COVID-19 Industry Pulse Report: Tourism
COVID-19Industry PulseReport: Tourism16 April 2020
COVID-19 Industry Pulse Report: Tourism How does COVID-19 impact the tourism sector? What is the industry’s sentiment around it? What actions could limit the impact for tourism and itsecosystem?
Stelios DemetriouPartnerTransaction Advisory Services LeaderReal Estate and Hospitality LeaderForeword“The pandemic has caused globaleconomic turmoil and has disruptedconsumption and supply chains across theworld.Cyprus is once again facing an immensechallenge that is exacerbated by the globalinterconnectedness of its economy. Thesituation calls for ongoing monitoring toensure proper understanding and sounddecision-making.At EY Cyprus, we have prepared threeIndustry Pulse reports for the Tourism,Banking and Real Estate sectors. The reportsaim to provide sector-specific perspectivewith regards to the impact of COVID-19, inconjunction with fiscal and monetary policyresponse, and include our own assessment oflikely scenarios and trends. In this report, wefocus on the Tourism sector.3Our team has spoken with tourism sectorexperts and leaders to obtain a realisticcollective sense of their sentiment andexpectations of this crisis, their views inrelation to the response measures to date andtheir insights with regards to recoveryscenarios and trends.This publication will be updated periodicallyand shall incorporate the most updatedpublicly available information in relation tothe impact of the virus on the aforementionedindustries, the Government and regulators’response actions as well as an updatedeconomic assessment in accordance with ourview.We trust that this publication will become areference document for discussion amongstakeholders such as corporate executives,financial institutions and the Government.
ContentsExecutiveSummaryPagePreamble5Page7Tourism stakeholdermap and COVID-19ImpactPage11COVID-19 impacton TourismPageIndustry Sentiment18PageRecommendationsPage24Sector’s MegatrendsKey TakeawaysPage414Page25How EY can help26PageCOVID-19 Industry Pulse Report: Tourism27
Executive SummaryThe unprecedented humanitarian effect of the COVID-19 crisis comes along with a potential economic downturn.We are in unchartered territory that is beset with further shocks both to the local and global economy. What isclear, however, is that the road to recovery will be an uphill one. Addressing a volatile situation like this requirescoordinated actions across all levels and stakeholders. The Tourism sector, a key pillar of the economy, has a critical role to play in economic recovery.It is noted that the rapid expansion of the outbreak may cause some of the perspectives in this report to quicklybecome out of date. This Pulse report reflects our perspective as of April 13, 2020; we aim to update the reportregularly as the outbreak evolves, to capture the latest developments caused by the virus.Industry Sentiment – Key Takeaways of the EY SurveyEY has conducted a Survey with regards to the potential impact of COVID-19 on the Cypriot Tourism sector. Keyexperts and executives from major Cypriot hotels and hotel chains were invited to share their sentiment on theimpact of COVID-19 on the sector with regards to operations and financial performance.View on financial performance The vast majority of participants expect an overallreduction of at least 50% in revenue for 2020 comparedto 2019. They also project a decrease of more than 50%on the average occupancy for the year compared to theprevious year. Unanimous response that all reservations until the end ofMay 2020 were either cancelled or deferred. Similarly,bookings for June 2020 are currently at low levels andlikely to be also cancelled. The majority of the participants expect 2020 to be lossmaking, with a material risk of missing out on the rest ofthe season. Concerns by most participants that people will opt to spendsummer holidays in home countries, even after relaxationof measures. Only 25% of participants were optimistic for resumingoperations by July 2020, which still accounts for morethan 3 months lost business for the year.View on Government measures to-date Participants were neutral regardingGovernment support measures, anticipatingfurther measures and clarifications.View on industry behaviour and recovery Participants expect a change in tourists’behaviour in the short term towards domestictourism, less crowded facilities anddestinations closer to home. Half ofparticipants intend to increase their focus onthe domestic market.Hotels are considering 30%rate reductions up toto win localbusinessOnly 40% of executives anticipate that theindustry will return to 2019 levels by 2021.The rest expect recovery to drag beyond 2022.
