Planning on some future travel?
A year and a half after the COVID-19 pandemic was officially declared, travel bans remain in place around the globe, with nearly every economy still mandating some form of restrictions on foreign travelers.
A new report from The Conference Board examines the cascading costs of these measures—on the 334 million people worldwide directly dependent on the travel and tourism sector, and far beyond to long-term prospects for global growth and trade.
According to Trade Risks: Travel Bans, the travel services industry—gutted by sudden border closures in 2020—may only recover to 50 percent of 2019 levels by the end of 2021. A full recovery of travel services would add 0.7 ppts to 2021 global GDP, lifting The Conference Board forecast of 5.3 percent growth to a full 6.0 percent. On the other hand, if travel bans persist or even tighten, current consensus growth forecasts may be too optimistic.
“For much of the world, the travel bans enacted as emergency measures in 2020 remain in place,” said Dana Peterson, chief economist of The Conference Board in a news release. “The continued emergence of new virus variants and stubborn vaccination challenges—whether due to supply, logistics, or hesitancy—are understandably prompting governments to extend policies that heavily restrict the movement of people across borders. But with no certain end in sight, pandemic-era travel bans risk transforming longstanding expectations around the free movement of goods, services, cash, and people—and becoming a perpetual headwind holding back global economic potential.”
Among the report’s key findings:
- Business travel is down dramatically—and may be slow to return. Companies are cutting costs by forgoing travel as ongoing pandemic restrictions—63 percent of governments have either a total or partial ban on foreign visitors—appear to be accelerating a long-term trend toward virtual meetings. Over the long term, this shift may threaten industries that thrive on in-person connections that drive innovation and/or sales and customer relationships.
- Travel bans on foreign tourists are an even greater risk to economies worldwide. Tourist spending accounts for 87 percent of total global exports of travel services—which collapsed worldwide in 2020. The ongoing negative impacts of this collapse have extended beyond tourist industries directly affected by travel bans, to pummel adjacent sectors like entertainment, amusement, and food services, as well as national and regional governments dependent on tax revenues from visitors. Tourist hubs in Asia and the Caribbean have felt the brunt of these challenges, but even some of the world’s largest and richest economies—including Germany, Italy, Mexico, and Hong Kong—face outsized exposures to continued restrictions.
- Travel ban uncertainty creates different glide paths to recovery for the travel and tourism services trade—and consequently for global GDP growth as a whole. The path to recovery for travel and tourism activity remains uncertain given the tangle of conflicting restrictions on foreign visitors around the world. Ideally, international people, flows would return to pre-pandemic levels by the end of 2021 or early next year. However, as coronavirus variants spread, such a return to normalcy is highly dependent on the degree to which individual governments roll back travel bans and people regain confidence in the safety and reliability of international travel.
- Travel bans threaten to sour relations between economies that choose to reopen borders quickly and those that do not. Even before the pandemic, rising geopolitical tensions were already fueling a surge in tariffs, sanctions, and protectionist sentiments. As governments choose different paths to reopen their borders, travel restrictions may become the next front for international trade friction and another prime risk to the future of globalization.
Source: The Conference Board