Business recovery and continuity in crisis

The Philippine Trade Training Center—Global MSME Academy, an agency under the Department of Trade and Industry, held a forum on Bouncing Back: Business Recovery and Continuity in Crisis in the tourism industry, in partnership with the Management Association of the Philippines (MAP) Trade, Investments and Tourism Committee, Asean Society and the Asian Institute of Management.

As one of the hardest hit sectors, the pressing need is to discuss what to do to bounce back, and recover, and continue to do business in the future.
This article encapsulates the proceedings from the forum.

The pandemic threat of the coronavirus or COVID-19 reared its crowned head and tourism and tourism-dependent businesses are reeling from the business backlash. The effects are felt up and down the value chain, and initial estimates of the losses might even be more than what have been estimated. Consider the cancellations and the continuing fall of airline (and other transport) revenues, the nearly empty hotels and resorts, the postponements of conferences and other MICE (meetings, incentives, conventions and events)—and the travel bans and advisories continue to increase among source markets.

The National Economic and Development Authority (Neda) estimated a monthly loss of P22.7 billion as disclosed during the hearing at the House of Representatives. Business losses in billions could trigger layoffs, with the national flag carrier Philippine Airlines already announcing the reduction of its workforce by 300. South Korea, China, United States, Japan and Taiwan are among the country’s top source tourism markets, accounting for at least 5.5 million arrivals in 2019. That is an average of approximately 460,000 per month, representing more than 72 percent of the total eight million plus arrivals. We can do the math and it is painting a worrying picture.
Neda also said that Philippine gross domestic product (GDP) could reduce by 0.3 percent if the virus will last until June, rising to 0.7 percent if it persists till the end of 2020. This is a conservative estimate considering that the projections include only 10 percent reduction from other source markets and 100 percent from China. As we can observe now, the five top markets are heavily reduced, too.

There is a difference between crisis that are offshoots of natural causes, such as earthquakes, floods, typhoons and the like, and those that are health-related. The former we can ascertain at least about the extent and duration and most of the time, are location-specific. That is not the case for health-related hazards. Health issues that can potentially become life-threatening sow fears in our hearts, and we are all quick to retreat from these dangers instinctively. The magnitude also tends to be largely uncertain, especially for viral causes; they can spread quickly in such a short time, given the ease of travel and the mobility of people, the population density, and the toll on an already burdened public health system.

In health crisis events, the burning question is always how long it will take to bounce back and reverse the negative effects—in businesses, in people and in the country. Studies have shown that recovery is not easy. The 2016 Ebola impact on the tourism market of Sierra Leone, Guinea and Liberia showed that as of the 2018 World Travel and Tourism Council (WTTC) study, both arrivals and spending from international visitors have not yet returned to their preepidemic peak.

Why the COVID-19 impact matters

The COVID-19 might have a more serious impact than the previous outbreaks of SARS in 2003, H1N1 in 2009 and MERS-COV in 2016 for the following reasons:
• Even while the experts are working round the clock to understand the virus, they have yet to give a definite explanation about its exact nature and how to contain the contagion.
• It is a more progressive world that the one we inhabited since the SARS outbreak—more mobility and connectivity and more densely-populated cities. This will make it more difficult for the health system to respond, much more surveil proactively, in cases that can double or triple in matter of days.
• The China impact is grea¬ter. Back in 2003, China is just a bit player in the global economy. Today, it has become an economic powerhouse. In tourism, China received fewer than 38 million tourists and sent about 17 million tourists abroad. In 2019, it received 142 million inbound tourists and their citizens made 134 million trips abroad and 5.5 billion domestically. The reduction due to severe travel restrictions will be felt in almost every sector of the global economy.
• The social media is a vehicle for rumors, fake news and panic that spread faster than the virus. Fear has become the biggest enemy. Margaret Chan, former director general of the World Health Organization, cited a “World Bank estimate that 90 percent of the economic losses arise from uncoordinated and irrational efforts of the public to avoid infection.”
• The effect will ripple across industries as the supply chain gets disrupted.

In search for measures toward business recovery

The COVID-19 will hurt the tourism industry in a big way. The WTTC reports show that tourism has become a huge global business, accounting for 10.4 percent of global GDP and 10 percent of global employment. Its year-on-year growth increases surpass those of the global economy, with the UN World Tourism Organization projecting future growth of 3-4 percent in international tourist arrivals for 2020.

The Philippine data in 2018 highlighted the big contribution of travel and tourism to GDP (24.7 percent of total economy), 20.2 percent of total employment (8.3 million jobs) and 8.4 percent of total exports. It is a vital sector where losses can impact not only the big companies but the ecosystem of communities and micro enterprises whose livelihood depend on the industry. INQ

The author is Chair of the MAP CEO Conference Committee, former Undersecretary of the Department of Tourism and the President of ASEAN Society Philippines. Feedback at [email protected] and . For previous articles, please visit map.org.ph