Layoff Fears for Millions as Corona Brings Tourism to a Standstill
The travel and tourism sector is staring at millions of disappearing jobs and a grey future.
The closing down of the iconic Taj Mahal last month is an evocative symbol of how India’s travel and tourism landscape has changed due to COVID-19. The country’s travel and tourism sector, more dependent than others on the free and confident movement of people, is staring at millions of disappearing jobs and a grey future. As a result of lockdowns, with no travel possible, the tourism industry is being “badly hit”, a government press release said on April 10, 2020.
Reports and experts suggest possible job loss across tourism and allied industries due to standstill caused by the COVID-19 outbreak across the world. “The Indian tourism and hospitality industry is staring at a potential job loss of around 38 million, which is 70% of the total workforce,” due to COVID-19, a report by KPMG, a financial services and business advisory firm, said on April 1, 2020.
If this trend continues as the COVID-19 crisis progresses, it will be a setback for national employment. The sector accounts for 12.75% of employment, 5.56% of it direct and 7.19% indirect. Over 87 million people were employed in the tourism industry in 2018-19, according to the ministry of tourism’s annual report for 2019-20.
Officials of travel and tourism companies tell a uniformly dismal story of cancelled bookings from February 2020 leading to “complete paralysis” by mid-to-late March 2020. “The industry has come to a standstill as the crisis has hit its nerve centres--the airlines and railways,” Ajay Bali, managing director of the Mumbai-based BCD Travel India, the Indian arm of the Dutch corporate travel management firm, told IndiaSpend. “And in the next 45 days, we do not even know if there will be recovery.”
“This is one of the worst crises to hit the tourism industry and it has impacted all its segments--inbound, outbound and domestic, and leisure, cruise, adventure, corporate meetings, conference, and exhibitions,” concurred Unmesh Vaidya, currently business head at Iqomi Travel Services, a Mumbai-based startup specialising in corporate services such as meetings, incentive trips and conferences.
Bali described a job situation in flux, with some employees working from home (to handle cancelations, etc.), others asked to take their allotted leave, and those with no leave asked to go on leave without pay. Senior staff, he said, had been asked to take 30-40% pay cuts. While there were reports, he said, that blue-collar and contractual staff had been laid off at some travel firms, “actual retrenchment will only happen at the end of April if the lockdown is extended”.
Meanwhile, the current lockdown extends the curbs imposed on Kashmir in August 2019, hitting the livelihoods of 144,500 Kashmiris employed in the tourism and handicrafts sector, as IndiaSpend had reported on January 28, 2020.
Ravi Kumar (name changed on request), an employee of one of India’s largest travel agencies, with 22 years’ experience, was asked to go on leave without pay for 15 days in March 2020, even before the lockdown was announced, as COVID-19 hit his firm with cancellations from end-February all the way to June 30, 2020.
The timing was particularly unfortunate: “This is a major season for travel and airline companies,” Kumar told IndiaSpend. “A lot of bookings are made in February-May, whether for students travelling abroad, for leisure and vacation travel, for corporate travel, for religious and pilgrimage travel, and by elderly people visiting their children abroad.”
For the many thousands of freelancers making a living out of travel and tourism, the situation is as bleak. “All our assignments have been cancelled,” said Naina Thakkar, a professional tour guide in Mumbai for over 40 years, and part of a group of over 100 guides who work on a per-assignment basis with travel agencies and foreign tourists arriving on cruise ships. Some of her colleagues had not been paid since November 2019, she said, since cash-strapped travel agencies had held back their payments due to the worldwide slowdown.
While the tourism sector has struggled even before the pandemic, it remains, according to the Economic Survey 2019-20, “a major engine of growth, contributing to GDP [gross domestic product] and foreign exchange earnings”. The share of tourism in India’s GDP was 5.06% in 2016-17, down from 5.81% from 2014-15, according to the tourism ministry’s latest annual report cited above.
No Clear Timeline for Recovery
While every industry faces uncertainty over its future course with the unabated global advance of COVID-19, which has so far caused outbreaks in 185 countries, for this one the fears are more visceral. As those in the industry point out, information technology, banking/financial services and pharmaceuticals have no doubt felt the sting of the virus, but they are not as dependent on the physical mobility of people, and their comfort with the idea of travel, both of which have been casualties of the current crisis. Will it take nothing short of a vaccine, they wonder, for people to feel confident enough to undertake non-essential travel again.
Vaidya is relatively optimistic. “I foresee a turnaround by August this year with restaurants, bars, event venues, amusement parks, hotels, flights leading our recovery, in that order,” he said.
“The situation looks bleak,” said Kumar, “as people will not be willing to travel even when the lockdown is lifted. Domestic travel may take off again, but people will not think of travelling abroad soon.” He added that agents were currently caught between passengers and airlines, with the former wanting full refunds and the latter asking them to change dates of travel free of cost, but with additional charges on account of fare differences. “People don’t want their money stuck for so long. The magnitude of the virus’s spread has led many to push their travel plans to next year,” he said.
