Covid-19 and Tourism

Covid-19 and Tourism

Covid-19 and Tourism

Covid-19 and Tourism

Vivek Agarwal | Partner,

The outbreak of COVID-19 presents the tourism sector with a major and evolving challenge. While the full extent of the outbreak’s economic ramifications is still unknown, India’s tourism and aviation sector has been one of the first few industries to be hit. If media reports are to be believed, this crisis is a greater threat than 9/11 and the financial meltdown of 2008-09 and India’s tourism and aviation sector faces the peril of its very survival.

The World Travel & Tourism Council (WTTC) expects the crisis to cost the tourism sector at least USD22 billion, with the travel sector anticipated to shrink by up to 25 per cent in 2020, resulting in a loss of 50 million jobs.[1]

The World Tourism Organization (UNWTO) foresees international tourist arrivals declining by 1 to 3 per cent in 2020 globally, translating into an expected loss of USD30 billion to USD50 billion in international visitor spending.[2] Of this, Asia Pacific is expected to be the most affected region with a decrease of 9 to 12 per cent in international tourist arrivals in 2020, down from growth of 5 to 6 per cent forecast in early January. According to International Air Transport Association (IATA), 2020 global revenue loss for the passenger business is expected between USD63 billion (11 per cent) and USD114 billion (19 per cent).[3]

Closer home, travel and tourism contributes to around 8.1 per cent to India’s employment, or 42.7 million jobs[4]. As per KPMG assessment, it is expected that about 10 to 15 per cent of these jobs will shrink. Four of the top 10 countries (China, Germany, the U.S. and the U.K.) that contribute to about 65 per cent of foreign tourist arrivals (FTAs)[5] in India feature among the top 10 countries reporting the maximum COVID-19 cases.[6] Similarly, the top states contributing to domestic tourism both in origin and destination are impacted. These states include Maharashtra, Kerala, UP, Rajasthan, Gujarat and Tamil Nadu.[7] The focus needs to move to encouraging domestic tourism since international tourism will also depend on multiple factors.

Next steps

Governments around the globe are developing an action plan for revival of the tourism industry. Countries such as Australia, France, Indonesia, Malaysia and Singapore have announced several measures ranging from extension of tax-collection deadlines, setting up taskforces to develop and implement strategies to aid the tourism industry to broader stimulus packages with a focus on boosting consumer spending and tourism.

The UNWTO, as well, has called for interventions such as the following. 

  • Financial and political support for recovery measures targeting the tourism sector in the most affected countries
  • Recovery measures and incentives to be planned and implemented in coordination with international development and donor organisations
  • Tourism support to be included in the wider recovery plans and actions of affected economies.

Based on our interaction with industry players, we believe a four-point approach needs to be adopted by the GoI, state governments and industry players. 

1. Taxes, Duties and Levies:

a. GST holiday for all travel and tourism services.

b. Waiver for the next 12 months from all state governments for the entire tourism industry, including:

i.    property and excise taxes;

ii.    reduction in electricity and power tariffs;

iii.    deferment of payment of all previous due GST till the COVID-19 impact exists;

iv.    no new compliances that create additional burden of resources on the industry (e.g. mandatory e-invoicing under the GST act).

c. Aviation turbine fuel (ATF) needs to be brought under the ambit of GST at 12 per cent to provide immediate relief to airlines with full input tax credit on all goods and services.

d. VAT on ATF by state governments (which ranges from 0 to 30 per cent) should be rationalised with immediate effect to a maximum of 4 per cent across all states for the next 6 months.

e. Fuel infrastructure and into plane charges to be discontinued with immediate effect.

i.    Waiver of AAI and Private Airport Operators’ Space rentals, royalty, landing, parking, route navigation and route terminal charges for the next six months.

2. Financial support

a. All tourism entities –  including airlines and hospitality – must be treated as priority sector lending.

b. Increased credit allowance to airlines by AAI, oil companies, etc.

c. Moratorium for the next 12 months on all interest, principal amounts and covenant relaxation for all loans, including payment of all principal and interest in airlines/hospitality/travel service entities without limitation of size or turnover through a direction to all financial institutions. No loan may be classified as an NPA and no collateral to be enforced or enhanced in this period of moratorium.

d. Government funding for ventures in distress.

e. Relief funds, e.g. Kerala.

3. Promote hygiene and safety

a.    Destination level hygiene and safety assessment and publication

b.    Healthcare and insurance incentives

4. Media outreach

a. Campaign to promote domestic tourism.

b. Allow travelers flexibility to change their itinerary for 12 month without penalties.

c. #India welcomes you back - Develop appropriate messaging and advertising campaigns for tourism during the crisis. Once the crisis mitigates, promote India aggressively. The Incredible India campaign henceforth must be driven with planning assistance from industry associations, as they will be able to give real-time pulse and need of the market.

[1] Coronavirus puts up to 50 million Travel and Tourism jobs at risk says WTTC, Press Release, 13 March 2020

[2] Coronavirus puts up to 50 million Travel and Tourism jobs at risk says WTTC, Press Release, 13 March 2020

[3] IATA Updates COVID-19 Financial Impacts -Relief Measures Needed, IATA Press release, 5 March 2020

[4] Annual Report 2019, Ministry of Tourism, accessed on 20 March 2020

[5] Annual Report 2019, Ministry of Tourism, accessed on 20 March 2020

[6] World Health Organisation (WHO) COVID-19 Figures, accessed on 20 March 2020

[7] Annual Report 2019, Ministry of Tourism, accessed on 20 March 2020