Executive Summary (cont’d)Possible Scenarios for the impact of COVID-19 on the Tourism Sector Solid fiscal/monetarypolicies, robust economywide but partial sectorspecific measures, moderatetimeliness, modest EUsolidarity. Sector supply/capacitysuffers some contraction,mild depression.Scenario 2Scenario 1Partially effectiveeconomic responseassumption20202020 Severeresurgence episodehotel/restaurantbankruptcies &unemployment Mid-Long-term tourismrecovery Govt debt:Debt/GDP: NumerousLowDepth of red colour indicatesmagnitude of COVID-19’snegative economic impactScenario 32020 Virusgenerally containedhotel/restaurantbankruptcies &unemployment Mid-Long-term tourismrecovery Govt debt:Debt/GDP: Some Viruswell under controlhotel/restaurantbankruptcies &unemployment Mid-term tourism recovery Govt debt:Debt/GDP: LimitedHighMediumSophistication/Effectiveness of pandemic countermeasuresExpected decrease in tourism revenues (receipts) in 2020 and length of recoveryIndustry performance is largely dependent on external factors such as the Government’s health-centric policies onsocial distancing and travel restrictions, in conjunction with measures undertaken in other countries, that willdetermine the timing and frequency of flight recommencement.S1LowS2MediumS3HighSeason missed for international market with no new arrivals until end of2020. Domestic market returns in 2020 albeit with significant reductioncompared to previous yearsDecline of 2.5b – 2.6b in2020 tourism revenues(90% vs. 2019)International flights/arrivals resuming, albeit at significantly reducedRates, from Sep 2020. Domestic market exhibiting more moderatereduction to previous years’ levels compared to S1Decline of 1.9b – 2.1b in2020 tourism revenues(70% vs. 2019)International market returning in Jul 2020, albeit still at reduced ratescompared to 2019. Domestic market recovering at faster pace thanother scenariosDecline of 1.6b – 1.9b in2020 tourism revenues(60% vs. 2019)Tourism Revenue ( billions)The graph below illustrates the sector’s projectedreturn to recovery based on the three scenarios used:2019 2022Medium20232024High2025RecommendationsMeasures to be considered in further supporting theindustry in responding to the COVID-19 challenges: Increased efforts in promotion and building marketconfidence; sector-wide efforts targeting bothindividual holiday makers and tour operators. Employment support measures; in addition tosubsidies, schemes aiming at retention of employmenteven on flexible/part-time basis. Attracting the domestic market; introduction ofpackages addressing this captive market, supportedby Government where possible. Further Tax Incentives and other forms ofGovernment support; -extension/increase of VATreductions, -tax incentives/subsidies for infrastructureupgrades/ extensions during crisis (also includingtechnology), -direct support in company liquiditythrough sector specific funding lines, -suspension ofmunicipality taxes/charges, -reduction in utility rates,-extension of social insurance payment deferrals.COVID-19 Industry Pulse Report: Tourism
PreambleCOVID-19 – Key Facts & FiguresIntroductionThe objective of the Industry Pulse report is to: Present a snapshot of the latest facts, figures, discussions and the industry sentiment around COVID-19 Obtain the industry sentiment around the impact of COVID-19 on the Tourism sector Estimate the potential impact of COVID-19 on the given sector Discuss effective fiscal and monetary measures for mitigating the above potential effects14%12%10%8%6%4%Death rate (%)Cumulative Cases per 100k 2%0%010203040506070Days since first caseCyprusItalyGreeceGermanyUKKoreaCyprus death rateItaly death rateGreece death rateGermany death rateUK death rateKorea death rateGovernments’ reactionHealthIn response to the rapid spread of the virus to date (depicted in the adjacent graph) governments across theglobe have adopted health-centric measures based on World Health Organisation’s guidance 1, with the aim tocontrol the human-to-human transmission of the virus, and care for those affected. The measures focused onthe below: Support the healthcare system through investment in necessary equipment & staff, protect healthworkers safety, ensure critical care of non-virus-related incidents; Enforcement of social distancing, closures of school & public spaces, lockdown, curfew, quarantine; Control points of entry into country, through strict border or travel bans; Contact tracing to identify cases, surveillance and monitoring of the spread; Testing ability, prepare capacity of national and private laboratories for rapid and reliable tests.The introduction of these health measures has necessitated the consideration of unprecedented fiscal andmonetary interventions to limit the anticipated economic downturn2:Fiscal 1. onavirus-2019/technical-guidance2. cy-Responses-to-COVID-193. ackage7COVID-19 Industry Pulse Report: TourismEconomyMonetary Households: Income subsidisation and job guarantees, tax breaks, VAT reductions, extension of loanobligations and suspension of instalments.Businesses: Salary payments to employees, suspension of financial obligations, favourable loan terms,tax breaks, deferral of VAT payments as well as sector-specific measures.ECB monetary support to governments such as additional asset purchases of 120bln until end-2020,an additional 750bln asset purchase program of private and public sector securities (PandemicEmergency Purchase Programme), removal of issuer limits from bond-buying programs to allowcentral banks to push borrowing costs down, relaxation of collateral standards for Eurosystemrefinancing operations.ECB to facilitate banks’ provision of the necessary liquidity to borrowers, temporary relaxation of:Pillar 2 Guidance and liquidity coverage ratio, as well as flexibility in classification requirements andexpectations on loss provisioning for non-performing loans that are covered by public guarantees.EU finance ministers have agreed on 540bln package of measures to support governments as theytake on unprecedented debt burden: 100bln for joint employment insurance fund, 200bln forliquidity to companies through European Investment Bank instrument and 240bln for credit linesfrom European Stability Mechanism3. Possibility of an additional temporary fund to help hardest-hiteconomies and discussion of option for joint sovereign debt issuance (corona bonds).