Bali expressed the hope that a mid-term recovery would start in June-July. “Assuming India recovers by mid-May, people will start travelling within the country,” he said, adding, “things will be back to normal by January 2021”. But even this prognosis is beset with uncertainty: “If international travel resumes, the first people to travel will be students and labourers. The leisure sector will be very slow to start its recovery.”
Medium and small enterprises dominating the tourism and hospitality sector are likely to be severely impacted by the pandemic, at least till the month of June, according to Mridula Tangirala, head of tourism at Tata Trusts. “July to September have always been lean for tourism in India except for a few select pockets. The rate of revival after the month of October cannot be predicted right now as the full impact of the crisis is still unknown,” she told IndiaSpend.
However, there was no way to make up for the income already lost, Sabina Dewan, president and executive director of Just Jobs Network, pointed out. She said that states relying heavily on income from tourism, such as Kerala and Himachal Pradesh, would feel the effects more.
Bleak International Picture
Internationally, the situation is bleak too, with several countries having restricted movement within and across cities and borders, and travellers themselves putting travel plans on hold, for both financial reasons and health anxieties.
As many as 75 million travel and tourism jobs are at risk worldwide, one in eight of them in India, according to the WTTC. The council, which had earlier projected a 50-million global job loss due the pandemic, said in a release on March 25, 2020: “This latest projection of a 50% increase in jobs at risk, in less than two weeks, represents a significant and worrying trend, with an astounding one million jobs being lost every day.” This comment suggests estimates could turn even more bleak with the further spread of the pandemic.
Travel and tourism was the second fastest growing sector in the world at 3.9% in 2018, after manufacturing which grew by 4%, according to WTTC.
The Asia-Pacific region may lose 49 million jobs due to the pandemic, causing a loss of nearly $800 billion to travel and tourism GDP, the WTTC’s most recent analysis suggests. More than half of these jobs (25.6 million) are in China, where COVID-19 originated.
Plummeting Foreign Tourist Arrivals and Empty Hotel Rooms
The nationwide 21-day lockdown from March 25, 2020 suspended domestic flights, trains and inter-state buses, and instructed all Indians to stay at home. The government had already restricted foreign arrivals earlier in March 2020, first suspending tourist visas and visa-free travel for those holding Overseas Citizen of India cards, then prohibiting arrivals from COVID-19 hotspots, and finally cancelling all international flight landings from March 22, 2020, about 700 a week.
The government called for suspension of all hospitality services with exceptions only for those who were accommodating tourists and people stranded due to the lockdown, and those designated as quarantine facilities.
Thus, foreign tourist arrivals in India, which saw a 9% decline in February 2020 (1.02 million) over January 2020 (1.12 million), and a 7% fall compared to February 2019 (1.09 million), have plummeted in March 2020.
Likewise, occupancies across hotels in India have crashed during March 2020, by over 40% in many cases; and cancellations are at an all-time high, said a March 23, 2020, report by ICRA, an independent investment information and credit rating agency.
The United States and the United Kingdom together accounted for 24% of India’s foreign tourist arrivals in February 2020. These two countries are among the worst affected by COVID-19, reporting over 600,000 cases (April 12, 2020), according to data from Johns Hopkins University.
Domestic tourist visits numbered 1.8 billion in 2018, a 12% increase from 2017, the tourism ministry’s 2019 report said. With the lockdown, this too has come to a standstill. The shutting down of the iconic Taj Mahal on March 17, 2020, which attracted over seven million visitors--both domestic and foreign--in 2018-19, was an evocative symbol of the dramatically altered tourism picture. The lockdown has also led to the closure of pilgrimage sites and temples across states, affecting local businesses and employment thriving around them.
The tourism sector was already in trouble before the rise of the pandemic, experiencing the impact of the global economic slowdown. Growth decelerated in 2019-20 with weaker growth in foreign tourist arrivals and consequently in foreign exchange earnings from tourism, according to the Economic Survey 2019-20.
Revenue Losses for Several Quarters, Big Impact on Unorganised Labour
The revenue losses in the travel and tourism sector would run into multiple quarters, Pavethra Ponniah, Vice President at ICRA, estimated: “Several hotels have already let go of all contractual labour. While there are discussions on pay cuts, we are not hearing of permanent labour cuts yet. A prolonged downcycle could however lead to those also being pruned.”
The indirect impact in the unorganised sector, including tourism, hospitality and transport, would be much bigger, said Santosh Mehrotra, Cambridge Professor of Economics and Chairperson, Centre for Labour Studies, Jawaharlal Nehru University. “Casual workers are employed in the urban and rural areas, but it is in urban areas where the economy has been brought to a standstill,” he said. All the unorganised sector jobs in urban areas would be affected and slowly the effect would be felt in rural areas.
