SARS-CoV-2 Impact: Where does the tourism sector go from here?

SARS-CoV-2 Impact: Where does the tourism sector go from here?

The tourism sector is an integral part of the Australian economy with a significant contribution to the country’s GDP as well as employment. It has continued to be a substantial driver of growth in the economy.

The sector is supported not only by foreign visitors but also by the Australians themselves who share strong willingness to explore other regions within the country. The growth in the tourism sector during 2018–19 was up by double-digit in value, and domestic expenditure surpassed $100 billion for the first time during that period.

Moreover, Australia stands amongst the Top 10 global players based on international expenditure in tourism with $64.2 billion on outbound trips 2018-19, highlighting the room for travel and significant capacity to grow domestic travel.

The year 2019 ended on an unfavourable note for the Australian tourism sector due to the bushfires that are said to have had a significant impact on Australia’s tourism industry. Australia witnessed one of the wildest bushfires in late 2019 with fires across nine tourism regions that affected Australia’s international and domestic tourism.

At the beginning of 2020, when the wounds of bushfires for the tourism industry had not even healed, the industry experienced a crackdown due to the COVID-19 pandemic originating in Wuhan, China. The coronavirus disease caused by the virus named Severe Acute Respiratory Syndrome Coronavirus 2 or SARS-CoV-2, has put the Australian tourism industry under misery.

Moreover, the origination of the virus in China was a major setback for Australian tourism industry long before the virus barged into Australia since China is Australia’s largest inbound visitor market with around 1.4 million visitor arrivals in 2018–19.

As the situation started to worsen, the tourism industry was amongst the first ones to feel the heat with travel restrictions being imposed across borders. Moreover, it is said that the tourism sector is yet to witness a breadth of events that are expected to take shape as the spread of coronavirus worsens.

The situation that the Australian tourism industry is currently grappling with due to the coronavirus outbreak is unquantifiable. A rough idea about the miserable situation can be drawn from the developments going across the organisations in the industry.

Grounded airlines, tourist spots and public places locked, social distancing measures imposed, and several other restrictions have compelled the businesses in the tourism industry to take steps for cutting costs and ensuring minimum financial burden on the companies at a time when businesses are at a standstill.

The longer the businesses continue to be in the state of cessation, heavier the financial burden on the companies due to the lack of commercialisation of its products and services. Management teams across the businesses are fearful of the liquidity crisis that could occur in the future if the situation does not improve.

The domestic tourism industry of Australia may revive in the coming months as the situation eases; however, revival in the international tourism is likely to be delayed for a long duration since this depends mainly on the related developments in other countries, especially China. The delay in the revival of international tourism is bound to cripple the growth of the tourism industry of Australia.

According to the Australian Tourism Export Council, multiple inquiries are coming from foreign travellers who are planning to visit Australia in the later part of the year 2020. The inquiries validate the desire of international tourists to visit Australia. However, visits from international tourists is highly dependent on the opening of borders for which there is no fixed date as of now.

The prevailing international travel lockdown looks likely to remain in place for around six months. The impact that this international lockdown shall have on the tourism industry is immeasurable and is expected to paralyse the industry in the coming quarters.

The Australian Government has been actively taking measures to reduce the burden on the businesses, especially the severely hit tourism industry. In March 2020, the Morrison Government had pledged $1 billion for the tourism industry from the $17.6 billion economic stimulus package that was announced for keeping Australians employed and assisting small and medium-sized businesses to continue doing business.

The package also includes several measures of subsidies and allowances, such as waiver of fees for tourism businesses that function in Commonwealth National Parks as well as the Great Barrier Reef Marine Park, while also assisting businesses to identify substitute export markets or supply chains.

Moreover, the Government also mentioned about developing targeted measures that shall be undertaken with a view to promoting domestic tourism. Also, the Government looks forward to engaging and partnering with the impacted industries and communities to plan and develop measures that shall support the recovery of the same.

Let us look at the recent developments with some of the stocks from the aviation and tourism-related business.

Individual businesses in the tourism sector like Qantas Airways Limited (ASX:QAN) have raised funding for additional liquidity to navigate through the current situation of coronavirus outbreak.

Under its freshly concluded round of debt financing, QAN has secured around $1.05 billion to supplement its existing liquidity to further solidify its position as it endures through the COVID-19 outbreak.

Another tourism player, Flight Centre Travel Group Limited (ASX:FLT) has also raised $562 million through a fully underwritten placement and institutional entitlement offer and has seen strong support from existing eligible institutional shareholders.

The company also looks forward to raising approximately $138 million through a fully underwritten retail component of the Entitlement Offer where eligible retail shareholders shall be invited to take part in the offer.

Corporate Travel Management Limited (ASX:CTD) and numerous other travel and airlines companies have withdrawn their earnings guidance citing the uncertainty due to COVID-19.

However, SeaLink Travel Group Limited (ASX:SLK) said that its revenue is predominated driven by the high-quality long-term government-contracted sources that account for 85% of its existing revenue.

Till March 2020, the business of SLK has remained resilient with no material change in the performance of the larger Transit Systems part of the business and had sorted several initiatives in response to the COVID-19.

Bottomline

Times were good for the Australian tourism sector before the events like bushfires and the coronavirus outbreak. Fast-forwarding to today in April, bulk job shedding, business closures, hibernation, disruption of the export channel are some of the events that have constituted for a nearly devastated Australian tourism industry due to coronavirus. The World Economic Forum predicts that the travel and tourism industry might take close to 10 months to recover from the severe impact of the pandemic. At present, the Australian tourism industry is desperately striving to hold on till the clouds of hopelessness demystify.


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