US Travel Restrictions Costs $700 Billion Loss to World Economy

Ever since March 2020, the US government has banned international travel to contain the spread of coronavirus. The unprecedented loss in the travel and tourism sector negatively impacted other sectors closely linked to it such as food, beverages, retail trade, communications, and transport, contributing to drastic business loss and decline in employment rates.

The tourism industry faced a major blow by the pandemic due to the ban on airline firms, hospitality firms, travel firms, and other small-scale businesses dependent on international tourists. According to a United Nations report, the crash in international tourism could cost around USD4 trillion to the global GDP for the years 2020 and 2021. International travel bans and limited travel activity induced by the COVID-19 pandemic resulted in economic and human tolls. Every two out of five jobs lost in the US due to the pandemic were lost in the travel, tourism, and aircraft manufacturing sectors. The current estimates suggest that the employment rate in the tourism sector is not expected to return to the pre-COVID level before 2024 or 2025.

The world’s leading hotel chains including Wyndham Worldwide, Choice Hotels, Marriott International, and Hilton Worldwide Holdings lost USD14 billion in revenue due to the travel restrictions. The US welcomed around 80 million international visitors in 2019 and the number could have been bigger in 2021 if the travel restrictions were not in place for visitors from the European Union, UK, China, and India.

Europe’s Economy Downturned Due to US Travel Ban
The unprecedented phenomenon of non-arrivals from the US is hitting the European tourism industry badly. Europe is the world’s leading tourist destination where one in ten businesses belong to the tourism industry. The hospitality sector accounts for 80% of the EU tourism workforce and 2 million enterprises. According to the European Commission, the US is Europe’s main long-haul inbound market in terms of the number of tourist arrivals and spending. North America is the most important origin market for EU countries, contributing to around USD70 billion to the EU countries annually.

Of 89 million foreign tourists in France each year, Americans represent around 8% while 6 million of 37 million foreign tourists in Germany are Americans. In Spain, the tourism sector constitutes around 12% of the country’s GDP. In the three months from May to June in 2021, the forbidden tourism led to USD9.79 billion losses to Switzerland where US visitors contributed the biggest uptick. The European Tour Operators Association (ETOA) is finding a solution for welcoming back non-essential travelers from the US to prevent the loss of billions again in 2021.

The US pandemic restrictions continue to hinder business travel to the European Union countries, especially Germany. Germany is one of the biggest providers of Foreign Direct Investment in the US. However, the US administration’s decision to reinstate and stringent the pandemic travel restrictions has frustrated Germany’s business leaders. From experts being unable to travel to assist with technical issues to new businesses being lost due to the difficulties of meeting potential clients, the travel restrictions are hindering the businesses in various ways. While remote working solutions have been able to ease the difficulties, routine business visits are very much required to personally oversee US investments and kickstart economies.

Hospitality Industry Faces the Worst Hit
The hotel industry is one of the hardest-hit sectors from the COVID-19 pandemic, and it is not expected to make a full recovery until 2024. Many of the USA hotels are closed, especially the luxury ones due to low traffic while others have an occupancy rate as low as 15%. According to the American Hotel and Lodging Association’s State of the Hotel Industry 2021 report, more than 600,000 hotel industry operation jobs and nearly 4 million hospitality jobs have been lost due to the pandemic. While business travel has drastically declined, the hotel occupancy rate in 2021 is expected to be down 85% compared to 2019. Post-pandemic, economy hotels are expected to have the fastest return as they would be able to tap segments of demand that remain relatively healthy despite travel restrictions. As international tourists tend to stay longer in hotels and spend more money on the offered services than domestic visitors, the international travel ban is putting severe impact on the hospitality businesses that cater to various international tourists.

Aviation Sector Hoping for Upliftment of International Travel Bans
Aviation is the most important international industry, which has been negatively impacted by the repeated travel bans and lockdown restrictions, suffering billions of dollars in losses. While reductions in passenger traffic have occurred due to past incidents such as 9/11. SARS, etc., the prolonged shut down of air traffic has devastated the airline industry, bringing airports to a virtual halt. Even though countries have moved away from lockdowns, many countries have opted for partial or total restrictive regulations throughout the first half of 2021. Major airlines are pressing the Biden government to relax its COVID-19 restrictions that block travelers from making entry into the US as other countries have started to ease down their prohibitions. Since March 2020, the US has barred nearly all non-US citizens from countries like United Kingdom, South Africa, Brazil, India, and Iran.

The United Kingdom is America’s seventh-largest trading partner, but the blocked air services between the two nations have been eliminated since March 2020. The heads of British Airways and Virgin Atlantic, along with the CEO of London Heathrow Airport are pleading American President Joe Biden to act swiftly for removing the ban to save the lucrative summer air travel season between the two countries. Not only the airline industry, but the hotels and other travel and tourism interests are also at stake.

MICE Sector at Huge Loss
MICE (Meetings, Incentives, Conferences, and Exhibitions) is a general term used for the event industry, which positively impacts the economy of a whole city, country, or region. Major international congresses increase footfall in hotels and amplify consumption of local services. Through the last decades, the MICE industry has boosted the economy of many destinations until the COVID-19 outbreak, which puts a halt on events and business travels. While 53% of tourists travel for pleasure or holidays, 14% travel for professional reasons but bring important economic benefits to the region.

In the US, the MICE industry generates around one million jobs in big cities as well as small towns and makes up for 15% of all travel throughout the country. However, Barcelona and Madrid remain the most preferred destinations regarding business tourism. Since only a few countries are re-opening the MICE sector, most countries are focusing on domestic conferences and exhibitions. For instance, the city of Tokyo is expected to welcome 25 million foreign visitors for the large-scale Olympics event, for which an aggressive tourism development strategy was put in place in the city. However, a ban on spectators could reduce the economic gains from the Tokyo Olympics amid the COVID-19 resurgence.

How Can Vaccines Impact Future Travel Plans?
As of July 2021, more than 49.6% of the US population and 13.7% of the world population has been administered at least a single vaccine dosage. While interest in taking vaccines might vary from person to person, the desire to travel does not. According to a recent survey by Hilton, around 95% of Americans miss traveling. However, the choice of whether to vaccinate or not might affect future travel plans.

While no country has made vaccine a mandatory requirement, but countries with tight border restrictions and low COVID-19 rates such as New Zealand might require travelers to be vaccinated before visiting. Singapore has also hinted that the unvaccinated travelers might have to undergo quarantine and additional testing. However, a blanket vaccination requirement would discriminate against those below the age of 18 years and others who are not yet provided with the vaccines. Moreover, many major airlines are awaiting governmental guidance to make vaccination a requirement before international travel. While some believe that putting a vaccine mandate could bring flyers back more quickly, others call the notion a “real logistical nightmare”, given the slow vaccine rollout rates.

The hotel sector might consider requiring guests to be vaccinated once the international travel bans are uplifted. Any major hotel brand taking this stance could attract the “Covid-safe” and affluent market. Moreover, hotel conferences might require entrants to be inoculated as a large number of people would share indoor space and meals. However, there have been no directions from the government for making such a mandate yet.


Comments are closed.