The restaurant industry in India, with an annual turnover of approximately Rs 4 lakh crore ($53 billion, or six times the Centre’s health sector budget for 2020-21), provides direct employment to more than seven million people--11 times the population of Sikkim--according to Anurag Katriar, president of the National Restaurant Association of India (NRAI). “The sector is fighting a grim battle for its survival,” he said. “We are staring at almost zero revenue in the immediate term and at least a drop of 50% for months thereafter.” The biggest concern, he added, was the fate of the millions employed in this sector.
“Nearly 15% of the jobs in the hotel and restaurant industry will be impacted once the lockdown is lifted, as the industry will not see an immediate surge in demand,“ estimated Sukesh Shetty, general secretary, Indian Hotel & Restaurant Association (Ahar). Ahar is the largest association of restaurants and bars in Maharashtra with over 35,000 members. About two million people, many unorganised workers, are employed across the state in these hotels, restaurants and bars, according to Shetty. For restaurant-owners, one of the uncertainties lying ahead is how comfortable people will feel with the idea of eating out, even after the lockdown, when fears about hygiene and infection have taken root.
“I have never seen such a situation in my lifetime,” Shetty told IndiaSpend, explaining that about half the staff working in hotels and restaurants had left Mumbai in fear of the epidemic. Losses, he said, would become clearer only after a proper assessment of the damage to businesses and their supply chains. “For owners to bear the burden of a big workforce without income or government intervention is going to be tough,” he said. Without support, many establishments would close down, he warned.
The hotel and restaurant industry is seeking relief measures from both the state and central governments such as interest-free loans from banks, waiver on all licence fees, supply of subsidised food grains and a tax holiday for a period of one year in order to maintain jobs and support the industry. They also expect to restore input tax credit on goods and services tax--that is claiming the credit paid on the purchase of goods and services which are used for furtherance of business--which will help them bring down fixed operating costs.
“The NRAI is grateful to the government and the RBI for their recent measures aimed at mitigating some of our woes,” Katriar said. “Deferment of GST payments, concession extended on PF contribution and permission to employees to partially withdraw from their PF accounts, moratorium on EMIs and easing of interest rates are all steps in the right direction,” he added.
Turbulence in Aviation Sector to Continue
A linked sector, aviation, could incur losses worth $3.3-3.6 billion (about Rs 27,000 crore) in the first quarter of 2020-21, according to the Centre for Asia Pacific Aviation, India, a consultancy and advocacy agency. These estimates are based on the assumption that all domestic and international operations will remain grounded until June 30, 2020. “Even with some partial resumption of services in May and June, the financial outcomes may not change significantly,” it said.
“The aviation sector was struggling in any case,” Mehrotra said. “For decades we have been trying to sell off Air India, but now markets have fallen and there is no possibility of selling it for many months again.”
Dewan of the Just Jobs Network estimated that India’s air transport market employs over 400,000 people and another 940,000 are employed in related supply chains. Apart from the impact of travel restrictions on the industry, and the likely impact of people’s fear of travel, she also drew attention to the cost of complying with new health and hygiene guidelines, for both the aviation and hospitality sectors.
CARE Ratings, a credit rating agency, estimated in a release on March 25, 2020 that the passenger growth of airlines in India would fall sharply and register a negative 20-25% growth for 2020-21. The sector was already in trouble. The passenger traffic for domestic airlines grew by 3.7% during 2019-20 (April-February) registering “a distinct fall” from the 15.1% growth rate achieved in the corresponding period in the previous financial year. “The general slowdown in the economy since the start of FY20 has led to a sharp moderation in airline passenger growth operated by domestic airlines,” the report said.
The Way Forward
Experts have emphasised on the need and potential to tap domestic tourism and the impact that social media has in capturing the imagination of potential travellers as the way forward to come out of the situation. “China is a very big inbound market and that market is going to be damaged,” Dipak Deva, co-chairman, FICCI Tourism Committee and managing director, Sita, Travel Corporation India and Distant Frontiers, said in a webinar on ‘Indian Travel and Tourism Industry: Impact, Survival & Roadmap to a better Future,’ held on April 6, 2020. “It is a very big opportunity for India to try and tap the business when it revives unlike the manufacturing sector that let it go,” he said.
“We have to go back to the strength of the domestic market to fuel its own consumption and if we get that engine going, then we will be far less touched in the negative way,” Rupinder Brar, additional director general with the Ministry of Tourism, said during the webinar. “Over the next few weeks, if cases in India do not spiral--the way it has impacted western Europe or America--then there is an opportunity in the domestic market and we need to capitalise it,” she said.
(Chaitanya Mallapur is a senior policy analyst with IndiaSpend. This article was first published on Indiaspend and is being republished with permission.)
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