China’s Virus Outbreak Plays Havoc With Travel, Tourism Sectors

The outbreak of the coronavirus in China, which has now infected more than 3,000 and killed at least 81, has led to a disruption in peoples’ movements that could spell havoc for tourism and travel into and out of the giant nation and within it.

The Chinese government has ordered travel agencies to cancel group tours nationwide, while other Asian nations that depend heavily on Chinese tourists -- like Hong Kong, Thailand, Vietnam, Singapore and Philippines -- could suffer financial losses in the coming months from fewer visitors.

On Monday, Chinese authorities extended the Lunar New Year holiday through Feb. 1 in order to halt spread of the virus by encouraging people to stay at home and prevent public assemblages.

More than 400 million Chinese were expected to travel during the Lunar New Year, one of the busiest times for airlines, hotels and tourist sites. However, now as people deal with travel restrictions, flights and hotel bookings are being cancelled.

The government of the city of Shanghai, a massive metropolis of some 25 million people, extended the holiday through Feb. 9 and ordered the closure of sports stadiums and certain public events.

The former Imperial Palace in Beijing was closed Friday until further notice while other tourist sites across China have also been shut down.

Hong Kong, which has already confirmed the presence of the virus on its territory, said it will prohibit the entry of visitors from Hubei province, the epicenter of the coronavirus. Hong Kong also closed two of its most popular tourist attractions, Hong Kong Disneyland and Ocean Park.

Chinese officials have already suspended transport links in Wuhan, a city of 11 million people, where the virus is believed to have originated. That lockdown has now encompassed 17 cities comprising more than 50 million people.

Economists and analysts are worried about the economic impact of the virus outbreak, especially on the tourism and travel sectors, as well as on it overall economic growth.

George Magnus, an associate at the China Center at Oxford University in England, said: “[This crisis is] coming at a very sensitive time for the Chinese economy. It looked as though at the end of 2019 the downturn in economic activity and unemployment had stabilized. The idea was that we would see a modest rise in economic growth in the first and second quarters of the year. That might not actually happen. It may cause stagnation around current levels of activity to continue.”

Some Chinese companies have already taken a hit.

After the Civil Aviation Administration of China ordered airlines to make refunds for cancelled flights, major airlines like China Southern Airlines, China Eastern Airlines (CEA) and China Air saw their stocks plunge.

Trip.com, an online travel agency, waived all cancellation fees on hotels, auto rentals and tickets for tourist sites.

Hotel and casino companies have also seen their bottom lines dented -- InterContinental Hotels Group (IHG) and Hyatt Hotels (H) said they will permit guests to cancel reservations at Chinese hotels during the Lunar New Year holiday.

Casino operators like Las Vegas Sands (LVS) and Wynn Resorts (WYNN), which have businesses in Macau, have endured share price declines.

Overall, tourism – both to and out of China – has become a huge business and contributes about 11% of China's economic growth.

In 2018, 62.9 million tourists visited China, making it the world’s fourth biggest tourist destination.

In 2018, China outbound tourists totaled 149.72 million – and the most popular destinations were Thailand, Japan, Vietnam, Singapore, Indonesia, Malaysia, U.S., Cambodia, Russia and the Philippines.

“China is the biggest driver of global growth so this [virus outbreak] couldn’t have started in a worse place,” said Alec Young, managing director of global markets research at FTSE Russell. “Markets hate uncertainty, and the coronavirus is the ultimate uncertainty in that no one knows how badly it will impact the global economy.”

However, Tommy Wu and Priyanka Kishore of Oxford Economics wrote that travel disruptions caused by the virus “could potentially be a high impact but short-lived event.”

They cited that during the 2002-2003 severe acute respiratory syndrome, or SARS, outbreak, Chinese economic activity suffered but then recovered quickly. The impact from the current virus, they added, should be “less severe” than SARS because of more rapid government response and “increased transparency.”

Similarly, Seema Shah, the chief strategist at fund manager Principal Global Investors, said: “it is too early to assess the potential economic impact of this outbreak. However, there is reason to hope that the impact of this virus will not be greater than SARS. China’s response has been considerably more proactive than in 2003.”