The Affects of a Swine Flu Pandemic to the Travel

1
The Affects of a Swine Flu Pandemic to the Travel
Tourism IndustryA preliminary analysis

• 14 May 2009
• WTTC/Oxford Economics Research

2
Executive Summary

• This presentation summarises the preliminary
  results of a simulation analysis looking at the
  potential impact of a swine flu pandemic to the
  travel and tourism industry
• Two contrasting scenarios are built to assess the
  impact of a contagious disease that can be
  transmitted via travel flows a SARS-type case
  with a limited impact and a pandemic outbreak of
  swine flu with global consequences
• The disruptions associated with a global pandemic
  could cause GDP losses of nearly US2,200bn to
  the tourism economy spread over late 2009 and
  into 2010. This compares to a much lesser impact
  of US25bn in a case of a SARS-type crisis

3
The swine flu epidemic so far

• The WHOs latest update (13th May) reveals 5728
  confirmed cases across 33 countries, which have
  so far led to 61 deaths. So far the outbreak has
  been concentrated in NAFTA economies with Mexico
  (2059), the US (3009) and Canada (358) accounting
  for over 90 of infections.
• The WHO raised the pandemic alert level to phase
  five out of six. A phase five alert level is
  described as a strong signal that a pandemic is
  imminent and given mounting levels of infection
  in Europe, particularly the UK and Spain, the
  likelihood that the alert level will be raised to
  phase six is high.
• At present consensus within the medical community
  suggests that this represents a fairly mild
  strain, certainly in comparison with the SARS
  virus. This is corroborated by the very low death
  rate outside Mexico. Professor Neil Ferguson
  estimated that, in terms of death rates (around
  0.4), the epidemic may be comparable to the 1957
  Asian flu epidemic. However, at this early stage,
  given the lack of rigorous medical testing, such
  findings should be treated with caution.
• One common theme amongst medical experts has been
  the strong potential for second- and potentially
  third-wave outbreaks. For example Professor Neil
  Ferguson of the WHO warned that even if does
  fade away in a few weeks which it might we will
  get a sizeable epidemic in the autumn. More
  efficient transmission in cooler weather
  conditions should result in a more global
  crisis.

4
How could a Swine Flu Pandemic affect the Tourism
Industry?

• The experience of SARS in 2003, followed by the
  Asia-wide avian flu outbreak, reminded the world
  of the active threat of serious global pandemics.
  This threat has again come to the fore following
  the recent outbreak of swine flu originating in
  Mexico.
• Apart from the potential for bio-terrorism, the
  main route by which many believe a serious
  pandemic could arise today is through the
  appearance of a new and virulent strain of flu.
• Two scenarios are presented to assess the impact
  of a contagious disease outbreak in autumn 2009
  and lasting into 2010 that can be transmitted via
  travel flows
• Scenario I a SARS-type case with a limited
  impact in terms of geography and
  time span
• Scenario II a swine flu pandemic outbreak with
  global consequences

5
Some regions are more vulnerable to a
contagious-disease shock than others
High exposure to changes in foreign visitors
A high share of domestic outbound tourism may
help to cushion an external shock
6
Scenario I a SARS-type case

• As happened in the case of SARS, this scenario
  assumes the eruption flares up in one of the
  worlds major trade and travel hubs
• However, the geographic impact of the epidemic is
  limited, affecting only neighbouring countries
  during a few months though it has wider
  repercussions in terms of travellers sentiment
• A swift response of the public health authorities
  brings the outbreak under control. There are some
  losses in services exports, largely reflecting
  disruptions in travel and tourism activity as a
  result of the scare rather than actual loss of
  life

7
Worldwide, visitor exports would fall 1 point
vs. base forecast (or US10.5bn)
The total loss could reach US25.2bn once
indirect effects and discouraged investment are
considered
8
Issues/assumptions

• Health effects such as infection and mortality
  rates
• Nondiscretionary consumer spending falls and
  businesses cut back on travel.
• Government spending rises on health but
  governments constrained in giving help to hard
  hit firms because of budget constraints

9
Scenario II Global pandemic

• We suppose here that a swine flu epidemic
  re-emerges with greater force in late 2009 and
  lasts into 2010.
• Although the authorities and WHO observers are on
  high alert given recent events, the epidemic
  spreads globally. Countermeasures contain
  contagion, but the pandemic has lingering effects
  for Travel and Tourism as confidence takes time
  to re-build following the initial impact.
• There are rapid losses in services exports
  (especially tourism) and discretionary consumer
  spending. Border closures also slow down
  commercial activity even further late this year
  and into 2010.

10
Globally, visitor exports would plummet 60
points vs. base forecast (or US620bn)
The epidemic also hits domestic tourism, causing
losses to the industry beyond the fall in foreign
visitors
11
Although, globally, the net impact of a SARS-type
case is modest, a swine flu pandemic is likely to
badly damage travel tourism in the short term

12
Implications of a Swine Flu Pandemic for the
Tourism Industry

• A global swine flu pandemic could disrupt the
  Travel Tourism industry severely for a period
  of at least 6 months or so around the turn of the
  year. It could cause direct GDP losses to TT
  providers of about US1,073bn and a higher
  US2,190bn to the global tourism economy
  (including the supply-chain and investment
  impacts). This compares to a much lesser impact
  of a SARS-type crisis over the same period a
  global value added loss of about US15.1bn
  directly to the industry providers and US25.2bn
  to the wider tourism economy.
• There is a good chance of a strong recovery in
  demand as the outbreak is unlikely to have a
  lasting effect on expectations. The aim for the
  industry and policy makers would be to ensure
  that no lasting damage is done so that firms are
  able to take advantage of recovery when it comes.
  

13
Annex Key concepts of WTTC Tourism Satellite
Accounting

• TT Economy GDP the broadest measure of the
  economic contribution of the Travel Tourism
  industry. It records the activity of traditional
  TT providers (eg. lodging, transportation etc),
  plus tourism-related investment, public spending,
  and exports of goods (including both direct
  effects and the indirect effects via the supply
  chain of TT spending)
• TT Direct Industry GDP a narrower concept that
  measures the value added of the traditional
  Travel Tourism industries, excluding any
  indirect effects generated throughout the supply
  chain and tourism-related investment, public
  spending, and exports of goods
• TT Personal Consumption includes residents
  travel and tourism spending both at home
  (domestic) and abroad (outbound)
• Visitor exports refers to inbound tourism
  spending (ie, spending by international visitors
  on goods and services)