COVID-19 has brought many industries to a complete standstill, causing massive job and revenue losses. The travel, tourism, and hospitality industries are taking the brunt of the financial blows and their recovery still remains uncertain. Thomas Cooke, distinguished teaching professor of business law, explains how coronavirus has impacted these industries and what it will take for them to recover.
What industries will be hit the hardest by the virus, and what will it take for those industries to recover?
The industries hit the hardest by this virus are travel, tourism, and hospitality. Using the travel industry as an example, we can draw on the tragic events of Sept. 11, 2001, as a time this industry was severely impacted by the decline of travel. In both instances, passenger safety was threatened and caused a rapid decline in travel. The industry did recover after Sept. 11, and it did not take as long as people had projected. However, the coronavirus pandemic is raising entirely new safety concerns. As the virus continues to impact communities on a global scale, people have stopped traveling to prevent the spread of infection, so I think we are looking at four or five years until some of these industries recover.
This crisis is uniquely different from past financial crises because of the evolution of digital communication, especially in the business travel industry. A substantial amount of the travel industry’s profit comes from business travelers. Right now, Zoom is allowing large companies to conduct virtual meetings without the necessity of being in-person to carry out business, which alleviates travel, hotel, and meeting room expenses. Even if we were able to travel sooner than we had hoped, corporations are going to be reluctant to take on those expenses moving forward.
What will it take for the public to feel safe when they choose to resume normal activities?
What it will truly take for the industries to recover is the public’s trust and confidence in the safety of those affected industries. The introduction of a vaccine will be critical to gaining back the public’s trust and confidence. We are all listening to the medical experts in our communities and access to testing is great, but the vaccine is the grand prize. Until we have a vaccine in place, I think our level of confidence in doing any number of things will be in question, including traveling in close proximity with other people.
Should governments introduce travel incentives once coronavirus is under control?
The government should be cautious about creating any incentives that tend to benefit one segment of the economy. So far, we have seen relief in the airline industry based on the measures Congress has approved the president signed into law. Although these are justified precautions, it does isolate one segment of the economy. This turn of events is causing other industries, such as hospitality, to advocate for government support. Instead of industries advocating for financial incentives, it may be a better alternative for industries to find ways to retain their workforce while also reducing spending. The last message the public wants to hear is about bonuses or stock options when line workers are losing their jobs. The airlines need to show people that they are socially responsible citizens by finding a way to keep people employed.
What is the impact of coronavirus on corporate earnings?
The hit to U.S. corporate earnings from coronavirus is getting harder and messier to predict. As the quarterly earnings demonstrate, companies have taken serious losses in revenue since early March and, in some cases, have stopped with future forecasting and/or adjusted previous forecasts.