China virus outbreak rams global tourism, costing billions

AP – Business around the world that have grown increasingly reliant on big-spending tourists from China are taking a heavy hit, with tens of millions of Chinese residents restricted from leaving their country as the coronavirus spreads.

Hotels, airlines and cruise operators were among the industries suffering the most immediate repercussions, especially with the outbreak occurring during the Lunar New Year, one of the biggest travel season in Asia.

What happens in China means a lot more to the world economy than it did when the SARS outbreak struck nearly two decades ago. In 2003, China accounted for 4.3 per cent of world economic output. Last year, it accounted for 16.3 per cent, according to the International Monetary Fund (IMF).

Tourism from China was already down before the virus hit due in part to the Hong Kong protests and the trade dispute between Beijing and Washington.

But about 134 million Chinese travelled abroad in 2019, up 4.5 per cent from a year earlier, according to official figures. Before the outbreak, the China Outbound Tourism Research Institute predicted some seven million Chinese would travel abroad for the Lunar New Year this year, up from 6.3 million in 2019.

Hong Hong, Thailand, Japan and Vietnam were top destinations, but Chinese tourists are big spenders in cities like London, Milan, Paris and New York.

Economist and tourism industry officials said the biggest threat so far is to China’s closest neighbours, with the United States (US) and Europe likely to face major repercussions only if the coronavirus outbreak proves long-lived.

Travellers from Beijing, wearing masks, arrive at Charles de Gaulle airport, north of Paris. PHOTO: AP

In Thailand, a favourite destination for Lunar New Year travel, officials estimate potential lost revenue at 50 billion baht (USD1.6 billion). Many drugstores in Bangkok ran out of surgical masks and the number of Chinese tourists appeared to be much smaller than usual for the Lunar New Year. The government announced it was handing out masks, and that the airport rail link would be disinfected.

Spillover is also probable in Vietnam, Singapore and the Philippines, said Tommy Wu and Priyanka Kishore, of Oxford Economics.

Hong Kong is especially vulnerable because its economy and its appeal to tourists have already been weakened by months of sometimes-violent political protest. By November, inbound tourism to Hong Kong was already down 56 per cent from a year earlier.

Visitors from mainland China to Macau was down 80 per cent on Sunday from a year earlier, a threat to a regional government that depends on gaming revenue.

Operators in Macau reported higher-than expected cancellations over the weekend as the death toll from coronavirus rose and the Chinese government extended travel restrictions, according to Instinet analyst Harry Curtis.

“Cancellations soared across all of the properties we contacted,” Curtis said in a note. “Pessimism rose on how long it could take for business to recover.”

Shares of Wynn Resorts, Las Vegas Sands and MGM Resorts International — which all have operations in Macau — have declined 18.3 per cent, 14.6 per cent and 12.1 per cent since January 17. But analysts said it was too soon to tell how deeply their finances would be affected.

Jefferies, an equities research firm, predicted the virus outbreak would affect first quarter results for the companies “but how large and will it linger onward remain the questions.”

Wynn Resorts said it had scaled back Lunar New Yea r events in Macau, begun screening the temperature of all guests and taken other steps to comply with the directives of the Macau government. MGM and Las Vegas Sands also said they were following government guidelines. The companies declined to provide any cancellation figures in Macau.

At least 106 people have died and 4,515 people have fallen ill since the coronavirus was first found in the central Chinese city of Wuhan.

China extended the week-long Lunar New Year holiday by an extra three days to February 2 to help prevent the epidemic from spreading.

Travel agencies in China were told to cancel group tourism, and governments around the region were restricting travel from Wuhan, closely monitoring other travellers and helping arrange evacuations of some foreigners stuck in Wuhan.

The outbreak comes just as hopes were rising that Chinese tourism to the US would start to recover following two years of decline due to the prolonged trade dispute between the two countries.

In 2018, travel from China to the US fell for the first time in 15 years, according to the National Travel and Tourism Office, which collects data from US Customs forms. The office has forecast a further decline of five per cent in 2019 but had predicted a return to growth in 2020 and beyond.

China remains the fifth-largest source of foreign tourism to the US, behind Canada, Mexico, the United Kingdom (UK) and Japan. Nearly three million Chinese travelled to the US in 2018, spending more than USD36 billion.

Tourism industry officials said it was too soon to say whether the outbreak would significantly effect expectations for a recovery, saying much depends on how long the outbreak lasts and if the Chinese government extends travel restrictions to major cities such as Shanghai.

“Anything that goes on for a sustained period of time would obviously have a significant impact,” said Chris Heywood, spokesman for NYC & Company, the official tourism organisation of New York City. “For us, China is a critically important market.”

Heywood said China was the second-largest source of foreign visitors to New York, following the UK.

Broadway Inbound, which sells group discount tickets for Broadway and other shows, has received a handful of cancellation requests for China-based customers unable to travel due to the outbreak, said Bob Hofmann, vice president of Broadway Inbound. He said ticket sales are normally final but customers affected by coronavirus would get a full refund.

Chinese tourism to other countries has continued to grow in recent years. In Britain, Chinese visitors were second only to tourists from the Middle East spending per visit – about USD2,200 on average in 2018. The number of Chinese visiting Britain has quadrupled since 2010.