CoronaVirus Update ·

CoronaVirus Update

The CoronaVirus situation has escalated dramatically over the last few days. The impact of these developments, on the back of the ongoing bushfire situation, is creating major challenges for tourism operators across the state with some operators reporting severe hardship.

QTIC is liaising with State Government, TEQ and the RTO network to ensure we have a consistent and comprehensive understanding of the impacts. As you may have seen in the media, the information to date suggests losses in China trade of up to $100 million so far in Queensland. The outlook is not encouraging, considering that the last pandemic outbreak in 2003 saw the infections spread for more than two months before the situation stabilised. It is clearly not just the visitor flows from China being affected but all international travel is likely to be impacted. We have provided an excerpt of an academic article written after SARS which highlights some interesting parallels to the current situation (see below).

We welcome both the State Government and the Commonwealth Government’s efforts to boost marking efforts, especially in the domestic market. At the same time, we are urging both governments to consider the need for measures that can support businesses that are facing immediate cash-flow issues.

Practical support for business is QTIC’s focus and we will make every effort to support our industry and our members in any way we can. We hope to make some further announcements soon. A push from marine tourism operators to seek some temporary relief from fees and charges is an initiative we strongly support and have now raised at a political level. We welcome all practical suggestions to support the industry that we take up with government decision-makers.

QTIC is part of the State Government’s Economic Recovery Group which was activated yesterday. This group brings together all heads of state agencies and peak industry groups and QTIC was able to raise tourism concerns at the highest level. Tomorrow the Premier will host a roundtable Industry Forum to discuss the Coronavirus implications which will give QTIC an opportunity to express the concerns that operators have.

We welcome the Queensland Tourism Minister’s strong call for action and the support from the Queensland Leader of the Opposition for prompt measures

We are also working with our national colleagues through the Australian Tourism Industry Council (ATIC) to prompt more action at the national level. Yesterday QTIC participated in a meeting with Hon Simon Birmingham, Minister Trade, Tourism and Investment to discuss how the Commonwealth can assist.

Our industry will need a national crisis response to keep local economies – and the jobs that go with it – going!

An illustration of how long the SARS infection spread lasted and how rapidly the Coronavirus spread.

 

Bloomberg Economics – 31 January 2020
Coronavirus Is More Dangerous for the Global Economy Than SARS

The impact could potentially be deeper and wider due to China’s economic rise over the past 17 years and the very different risk environment this time around.” For one, China’s economy is almost 10 times larger than in 2003, making it a much bigger systemic threat to the global financial system. At the same time, it has evolved to become more services-led, with major implications for how the virus scare is transmitted into markets. First, the nature of media and of the coverage was different. SARS started in November 2002, but it didn’t immediately acquire its moniker and the virus took time to reach widespread public attention.

Days after the first Bloomberg article citing “SARS,” the U.S. and its allies invaded Iraq. Subsequent global market reaction to the virus is therefore impossible to separate from the response to turmoil in the Middle East. “While the coronavirus thus far appears less deadly than SARS, risk to markets is elevated given stretched valuations,” Morgan Stanley Wealth Management strategists including Scott Helfstein wrote this week.

Dwyer, L., Forsyth, P., & Spurr, R. (2006).
Effects of the SARS Crisis on the Economic Contribution of Tourism to Australia. Tourism Review International, 10(1-2), 47-55.

Effects on international tourism were immediate. GDP of the affected Asian economies was estimated to decline by an average of 1–1.5% as a direct result of the outbreak, largely due to the effect of image problems on the sensitive tourism industry, which in some cases accounts for as much as 15% of private consumption. Tourism arrivals fell by as much as 20– 25%, clipping at least US$85 billion from aggregate travel income and a further $15 billion from corporate income (Asia Times, quoted in DITR 2003b).

A lack of knowledge of the exact nature of the disease, coupled with certain media outlets’ handling of the outbreak, contributed to a climate of uncertainty, particularly in Asia. The psychological dimension of the outbreak was disproportionately large in comparison to the real scope of the disease, leading to irrational reactions that significantly impacted upon international tourism. An initial effect of SARS was the cancellation of scheduled holiday trips to affected destinations, redirecting them to others instead. The business travel segment was one of the hardest hit as corporations banned business trips particularly to Asian destinations.

Most intending travelers applied a “wait and see” approach to SARS. However, late bookings persisted, along with last-minute purchases with some markets revealing a high degree of price sensitivity. Given its status as an “alternate destination,” one might have expected Australia to have benefited from inbound travel from the US and Europe. However, travel from both Europe and the US to all destinations had already fallen because of the Iraq conflict. Moreover, potential travelers were fearful of catching SARS on a plane or in transit at a foreign airport. Other countries (e.g., New Zealand) that would otherwise have generated some additional tourism to Australia themselves had vigorous tourism campaigns encouraging residents to travel domestically.

SARS emerged after 2 years of unprecedented airline industry losses, and in association with the Iraq war, led to a 10% decrease in traffic and a 20% cut in advance reservations (DITR, 2003b). Asian airlines were the hardest hit as a result of SARS. Almost all Asian carriers reduced services. Many airlines restructured their routes while other cut capacity on Pacific or Asian routes serving certain destinations. Although oil prices (a major cost for airlines) had fallen following the Iraq War (but have again risen over the past year) all airlines continue to face higher costs through insurance, security, and other technology such as temperature scanning required for detecting the SARS virus.

In April 2003 the Director General of the Association of Asia Pacific Airlines (comprising Air New Zealand, All Nippon Airways, Asiana Airlines, Cathay Pacific Airlines, China Airlines, Dragonair, EVA Air, Garuda Indonesia, Japan Airlines, Korean Air, Malaysia Airlines, Philippine Airlines, Qantas Airways, Royal Brunei Airlines, Singapore Airlines, Thai Airways International, and Vietnam Airlines) stated that “the dramatic fall in demand for air travel as a result of the spread of SARS across the region has had a devastating effect on airlines in the Asia Pacific.

People have simply stopped travelling or worse, been prevented from travelling by government action” (Association of Asia Pacific Airlines [AAPA], 2003). The proactive response by airlines after SARS to rebuild travel confidence was significant. Heavy discounting in many markets took place to stimulate the market and also to help build market share, but this did little for ongoing airline sustainability. All major airlines, as well as tour operators, introduced a flexible cancellation and refund policy for flights to and from the affected areas. In order to help the sector to cope with the circumstances, and following IATA’s appeals for partnership, some airports rebated their charges (Singapore-Changi, Chiang Kai Shek, Chinese Taipei, Dubai, Cyprus, Athens, Melbourne, Brisbane, Kuala Lumpur, and Hong Kong).

In Australia, the downturn in international travel made it even more important for the struggling tourism industry to encourage Australians to holiday at home. With a reduction in international traffic, domestic capacity was boosted, but bookings were lower than expected. Furthermore, Qantas and Virgin Blue actively sought to stimulate domestic traffic by discounting. There was heavy discounting in domestic tourism, and given the reduction in both direct and indirect tourism expenditure, the SARS effect thus extended to all tourism sectors. Occupancy levels in hotels plummeted in the Asian Pacific region. Airlines, hoteliers, car rental agencies, and tour operators offered discounts of up to 45%. Cruise tourism was also affected by SARS as certain cruise lines transferred their principal ports from China or Singapore to Australian ports.

Economic Effects on Australia: The 5.3% reduction in forecast inbound tourism numbers led to a $977 million fall in injected tourism expenditure in Australia in 2003. This translates into a reduction on real GDP of $109.2 million and loss of 2517 jobs.

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