Preamble (cont’d)COVID-19 – Key Facts & FiguresWider implications of COVID-19 Decline in consumption Overleverage as debt to GDP ratio spirals Drop in investment Sustained burden on the healthcare system Structural changes as affected sectors shrink Long-term loss in productivity Spike in unemployment Poverty increase Potential banking crisis Increased digitalisationAccording to the latest worldwide research and discussions, expected timeframes for keymedical solutions are: Vaccination: 12-18 months Drugs/cure: 6 months (timing highly uncertain) Antigen (polymerase chain reaction “PCR”) tests that are cheap, mass-scalable andreliable : 1-3 months Antibody (immunity) tests that are cheap, mass-scalable and reliable : 1-3 months8Wider ImplicationsThe social and economic ramifications in the aftermath of the pandemic are expected to be severe andwidespread. These will likely include:
Preamble (cont’d)Global Tourism Industry & COVID-19The following pages address the growing performance of the global and local tourism industries during recent yearsand the anticipated COVID-19 impact on their impressive growth.This Pulse report, survey and results, address the COVID-19 impact on the Cyprus Tourism Industry on the basis ofits effect on tourist arrivals and tourist spending. A similar approach was adopted by the World TourismOrganisation in the case of the global industry. In the case of Cyprus, the analysis excludes revenues associatedwith air travel and related costs (the great majority of which stays outside the local economy). Moreover, thequalitative part of the analysis and the survey has focused on the hotel sector alone; representing the majority ofthe tourists’ spending while in Cyprus.Recent past performance of Global Tourism Industry and COVID-19 impactBased on World Tourism Organization (“WTO”), international tourism has experienced a continued expansion inrecent years, withstanding set-backs from the SARS epidemic (2003) and financial crisis (2009). Historically, thesector has demonstrated resilience to demand shocks and has acted as a pillar for economic recovery in othersectors through ripple effects.According to WTO, total international tourist arrivals reached 1.5 billion in 2019; with a year-on-year increase of4%. International tourism receipts(1) reached US 1.5 trillion in 2018 and are estimated at similar levels for 2019.In view of the COVID-19 pandemic, WTO projects that international tourist arrivals in 2020 could experience ayear-on-year decline in the region of 20% to 30%. This translates to a staggering loss between US 300 billion toUS 450 billion in receipts.International tourist arrivals1,600International tourist arrivals (in 02009298929971,0441,0971,2431,4081,4601,0202020: It is estimated that theCOVID-19 pandemic could causeinternational tourist arrivals todecline by up to 440 million (i.e.30%) year-over-year2009: Due to the globalfinancial crisis, internationaltourist arrivals fell by 37million (i.e. 4%) year-overyear2003: Due to the SARSepidemic, internationaltourist arrivals fell by 3million (i.e. 0.4%) 15201620172018Note: Figures for 2019 and 2020 are estimatesSource: WTO (March 2020)International tourism receipts(1)International tourism receipts ( in US billions)1,6001,4631,4001,096 0(e)1,5071,3511,227 1,2531,0609797732020: It is estimated that the COVID-19pandemic could cause international tourismreceipts to fall up to US 450 billion (i.e. 30%in nominal terms) year-over-year5552009: Due to the global financial crisis,international tourism receipts fell by US 88billion (i.e. 5.4% in real terms) year-over-year4002009011,2242019(e)2003: Due to the SARS epidemic,international tourism receipts fell by US 50billion (i.e. 1.4% in real terms) year-over-year020002001Source: WTO (March 013Note: Figures for 2019 and 2020 are estimates201420152016201720182019(e)2020(e)Notes: 1. International tourism receipts are defined by WTO as expenditure of international inbound visitors (including their payments to national carriers forinternational transport). They also include any other payments or payments afterwards made for goods and services received in the destination country.9COVID-19 Industry Pulse Report: Tourism
