Tourism recovery at risk as global crises take a toll, OECD report says

Factors such as Russia’s war in Ukraine, high inflation and weakened household purchasing power are affecting the sector

Tourists at the Taj Mahal in India. In OECD countries in the Asia Pacific region, tourist arrivals were at least 40 per cent lower in July 2022 than in July 2019. AFP

The post-pandemic rebound in the tourism sector is at a risk of slowdown as the global economy loses momentum during the energy shock triggered by Russia’s war against Ukraine, high inflation and weakened household purchasing power, according to the Organisation for Economic Co-operation and Development.

Many economies posted a strong recovery in tourism this year on the back of pent-up demand, household savings and travel vouchers, OECD's Tourism Trends and Policies report said. However, global tourism is now not expected to recover until 2024 or 2025, or even later, it added.

“The pandemic exposed underlying weaknesses in the wider tourism economy,” OECD’s secretary general Mathias Cormann said.

“Fallout from Russia’s war of aggression against Ukraine is now threatening the sector’s recovery,” Mr Cormann said.

Before the Covid-19 pandemic, tourism directly contributed 4.4 per cent of gross domestic product and 6.9 per cent of employment, and the sector generated 20.5 per cent of service-related exports on average in OECD countries.

Global tourism activity came to a “near complete halt at the height of the pandemic”, the report said.

With domestic tourism also constrained, tourism’s direct contribution to GDP dropped by 1.9 percentage points in OECD markets.

International tourist flows in July 2022 were 19.9 per cent below July 2019 levels across reporting OECD countries, although there were marked variations across regions.

For example, tourist arrivals in Denmark, Greece, Luxembourg, Portugal, Slovenia and Spain exceeded 2019 levels but in countries bordering Russia and Ukraine, tourist numbers were at least 30 per cent below the pre-pandemic levels in July 2022.

In OECD countries in the Asia Pacific region tourist arrivals were at least 40 per cent lower than in 2019.

Last month, a UN World Tourism Organisation (UNWTO) report said the global tourism industry is on track to reach 65 per cent of pre-pandemic levels of international visitors by the end of this year.

The industry could bring in $1.2 trillion to $1.3 trillion in tourism revenue this year, a 60 per cent to 70 per cent increase over 2021, according to the latest data from UNWTO. This year's revenue forecast is 70 per cent to 80 per cent of the $1.8 trillion the global industry generated in 2019.

In the first nine months of 2022, an estimated 700 million tourists travelled internationally, more than double the number for the same period last year, the UN tourism body said.

As the sector navigates various challenges and an uncertain outlook, OECD’s report said transformative action is needed to drive recovery and to set tourism on a path to a more resilient and inclusive future.

“The challenge for governments and businesses is not only to boost tourism in the short-term, but to also ensure the sector’s longer-term strength and sustainability," Mr Cormann said.

OECD emphasised strengthening collaboration across government, and with the private sector, to shape a better future for tourism.

It also recommended to establish a “robust and stable” tourism sector that is more resilient to future shocks.

“The pandemic and cost-of-living crisis have underlined vulnerabilities in the sector and the need to build the capacity of government and business to react and adapt quickly, develop tailored destination management approaches and promote a business environment where SMEs can succeed,” OECD said.

The report also urged sustainable and transformative action to promote a green tourism recovery.

Between 2010 and 2019, the sector’s GDP grew on average 4.3 per cent annually while its environmental footprint increased by 2.4 per cent, according to the latest data on the industry's climate impact by World Travel and Tourism Council and Saudi Arabia-based Sustainable Global Tourism Centre.

The sector was responsible for 8.1 per cent of global greenhouse gas emissions in 2019, down from previous estimates of 11 per cent, according to the data.