Blog: Tourism at stake: Challenges and measures for small businesses
Supporting small businesses in the tourism sector is vital for economic recovery
Travel and tourism are among the most affected sectors in the global pandemic. Lockdowns around the globe put millions of small businesses in travel and tourism to an existential test. After 21 January, 105 countries have imposed global travel bans, with no end in sight. The World Tourism Organization (UNWTO) estimates international tourism receipts could decline by 20% to 30% in 2020 compared to 2019, which would mean a reduction four to six times larger than during the 2009 global financial crisis.
Travel and tourism are key industries in many developing countries – and international tourist arrivals constitute a major source of their services export. Out of the ten countries most dependent on travel exports, nine are small island developing states. In six Caribbean states, travel exports account for about half of gross domestic product (GDP) – Antigua and Barbuda (50%), Grenada (48%), Saint Lucia (47%) – or roughly one-third of GDP with Saint Kitts and Nevis (36%), Saint Vincent and the Grenadines (29%), and Belize (26%) – (see figure). In Asia, Macao SAR and the Maldives are subject of severe hits, with travel exports-to-GDP ratios of 73% and 56%, respectively and in Africa, the Seychelles with a ratio of 35%. As of 9 April, three out of the top ten countries most reliant on travel exports have imposed travel bans themselves.
More than 100 countries are imposing global travel bans – a severe threat to the world’s major tourism destinations
Notes: Trade and GDP data from 2018. Countries for which data is not available are coloured in grey.
Sources: ITC Trade Map, World Bank,
https://en.wikipedia.org/wiki/Travel_restrictions_related_to_the_2019%E2%80%9320_coronavirus_pandemic, as of 9 April 2020.
Global travel bans hit countries differently, depending on their peak season
The impact of global travel bans is likely to vary depending on the peak season for tourism in different countries. In the Caribbean, where the travel exports-to-GDP ratio is highest, the beginning of the year (Q1 and Q2) is the time with the largest revenues from tourism. These countries already strongly feel the effects. Some African countries such as Cabo Verde follow a similar seasonal pattern, while Pacific islands such as Fiji and European countries such as Croatia and Montenegro see revenues from tourism rise up to 15 times higher in Q3 compared to the rest of the year. Travel to other destinations, for instance to Macao SAR, Seychelles or Cambodia is less seasonal, implying that business could pick up more quickly as soon as travel bans are lifted.
Some tourism destinations face substantially higher risks of an economic decline because the tourism sector shows a high incidence of small-scale – and often informal – enterprises, which are more vulnerable to external shocks¹. Introducing travel restrictions may also affect women disproportionately as the travel sector and related industries such as accommodation and food services employ an above-average share of women.
How to help small businesses in tourism survive
It is vital to help micro, small and medium-sized enterprises (MSMEs) in tourism weather the COVID-19 crisis, as it calls for quicker economic recovery and employment re-generation post-crisis. Since March, more than 20 countries have announced measures to support their tourism sectors, and more are expected in the coming weeks². These support measures broadly fall under the following categories:
Many small businesses need immediate access to funds to remain in business. Financing options such as government-backed credit guarantees, injecting capital to public funds and encouraging financial institutions to increase credit or working capital for the tourism industry can help MSMEs maintain their cash flow and remain operational during the crisis.
- Spain is injecting €400 million through the Official Credit Institute for self-employed and tourism companies in need of liquidity. Eligible firms can apply for a four-year loan with a maximum of 1.5% fixed interest rate.
- The Philippines is mobilizing funds from government-owned or controlled corporations to assist airlines and the rest of the tourism industry.
Tax reductions and grants
Reductions in taxes and fees, rental charges as well as electricity and water billing rates can lower the costs of tourism MSMEs.
- China will exempt VAT tax for enterprises in the transportation, catering, accommodation and tourism sectors.
- Qatar will provide electricity and water subsidies to tourism, hospitality, retail sectors as well as MSMEs.
- Indonesia will provide subsidies and cash incentives for airlines and travel agents to attract international tourists in the recovery period³. The country will also waive hotel and restaurant taxes.
Employment incentives, such as subsidizing wage bills, deferring contributions to social security funds and expanding health insurance can help tourism companies maintain workers, so that they can recover quicker once the crisis is over.
- Singapore will offset up to 75% of the salaries paid by local employees in tourism and aviation sectors for nine months as part of its Jobs Support Scheme.
- Jamaica will provide temporary cash transfers to tourism businesses based on the number of workers they retain⁴.
- Italy is setting up a redundancy fund to provide up to nine weeks of layoffs for all companies.
Tourism-targeted technical assistance
Targeted governmental support, including dedicated communications and special hygiene programmes, helps the tourism sector restore its competitiveness and maintain its market’s confidence.
- Thailand is implementing a safety and health programme to raise the cleaning and hygiene standards in tourism sites, hotels and restaurants.
- Singapore will cover up to 50% of third-party professional cleaning fees for hotels with confirmed and suspected cases.
- Chinese Taipei is allocating NT$5.45 billion ($179 million) to promote domestic travel, improve facilities, and introduce new technologies to upgrade the tourism industry.
Unfortunately, several of the countries most exposed to the tourism shock will find it hard to finance these kind of support measures. They may have to rely on support from the international community to help their small businesses in tourism survive the current COVID-19 context.
¹ Further information on the vulnerability of SIDS and the specific situation of women in the tourism sector is available at: https://www.worldbank.org/en/news/press-release/2020/03/30/east-asia-and-pacific-countries-must-act-now-to-mitigate-economic-shock-of-covid-19, https://blogs.worldbank.org/voices/swift-action-can-help-developing-countries-limit-economic-harm-coronavirus, https://read.oecd-ilibrary.org/view/?ref=124_124984-7uf8nm95se&Title=Covid-19:%20Tourism%20Policy%20Responses and https://www.unwomen.org/en/news/stories/2020/3/news-women-and-covid-19-governments-actions-by-ded-bhatia.