This blog is part of the seminar series on ‘The Economics of COVID-19’.
With abundant sun, sea and sand, tourism is the economic lifeblood of many small island developing states (SIDS). While they are not the countries that bring in the most income from tourism –the United States generated $214.5billion in 2018 - SIDS are by far the most economically dependent on tourism. As Figure 1 shows, 15 of the 20 countries where tourism makes the largest contribution to overall GDP are small island states.
Tourism is an attractive industry for these islands because it is a large employer of both skilled and unskilled labour. Tourism brings in significant foreign direct investment, drives international trade in services and capitalises on a country’s natural beauty and culture. Furthermore, with limited natural extractive resources and a small labour force, there are few other options for economic diversification.
Source: World Travel and Tourism Council
Life is not all beaches and bliss. SIDS must withstand destruction by natural disasters. Not only do they damage resorts and key attractions, but they also often damage critical infrastructure like airports, harbours, and roads. In Dominica, forty percent of the country’s hotel rooms were destroyed in Hurricane Maria in September 2017 and the island suffered an 88.4% fall in visitor arrivals during the first half of 2018.
Even so, this time things are different. The coronavirus pandemic has rocked the $8.8 trillion USD global tourism industry to its core. The lockdown measures implemented to control and contain the virus have struck at the very heart of tourism everywhere, not just in small states. Borders have closed and planes are not flying. Hotels and resorts are empty, restaurants have shut down, and taxis have no passengers. The continued growth for the cruise ship sector that analysts predicted in January, has sharply turned into strong contractions. Unemployment in the travel and tourism industries has soared.
In Fiji alone, 279 hotels and resorts have closed and more than 25,000 people have lost their jobs. There are likely to be further job losses in other tourism-dependent sectors. For example, travel and tourism directly accounted for 14 percent of jobs in Antigua and Barbuda in 2018, jumping to 46 percent when combined with indirectly related jobs.
As governments are thinking of slowly easing restrictions and restarting their economies, the immediate future of the tourism sector remains bleak. While on one hand, many people who have been in lockdown for months will be eager to getaway, with a global economic recession and unemployment on the rise, many will not have the financial wherewithal to do so. Moreover, it may take a while for people to feel safe enough to board a plane or cruise ship.
From a supply perspective, many governments are extending current restrictions on international travel and imposing two-week quarantines on incoming passengers. Even if SIDS decide to forgo these restrictions, they will have to ensure that they open in a way that is safe for their citizens and will not cause a second wave of infections.
It is natural to ponder what the future of tourism may look like. Will tourism in SIDS become a luxury reserved for the ultra-wealthy who have access by private planes and yachts? Will tourism become more regional, limited to corridors of travel between recognised safe places? Are the use of immunity certificates and disease detecting dogs a practical solution? Importantly, are any of these options enough to sustain tourism-dependent SIDS? Is the private sector in these countries big enough and strong enough to recover?
One thing is clear however, many governments will need financial support going forward, particularly given that many of them already heavily indebted.
The coronavirus pandemic has caused many countries to question their reliance on the tourism industry. But what options remain for economic growth outside of tourism? Many small states engage in financial services and citizenship-by-investment services as alternatives. New opportunities offered by the technology sector also have to potential to help diversify the economy.
The next webinar in the Commonwealth Secretariat’s Virtual Seminar Series: ‘The Economics of COVID-19' will focus on the pandemic’s impact on tourism, debt, and disaster risk management.
Ministers from Barbados, The Bahamas, Maldives and Malta will discuss how their tourism industry has fared and their economic outlook for the next year. They will also explore how they are preparing for the ever-present threat of natural disasters.
Register to join the discussion on 27 May 2020 at 13:00 GMT.
For more information or questions about registration please contact: [email protected]