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Economic Impact on Travel & Tourism
of the H1N1 Influenza Pandemic:
Scenario Analysis
25 August 2009
WTTC/Oxford Economics
Economic Impact Research
The swine flu epidemic so far
Swine flu epidemic so far
Reported cases ('000s)
2500
Cases
LHS
28
-
Source : WHO updates, last data from FT 17 Aug
2000
1500
1000
Deaths
RHS
Ap
5- r-0
M
12 ay 9
-M -09
19 ay
-M -0
26 ay 9
-M -0
a 9
2- y-0
Ju 9
9- n-0
J 9
16 un-J 09
23 un-J 0 9
30 un-J 0 9
un
7- -09
J
14 ul-0
-J 9
21 ul-0
-J 9
28 ul-0
-J 9
4- ul-0
A
11 ug 9
-A -09
ug
-0
9
200
180
160
140
120
100
80
60
40
20
0
Reported deaths
500
0
How could a Swine Flu Pandemic
affect Travel & Tourism?
• 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 global outbreak of swine flu which
originated in Mexico in April.
• 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.
• WTTC/Oxford Economics have undertaken scenario analysis
to assess the impact of a contagious disease outbreak. Our latest
results:
– assume infection and death rates of 30% and 0.4% respectively
– calibrate the likely drops in discretionary consumption and
international travel using the experience of Asia’s SARS outbreak
in 2003
Scenario I: a SARS-type case
•
As happened in the case of SARS, this scenario assumes the
eruption flares up in one of the world’s 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
Worldwide, visitor exports would fall
1% point vs. base forecast (or
US$10.5bn)
The total
loss could
reach
US$25.2bn
once
indirect
effects and
discouraged
investment
are
considered
Different transmission channels:
via discretionary spending
• During the SARS outbreak, private consumption fell sharply in
the region as consumers cut back on non-essential spending in
order to avoid infection.
• Discretionary spending other than that which is already
included in the Travel & Tourism effects (e.g. on clothing,
consumer durables, etc) accounts for about a third of
consumption.
• Our latest results assume a 30% cut in discretionary spending
over a 6-month pandemic which corresponds to a 10% cut in
consumption.
• This is larger than during the SARS outbreak given the higher
infection rates currently being experienced.
Other transmission channels:
via labour supply
• Death and illness dampen labour supply.
• The assumed mortality rate implies a 0.4%
permanent shock to labour supply.
• If the ill stay at home for two weeks, the 30%
infection rate corresponds to a 2¼% one-off shock to
labour supply in the six month period of the
pandemic.
• Although significant, this supply-side impact is
likely to be relatively small compared to the
demand-side shocks from lower travel and other
discretionary spending
Transmission of pandemic shock via
Travel & Tourism varies by region
Exposure to shocks to the T&T industry
GDP T&T
economy
GDP T&T
industry direct
Visitor
Export
T&T Personal
Consumption
as % total
as % total
as % total
as % private cons.
Latin America
15.4
9.7
9.9
9.5
9.1
10.7
6.8
4.7
3.3
3.6
3.1
3.3
2.7
2.4
16.4
6.1
7.2
4.5
7.7
5.3
4.7
6.1
9.8
8.8
8.8
5.1
10.0
5.5
World
9.6
3.3
5.8
8.9
based on 2008
figures
Caribbean
Europe
North America
Asia/Oceania
Africa
Middle East
See annex for glossary of terms
Source: WTTC/Oxford Economics
High
exposure to
changes in
foreign
visitors
A high share
of domestic
& outbound
tourism can
help to
cushion an
external
shock
Globally, visitor exports would
plummet 60% points vs. base forecast
(or US$620bn)
The epidemic
also hits
domestic
tourism,
causing
losses to the
industry
beyond the
fall in foreign
visitors
Scenario results: Impact on Travel &
Tourism sector
Global T&T Economy GDP: Impact of flu pandemic
US$ trillions
7.0
6.0
5.0
Base
forecast
Pandemic
scenario
4.0
3.0
2007
2008
2009
Source: WTTC/Oxford Economics
2010
2011
2012
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 T&T providers of about
US$1,073bn and a higher US$2,190bn to the global
tourism economy (including the supply-chain and
investment impacts).
• This compares to a much lesser impact of a SARStype crisis over the same period: a global value added
loss of about US$15.1bn directly to the industry
providers and US$25.2bn to the wider tourism
economy.
Impact on all sectors cuts world GDP
by about US$2.2trn in the six-month
pandemic or 3½% of 2009 GDP
Cumulated GDP loss
% of baseline 2009 GDP
2009Q4
0.0%
2010Q1
-1.0%
-2.0%
-3.0%
-4.0%
-5.0%
-6.0%
Source : Oxford Economics
World
US
Eurozone
UK
China
Risk remains significant that pandemic
hits economy at vulnerable time – and
so tips the world into deflation
World GDP growth
% year
Scenario 1: return
to normal
8.0%
6.0%
4.0%
Baseline
2.0%
0.0%
-2.0%
-4.0%
Scenario 2:
deflation
-6.0%
-8.0%
-10.0%
-12.0%
2008Q1
2009Q1
Source : Oxford Economics
2010Q1
2011Q1
Annex: Key concepts of
WTTC/Oxford Economics
Tourism Satellite Accounting
•
T&T Economy GDP: the broadest measure of the economic
contribution of the Travel & Tourism industry. It records the activity
of traditional T&T 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 T&T spending)
•
T&T 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
•
T&T 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)