The coronavirus outbreak could mean no summer vacations this year

Tourist wearing a protective respiratory mask outside the Coliseum in Rome on February 28, 2020.

Andreas Solaro | AFP | Getty Images

Summer vacations could be off the table this year as tourists put off traveling to avoid catching the new coronavirus, experts told CNBC.

Demand for international travel has taken a downward turn amid the outbreak, which has seen the virus spread to almost 60 countries.

Speaking to CNBC’s “Squawk Box Europe” Monday, Ian Harnett, co-founder and CIO of Absolute Strategy, warned a prolonging of the crisis could seriously impact the global travel sector.

“If this gets extended, we’re talking about the impact on Easter holidays, potentially summer holidays, (and) whether the ‘staycation’ becomes the default for all of us here — that’s going to be tremendously damaging to these industries,” he said.

Data from travel analytics firm ForwardKeys shows international flights booked from the U.S. and the U.K. were down almost 20% year-on-year for the five-week period ending February 23.

Olivier Ponti, vice president of insights at ForwardKeys, told CNBC in a phone call it was “crystal clear” the decline had been sparked by coronavirus fears.

“Will it be delayed travel, does it convert into people choosing another destination, or will there be no travel at all?” he said. “The longer the crisis lasts, the more likely it is that this will convert into no travel at all.”

He noted domestic trips — sometimes referred to as “staycations” — could see an uplift as coronavirus fears dent demand for overseas destinations.

“When there’s a large-scale crisis, it’s often the case that domestic tourism plays the role of safety net,” he told CNBC. “People may look at short-haul trips over long-haul because it’s an environment they know better.”

Ralph Hollister, travel and tourism analyst at GlobalData, also told CNBC the outbreak could alter consumers’ travel plans. 

“The majority of consumers — especially in the western world — place high importance on their holidays and won’t give them up easily,” he said. “(But) if the virus is still having the same impact by the end of April, cancelations could start to increase at a rapid rate as consumers deem the risk to their health to be greater than their need for a holiday.”

Airlines have already warned the outbreak will weigh on their profits, with the International Air Transport Association estimating in February the crisis will cost the sector more than $29 billion in 2020.

‘Big losses’ in Europe

Ten percent of European GDP (gross domestic product) is derived from tourism, according to the European Travel Commission — but in some EU member states, including Spain and Italy, that figure rises to as much as 14%.

“Inter-European tourism is the most important factor when comes to numbers and expenditure,” the Commission’s CEO and Executive Director Eduardo Santander told CNBC in a phone call. “And Italy is an iconic destination market for both inter-European and Chinese tourism.”

He added that Europe’s tourism industry accounted for 30 million jobs, making it “essential” to the regional economy.

“The impact of the coronavirus on European tourism will be massive — we’re talking about big losses,” he told CNBC. “We’re trying to persuade people not to cancel but to postpone their trips.”

However, David Goodger, managing director at Tourism Economics, told CNBC he was optimistic the impact would not extend into the peak summer season.

“Right now I don’t see any major impact on summer travel. If the virus does continue spreading to other places over the next weeks or months, it could have some impact,” he said.

“Demand bounces back from these short, sharp events relatively quickly — that’s particularly true for short-haul travel, which is a large part of the European sector.”

Cases of the coronavirus have been confirmed in several tourist hotspots across Europe, including Germany, Scandinavia and the Spanish Canary Islands — but Italy has been hit particularly hard. As of Monday, more than 1,600 cases of the virus have been confirmed in the country and 34 people have died.

Speaking to CNBC in a phone call, Lorenzo Codogno, founder and chief economist at LC Macro Advisors, said the sudden rise in coronavirus cases in Italy would have “a massive impact” on the country’s economy.

Codogno, who had expected a recession in Italy this year regardless of the coronavirus, added the outbreak was making his forecast increasingly likely.

Meanwhile, a slowdown in international visitors would also have a significant impact on France. Tourism accounts for 8% of French GDP, according to the country’s Foreign Ministry.

France was the tenth most-visited nation in the world by Chinese travelers last year, data from Oxford Economics shows, with 2.1 million Chinese tourists traveling to the country in 2019.

Speaking to CNBC at the G-20 summit in Riyadh last week, French Finance Minister Bruno Le Maire said France had seen a 30% to 40% decline in inbound tourism since the coronavirus outbreak began, adding that the numbers “won’t be the same in 2020.”

That sentiment was echoed by Christophe Decloux, general manager of the Paris Region Tourist Board, who told CNBC in a call that the French capital was expecting a dramatic downturn in visitors from China, the city’s fifth-biggest source market for tourism.

“Flight reservations from China to Paris are down about 80% year-on-year for February, March and April, because people in China are not travelling anymore,” he said. “The coronavirus will impact the wider economy because Chinese tourists spend a lot when they come.”

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