Preamble (cont’d)Cypriot Tourism IndustryRecent past performanceIn line with the global tourism sector, the Cypriot sector has experienced consecutive and rapid growth since 2015. Recordyear-on-year tourist arrivals during the last five years, coupled with sizeable investments in tourism infrastructure, contributedto the sector’s upwards trajectory and its re-establishment as a key pillar of the local economy.In economic terms, the Cyprus Statistical Service reported that direct revenues from the 4 million tourist arrivals in 2019(majority from the UK and Russia) reached 2.7 billion, accounting for the equivalent of 12.2% of nominal GDP(1). The sectoralso employed c.30,000 people during the peak season of the same year.The sector’s attractiveness and growth have fuelled a surge in upgraded tourism infrastructure such as new hotels (as depictedby the significant increase in new hotel building permits since 2015), mixed-use marina developments, golf courses and thelargest casino resort in Europe set to open its doors in 2021.The rapid growth and contribution of the sector to the local economy are summarised in the charts below.Key tourist feeder markets in .00.50.50.00.0201420152016Tourist arrivals20172018Revenue from tourist arrivals (in billions)Tourist arrivals (in millions)Tourist arrivals and revenue31%34%4%4%20197%United KingdomRevenue from tourist arrivalsNote: Revenue from tourist arrivals includes visitors’ accommodationspending and other expenditure during their stay (such as food : Cyprus Statistical ServiceSource: Cyprus Statistical ue of building permits for Hotels (in million)Number and value of new hotel building permitsNumber of building permits for HotelsNumber of active employees in the hotel industryNumber of persons employed in hotels2019Number of new building permits for HotelsOctoberValue of new building permits for HotelsNote: As of the date of this document, the October 2019 figures had notbeen released by the Social Insurance ServicesSource: Social Insurance ServicesNote: Number of building permits excludes otherestablishments such as tourist apartments and villagesSource: Cyprus Statistical ServiceNotes: 1. In line with the latest National Accounts published by CyStat, Cyprus’ GDP in 2019 was 21.9 billion.10COVID-19 Industry Pulse Report: Tourismtouristic
Tourism stakeholder map and COVID-19 ImpactSector’s Ecosystem, Key Pain-Points and ReactionsThe Cypriot tourism ecosystem is highly dependent on a range of stakeholders. Below we illustrate the impact ofCOVID-19 on key stakeholders and the resulting effect on the sector. We also address the expected reactions ofthese players in their effort to respond and adapt to the new situation imposed by the pandemic.Restaurants,bars & shopsHotelsGovernment CustomersWorkforceBankingKey(1) Even though an integral part of the tourism ecosystem,airlines are not covered by the analysis, as the majority ofthe relevant revenues fall outside the local economy COVID-19 direct impact Stakeholder interplayHotelsCOVID-19 impact Significant reduction in revenue (more than 50% drop compared to 2019) due to the cancellation of bookings/events andthe suspension of operationsHigh fixed costs and increased costs in other expense categories (such as Health & Safety) hurt bottom line profitabilityCash liquidity pressure as revenues fall dramatically but fixed costs remainHigh uncertainty surrounding the pandemic hinders management planningReaction Full or partial suspension of operations to mitigate lossesReduction of room rates to stimulate demand by, e.g., attracting tourists from the domestic marketFocus on working capital management including collections, credit term renegotiations, adjustment of ordersCost-saving exercises including sta
Season missed for international market with no new arrivals until end of 2020. Domestic market returns in 2020 albeit with significant reduction compared to previous years International flights/arrivals resuming, albeit at significantly reduced Rates, from Sep 2020. Domestic market exhibiting more moderate
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COVID-19 Mental health impact COVID-19 Impact on Sleep COVID-19 Positive Impacts University of California, San Dr. Ariel J. Lang ajlang@health.ucsd.edu ID: 21877 COVID-19 Household Environment Scale (CHES) - English COVID-19 Household Environment Scale (CHES) - Spanish COVID-19 Social Distancing and Symptoms COVID-19 on Family .
