The travel and tourism industry was one of the first sectors to be affected by COVID-19. Since March, the entire value chain that defines the industry — spanning airlines, bus and train companies, cruise lines, hotels, restaurants, attractions, travel agencies, tour operators, online travel entities, and others — has entered a state of suspended animation. While bankruptcies of major airlines and large tour operators have been widely reported, the effects of the crisis are perhaps being most acutely felt by the Small and Medium-sized Enterprises (SMEs) that make up around 80 percent of licensed tourism and tourism-related businesses, and are at the greatest risk of failure. Their potential collapse threatens to adversely affect millions of people across the world, including many vulnerable communities, who depend on tourism for their livelihoods. According to the World Travel & Tourism Council, as many as 100 million jobs supported by travel and tourism are currently at risk.
The COVID-19 pandemic will undoubtedly leave a deep imprint on the structure of the travel and tourism industry. Collapsing consumer demand, low cash reserves, and a lack of access to flexible lines of credit has forced many smaller travel and tourism operators to close. At the same time, while larger firms such as national airlines, tour operators, cruise lines and nationally branded hotel operators are better positioned to withstand the crisis, they are also facing significant challenges as demand is not recovering anytime soon. While some agile players have repurposed their offering, the pandemic is likely to fuel consolidation – and potentially vertical integration – across the sector. While in the short-term there is a risk of widespread discounting to attract visitors to return, in the medium to long-term consolidation may spur price increases and reductions in the range and quality of services. Consequently, the travel and tourism sector that will emerge from the pandemic is likely to be smaller, in terms of both employment and revenue, than it was before. The process of consolidation and vertical integration is also likely to curtail opportunities provided by the sector for operators from developing countries.
