International Travel – what’s it worth?

May 11, 2020 Peter No comments exist

As the world grapples with the fallout from the Covid-19 crisis, one thing that is abundantly clear is that international travel is at the back end of re-opening economies. Those countries that have managed to, using an overworked phrase, successfully flatten the curve and get their numbers under control will be loathe to suddenly open their borders and risk foreign travellers reintroducing the virus into their countries.

It will be a huge problem for those countries that rely heavily on international tourists but, with international tourism being such an important part of the world economy, almost every country will be affected. In 2018 there were 1.401 billion international tourist arrivals worldwide. These international trips generated US$256 billion in passenger transport and US$1.5 trillion in receipts at the destination. Travel for leisure and by air dominates international tourism.

In 2017, Tourism was the world’s third largest export category (US$1 586 billion) after Chemicals (US$1 993 billion) and Fuels (US$1 960 billion) and ahead of Automotive products (US 1 470 billion) and Food (US$1 466 billion). International travel is big business and vital for some countries. It is hard to believe that in a few weeks a little over US$1.7 trillion in international trade simply came to an abrupt stop. No-one knows what effect this will have on the world’s economy and it will take some time for the effects to be felt. What is however clear is that it’s going to hurt – badly.

The World Travel and Tourism Council estimate 75 million jobs are at risk and that in 2019, “Travel & Tourism’s direct, indirect and induced impact accounted for:

  • US$8.9 trillion contribution to the world’s GDP
  • 10.3% of global GDP
  • 330 million jobs, 1 in 10 around the world
  • US$1.7 trillion visitor exports (6.8% of total exports, 28.3% of global services exports)
  • US$948 billion capital investment (4.3% of total investment)”

For 2018 the top 10 international tourism destinations (by arrivals) were:

Rank Destination International Tourist Arrivals International Tourist Receipts
1 France 89.4 million US$67.3 billion
2 Spain 82.8 million US$73.8 billion
3 United States of America 76.9 million US$214.5 billion
4 China 60.7 million US$40.4 billion
5 Italy 62.1 million US$49.3 billion
6 Turkey 45.8 million US$37.1 billion
7 Mexico 41.4 million US$23.8 billion
8 Germany 38.9 million US$43.0 billion
9 Thailand 35.5 million US$63.0 billion
10 United Kingdom 37.6 million US$51.9 billion

Australia does not make the top 10 by arrival numbers (9.3 million) but ranks number 8 by International Tourist Receipts (US$ 45.0 billion).

China is the world’s largest market for outbound travellers with 150 million travellers in 2018. Approximately 10% of China’s 1.4 billion inhabitants travel internationally – well they did prior to Covid-19. Where do the Chinese go? Here are the top 10 destinations for 2018:

  1.  Hong Kong – 49 000 000
  2.  Macao – 27 500 000
  3.  Thailand – 10 100 000
  4.  Japan – 9 250 000
  5.  South Korea – 6 250 000
  6.  Vietnam – 4 800 000
  7.  Singapore – 3 600 000
  8.  Malaysia – 3 150 000
  9.  Cambodia – 2 750 000
  10.  Taiwan – 2 750 000

The United Nations World Tourism Organisation estimate that Chinese tourists overseas spent US$277.3 billion in 2018. By comparison, American tourists overseas only spent US$144.2 billion. The world desperately needs the Chinese (and everyone else for that matter) to start travelling overseas but it is hard to see how this is going to happen anytime soon. The sudden loss of overseas tourists is going to leave a gaping hole in the economies of many countries and this is going to compound the financial fallout from this crisis.

Australia and New Zealand are already floating the idea of a ‘trans-Tasman bubble’ which would see flights between the two countries resuming fairly soon and allow tourists to travel freely between the two countries. Both countries rely heavily on international tourists (and immigration) to support their economies and the loss of overseas tourists is going to put a huge dent in both governments coffers.

It is not hard to see why both countries are so keen to create a ‘trans-Tasman bubble’. There were 8.5 million international visitors to Australia in 2018 – they were arriving at a rate of 970 an hour – and 1.3 million of these visitors came from New Zealand. New Zealand tourists were second only to Chinese tourists.

For the year ending February 2020, 1 550 683 Australians travelled to New Zealand. This was more than from China (367 629) and the USA (370 879) combined. A ‘trans-Tasman bubble’ would go a long way to getting the much needed overseas tourists back in Australia and New Zealand but it would clearly be a far bigger benefit to New Zealand.

Given that both countries have been hit hard by the loss of overseas tourists it is however hard to see that either country will want to see that amount of money leaving the country and the tourism bodies in both countries will fight tooth and nail for every tourist dollar. Australia launched a ‘Holiday Here This Year’ campaign after the bush fires last year and they will no doubt be pushing that message hard.

The problem facing both Australia and New Zealand (and others who adopted a ‘go early, go hard’ approach) is that they cannot open their borders without a vaccine, unless of course they impose a 14 day quarantine for all overseas arrivals, which will in itself stop international tourists from visiting these countries.

Sweden adopted a very different approach and did not go for a hard lockdown and their infection and fatality numbers are not the worst in the world. They are in fact doing a lot better than some countries who did adopt a hard lockdown.

Sky News Australia recently interviewed Johan Giesecke – Sweden’s former state epidemiologist – who has suggested New Zealand may have to isolate international arrivals for the next decade. He makes a compelling case for Sweden taking the course that it did and if he is right those countries that adopted a ‘go early, go hard’ approach may well have wrecked their economies in vain.

 

While everyone desperately needs to see full planes and busy airports again I daresay it will be a while before we see those again. What is more likely is that we will see more ‘trans-Tasman bubble’ type arrangements between various countries.

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