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The Impact of COVID-19 on the Airline, Hotel and Cruise Line Sectors

 

Learn more about our Travel Industry ETF

Part 1: The Impact of COVID-19 on the Airline, Hotel and Cruise Line Sectors

Part 2: Exploring COVID's Impact on Travel and Tourism Sectors

Part 3: Factors Driving the Recovery of the Travel Industry

 

Abstract

The travel and tourism industry generated 10.4% of global GDP in 2019.  Three sectors (airlines, hotels, and cruise lines) accounted for over a quarter of total 2019 travel spending.  All three of these sectors were hard-hit by the COVID-19 pandemic, losing nearly half of their combined annual revenues between 2019 and 2020.  However, most major industry players survived this crisis, and a recovery appears firmly underway as of mid-2021, at least in the world’s advanced economies.  After a year on lockdown, there is an enormous pent-up demand for travel, fueled by an increase in disposable incomes and savings in the US and other major markets.

 

Introduction to the travel and tourism industry and our Travel Industry ETF

At the beginning of 2020, global leisure and business travel had been increasing steadily for years, and the international travel industry was optimistic that these trends would continue.  However, the first case of COVID-19 was identified in China in December 2019.  The World Health Organization (WHO) declared COVID-19 a Public Health Emergency of International Concern at the end of January 2020, and subsequently declared it a pandemic in March.

Trends in Leisure and Business Travel Spending 2017-2021 (Trillion USD)

Source: Statista, Global Business Travel Association [1] 

 

COVID-19 triggered a global economic contraction of a scale not seen since the Great Depression, and whose impact on the travel and tourism travel was magnified by severe government restrictions on movement, including closing international frontiers and limiting the public’s ability to travel domestically.  As a result, total global spending on leisure travel fell 50%, from $4.692 trillion in 2019 to $2.373 trillion in 2020.  Expenditures on business travel took an even bigger hit, falling 52% from $1.445 trillion in 2019 to $694 billion in 2020.[2] 

With the rollout of COVID-19 vaccines and the gradual relaxation of restrictions on public movements, global spending on leisure travel is expected to increase by 45% in 2021, to $3.45 trillion.  Business travel expenditures are projected to increase by 21%, to $842 billion in 2021.  While welcome, these increases still leave leisure and business travel spending far below their 2019 peak.  It is likely to take several more years to regain all of the lost ground.[3] 

 

To learn more about our Travel Industry ETF, please visit our fund page here.

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