Farley said that Royal Caribbean Cruises
Ltd. (RCCL) is the most exposed to the China market, where it has about 6% of
its deployments in 2020, followed by Carnival Corp. with 5% and Norwegian
Cruise Line Holdings with less than 1%. She said that while Chinese passengers are growing rapidly as a source in other parts of
the world as well, “Chinese passenger travel to other markets may not be as
impacted by these concerns.”
Farley also said that early checks had indicated that the
coronavirus had not impacted North American cruise bookings.
“Concerns about viruses tend to be regional to the
occurrence, and it is still early to know what regions may ultimately be
impacted,” Farley wrote in an investors note.
The outbreak was top of mind at the Americas Lodging
Investment Summit in Los Angeles last week, as hoteliers braced for a
significant drop in one of their biggest growth markets as well as potential
fallout from a decline in outbound travel from China.
STR president Amanda Hite said, “I do expect there to be a
pretty big demand drop [for hotels] in China. When I look at the initial impact
on the U.S., there will be some key markets that feel it, especially in gateway
cities that depend on Chinese travelers, like New York, Los Angeles. Those are
markets where if this is a prolonged issue, that could be very impactful.”
Hite said a look back at the impact from SARS, which began
around February of 2003, showed the peak drop in room demand for China came a
few months later.
“We saw room demand drop 50% in April, 75% in May and then
another 50% drop in room demand in June” she said. “And then it started to pick
Jamie Biesiada, Johanna Jainchill, Christina Jelski and
Robert Silk contributed to this report.