From empty sidewalks to deserted hotels, coronavirus is slamming the tourism industry

"If it's not contained, the entire world is going to shut down,” one executive who has seen his business suffer said.
Image: Empty tables are pictured outside a restaurant at St. Mark's Square, which is usually full of tourists, after Italy's government adopted a decree with emergency new measures to contain the coronavirus, in Venice
Empty tables outside a restaurant at St. Mark's Square, in Venice, on March 5, 2020.Manuel Silvestri / Reuters

Breaking News Emails

Get breaking news alerts and special reports. The news and stories that matter, delivered weekday mornings.
SUBSCRIBE
By Leticia Miranda and Claire Atkinson

In Rome, sidewalk cafes sit empty and the usual lines of tourists visiting the Vatican’s Sistine Chapel have disappeared. The Italian tourism industry is in rapid retreat, the result of government lockdowns and a slew of travel warnings against visiting that nation, which has struggled to contain the coronavirus.

The fallout has left peak tourism season in tatters, with airlines, hotels, casinos, tourism offices and booking agencies scrambling. In the United Kingdom, low-cost airline Flybe said it was ceasing operations, citing the large number of coronavirus cancellations. While the company had been struggling financially for a while, the impact of the virus proved the final blow.

“This is perhaps the most extensive hit we have seen in the worldwide travel industry since 9/11,” said Henry Harteveldt, president of the global travel industry advisory company Atmosphere Research Group.

A growing list of multinational companies from Google to Walmart have announced plans to restrict "nonessential" travel for employees, and one trade conference after another has had to cancel either because of local government efforts to contain the virus or for lack of clients who are able to travel.

Global air travel is expected to lose anywhere between $63 billion and $113 billion as a result of reduced demand for flights, according to a new estimate from the International Air Transport Association. The broad range depends on how extensive global reaction is to the disease.

“January was just the tip of the iceberg in terms of the traffic impacts we are seeing,” said Alexandre de Juniac, IATA’s director general and CEO. “Nevertheless, it was still enough to cause our slowest traffic growth in nearly a decade.”

United Airlines announced Wednesday that it will decrease its North American flights by 10 percent in April and its international flights by 20 percent, with reductions likely to continue through May. Lufthansa grounded 150 planes, and Cathay Pacific slashed around 75 percent of its flights.

Travel demand through 2020 is expected to decrease by 5 percent in North America, 10 percent in Europe, and 25 percent in the rest of the world compared to last year, according to Dan Wasiolek, a senior equity analyst for Morningstar. The number of open airline seats increased by 1.7 percent in January compared to the same time last year, and demand climbed by just 2.4 percent, compared to 4.6 percent, IATA noted.

Booking Holdings, which owns Booking.com, Kayak, Priceline, and other online travel services, said revenue could fall as much as 7 percent in the next quarter, compared to the same time last year, due to the virus.

“You've got to believe it's going to be contained,” Barry Diller, executive chairman of the board at travel group Expedia, told investors last week. "If it's not contained, the entire world is going to shut down.”

China, where the outbreak originated and where the most cases have been reported, makes up a significant portion of sales for hotel and travel companies: Casino and resort company Las Vegas Sands earns 90 percent of its income in China, Wynn Resorts earns 73 percent of its income there, and Hyatt said China makes up 11 percent of its total fees. Melco Resorts & Entertainment, which has casino and gaming businesses across Asia, saw shares fall by about 15 percent since the beginning of the year.

“There are a lot of pieces to the puzzle to bring our business back online — it isn't just opening the casinos,” said Evan Winkler, president of Melco Resorts & Entertainment, which owns properties in Macau, an area popular with Chinese gamblers. “Until we kind of hit a peak, and we see a substantial sort of 'over-the-hump' in terms of the infection rate and the death rate, you're not going to have those structural changes that are needed to put the business back on track,” he told investors last month.

In Italy, where over 100 people have died from the virus, the country’s $253 billion tourism industry has slowed down significantly. Annie Ojile, founder of private tour company Scooteroma, based in Rome, has been trying to organize local business owners to communicate that it is business as usual. While the historic center is a ghost town, ordinary Romans are shopping and going about their daily lives.

“We are missing the tourists and the Americans. The Vatican is empty,” she said, adding that there is almost no one on the Italian subway system or even in the streets. “If you sign up for a tour, people are saying ‘I don’t want to cancel, but it will be a problem getting back into the United States because if you work for certain companies, you’ll have to self quarantine.’”

The coronavirus is on track to slow global travel at a faster rate than the SARS outbreak in 2003 and MERS in 2012. That is in part because of the global nature of the virus and how flights have become more intercontinental, where one flight may have stopovers in one or two countries before reaching its final destination, according to Harteveldt.

“What is interesting here is that coronavirus has really permeated almost all parts of the world,” he told NBC News. “What’s also different is there are far more intercontinental-stop flights and China has become a much larger participant in global trade compared to where they were in 2003.”

Shares for major cruise lines and airlines have tumbled as well. Carnival Corporation shares have fallen by about 56 percent since the beginning of the year after multiple infections and a number of fatalities from the coronavirus aboard one of the company's ships, the Diamond Princess. Norwegian Cruise Line shares have fallen by about 40 percent during the same time.

The hit to the travel sector comes after a decade of growth following the financial crisis of 2008. Between 2009 and 2017, U.S. hotel gross bookings grew from $116 billion to $185 billion and airline revenue jumped from $155 billion to $222 billion, according to a Deloitte analysis of U.S. Bureau of Transportation statistics. Moving into 2020, world trade growth was expected to increase to 3.3 percent from 0.9 percent in 2019, according to IATA. Now those expectations are muddied.

Still, the travel industry is confident that consumer interest will bounce back.

“A lot of people have worked hard for a vacation,” John Lovell, president of leisure travel for travel agency company Travel Leaders Group, said. “So, yes, we’re seeing cancellations — but at the same time, people who are calling to cancel are looking for other options, because they still do want to travel.”