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Air, cruise and lodging: COVID-19 disrupts the tourism industry

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Rebecca Valli

The coronavirus outbreak is putting many industries at risk. Among them, the tourism industry seems to be one of the worst affected in the short term. The World Travel and Tourism Council has warned that the pandemic could cut 50 million jobs worldwide for an industry that currently accounts for 10% of global GDP. 


Professor at the Cornell School of Hotel Administration

Christopher Anderson

Professor at the Cornell School of Hotel Administration

Christopher Anderson, professor of business at Cornell University’s Hotel School, breaks down the likely repercussions to air, cruise and lodging industries. 

 

Anderson says:

“I think the biggest changes we are going to see short term are impacts on air and cruise – both these industries will be impacted but in different ways.

“I think air will be slow to recover because there will be substantive capacity reductions – airlines have been very cautious in adding new capacity especially after the last recession and given the consolidation within the industry they will push prices higher as demand recovers and then slowly add capacity. As a result, I think it will take a while to get back to current capacity levels. I also believe air recovery will somewhat depend on how effective we become at digital/virtual meetings. I believe people need interaction, and it is possible a prolonged pause in regular business dealings may jump start air as people look to get back to business and create opportunities.

“Cruise is a different story as the major players have new ships in the works already, so cruise while structurally damaged in the minds of non-cruisers is going to be very, very inexpensive which I expect will pull back experienced cruisers quickly. The bigger issue here will be getting new people to cruise, I expect this is going to be much harder. Cruise was already facing some environmental headwinds, so not overly optimistic.

“I am more positive on lodging as people are still going to need to get away, especially after having not been able to do so. In the near-term lodging can manage costs as they cut back on labor and then I think they will recover pretty quickly. Prices, I think, will be more stable than most recessions as I hope suppliers realize they are not going to stimulate demand with prices at present – as long as we get things under control sooner versus later and in time peak/summer travel. While the likes of Airbnb will still impact traditional hotels – by slowing capacity growth and limiting ADRs, I don’t see a big move to alternative inventory as I think this health scare is going to reinforce the value of standardization, cleanliness and the security that comes with established firms versus the potential unknowns of peer-to-peer rentals.”


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