To contain the virus, millions of Chinese are hunkering down, flights have been canceled and countries are imposing restrictions on anyone coming from mainland China.
The knock-on effects are being felt around the globe. Tour groups and cruise lines are canceling trips because of plummeting demand. International fairs and conferences from Hong Kong to Italy are being shelved. And hotels that are usually teeming with Chinese tourists are sitting empty.
“China is the single largest outbound travel market in the world, in terms of spending,” Matthew Dass, an economist with Tourism Economics, said in a research note earlier this month.
Tourism Economics downgraded its 2020 forecast for Chinese departures because of the coronavirus earlier this month. The firm said that if the outbreak lasts longer and is more severe than the 2003 SARS crisis, it could lead to 25 million fewer outbound trips by Chinese travelers this year. That could wipe out as much as $73 billion in spending.
The International Civil Aviation Organization said the hardest hit countries will likely be Japan and Thailand.
“This outbreak is beyond anyone’s imagination,” Jane Sun, CEO of Trip.com, told CNN Business on Monday.
Trip.com, China’s largest online travel platform, was supposed to release fourth quarter earnings this week, but delayed them until the middle of March. The company also owns and operates Skyscanner and Ctrip.
The final numbers are still being crunched, but Sun said the company will “of course” take a hit from the outbreak. She warned that the impact to her company and the travel industry during this quarter “might be significant.”
Hotels and airlines face steep losses
Marriott executives warned that the company could take in $60 million less in fees and earnings for the region than it originally expected for the quarter.
As the outbreak spreads to other countries, Marriott hotels in Europe and beyond are also starting to feel the pain.
“When you look at South Korea and Italy, we will see both cancellations and we will see declining (revenue per available room) in those markets,” said Sorenson. “Some of the Italian cities, we’ve probably lost a few tens of points of occupancy in the first days.”
The global airline industry is also facing huge financial losses and its first traffic decline in more than a decade because of the coronavirus.
The outbreak will also likely reduce global traffic by 4.7%, wiping out IATA’s earlier forecast for growth and marking the first overall decline in demand since the global financial crisis of 2008 and 2009.
Dozens of international carriers have canceled or reduced services to mainland China.
Cruise industry in crisis
China was expected to become the world’s largest cruise market by 2030, according to a recent study from the Shanghai International Shipping Institute. The crisis aboard the Diamond Princess cruise ship could derail that plan.
“China could be closed to cruise travel for a year or more and even once it reopens, many potential consumers may have a negative association with cruise travel, which could limit the long-term growth trajectory,” said James Hardiman, an analyst with Wedbush.
China was the second largest market for cruise ship passengers in 2018, with nearly 2.4 million Chinese sailing that year, according to the most recent global passenger report from Cruise Lines International Association. The United States remained the top market, with more than 13 million Americans traveling on a cruise in 2018.
Ingrid Leung, the managing director of Incruising Travel Asia, a Hong Kong-based travel company that sells cruise packages, said new bookings are currently down 95%.
The restrictions are in place until at least the end of March, but Leung said the slump to her business will likely continue until the end of the year.
“Instead of targeting sailings in the second quarter or the third quarter, we probably need to sell the fourth quarter 2020 or beyond,” Leung said.
Carnival said earlier this month that the coronavirus’ impact on global bookings and canceled trips “will have a material impact” on the company’s financial results.
Domestic Chinese travel will also suffer
The coronavirus outbreak hit during the critical Lunar New Year holiday, a time when millions across China travel home for family reunions. Beijing took the extraordinary step of extending the holiday until mid-February to try and contain the outbreak. Roughly half the country remains under travel restrictions.
All told, the coronavirus could result in 90 million fewer domestic trips and $115 billion in lost spending, according to the most severe scenario laid out by Tourism Economics.
“We’re seeing significant reductions in occupancy in the month of February across the entirety of the business,” chief executive Keith Barr said during an earnings call earlier this month, adding that the disruption will cost the company about $5 million for February alone.
Airbnb is also feeling the effects. The short-term housing company said it has suspended all bookings in Beijing until May, in accordance with government guidance. Bookings in other areas, including Wuhan, the epicenter of the outbreak, have been suspended until April.
Chinese airlines will also be hard hit.
Recovery could take years
So far, Trip.com’s Sun said “millions of orders have been canceled,” referring to both domestic and international trips. But she said the company is already seeing signs of pent-up demand.
After hunkering down for more than a month, “staying at home doing nothing, if we look at our search results, lots of people are ready to go out,” she said.
Millions of Chinese may be itching to travel, but it’ll be hard to make up for lost ground.
The World Tourism and Travel Council analyzed previous major viral epidemics, and found that the average recovery time for visitor numbers to a destination was 19 months.
Tourism Economics said Chinese travel demand will likely start to tick up later this year or by 2021.
But full recovery could take far longer. The research firm forecasts that China’s outbound and domestic travel markets won’t fully recover until about 2023.