[COVID-19 and Travel①] Companies Sponsoring Historic Sites... Travel Industry Faces 'Survival as Top Priority'

July Air Passenger Volume Down 80% YoY... Airlines Focus on Cargo Transport
Italy Provides Heritage Site Lists to Companies... Seeking Support
Travel Agencies, Hotels, and Tourism Industry Struggle... Exploring Survival Strategies

The prolonged COVID-19 pandemic has caused the global tourism industry to face its greatest challenges. Although social distancing and lockdown measures to prevent the spread of COVID-19 have been lifted, travel remains difficult without vaccines, and travel demand has yet to recover. Governments and companies are devising survival strategies, some tourist destinations have begun reopening, and unique business models are emerging.

A couple wearing masks is taking a selfie in front of the Trevi Fountain in Rome, Italy.
[Image source=EPA Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Rome, Italy, home to the world's largest UNESCO World Heritage sites, is facing the threat of budget cuts due to the impact of COVID-19. The World Travel & Tourism Council (WTTC) predicted that the number of tourists visiting Rome this year will decrease by 9.9 million compared to last year. With reduced tourism revenue, funds needed to manage, maintain, and restore historical sites had to be secured.

According to Bloomberg on the 29th (local time), Rome's solution was to sign a two-year sponsorship agreement with Confindustria, a nationwide association consisting of thousands of Italian companies. This approach is similar to how the Medici family, who effectively ruled 15th-century Florence, sponsored artists like Leonardo da Vinci and Michelangelo by creating a list of heritage sites for individual companies to sponsor.

Italian archaeologist Salvatore Settis commented, "Preserving large-scale historical centers is very costly," and praised the idea of securing additional funds to enable the maintenance and repair of heritage sites. This is the method chosen by Rome, a representative tourist city, for survival.

Since the onset of the COVID-19 crisis, the tourism industry has been fighting a battle for survival. With a sharp decline in travel demand, not only regions and countries famous for tourist attractions but also related industries such as airlines and hotels have faced economic hardships including job cuts and bankruptcy filings. While many are trying to reduce costs and increase debt to avoid bankruptcy, companies unable to endure are continuing to fail.

According to the International Air Transport Association (IATA), the number of airline passengers worldwide in July dropped by 79.8% compared to the same period last year. In a June report, IATA forecasted that global passenger numbers would not recover to pre-COVID-19 levels until 2024 and projected a 55% decrease in passenger numbers this year compared to last year.

[Image source=Reuters Yonhap News]

In response, airlines are seeking alternatives for survival. Latin America's largest airline LATAM and the second-largest Avianca have already filed for bankruptcy protection, and airlines such as Thailand's Thai Airways, Virgin Atlantic, and Virgin Australia have collapsed. Airlines that have barely survived so far are compensating for reduced passenger demand by increasing cargo transport due to the resumption of economic activities, removing passenger seats to accommodate cargo and generate revenue through freight transport.

According to an analysis by The Wall Street Journal (WSJ), IATA forecasts that total air cargo revenue for the airline industry will reach $111 billion this year. This is a slight increase compared to pre-pandemic projections. However, considering that revenue from passenger flights is expected to drop from an initial $581 billion to $241 billion, the increase in cargo revenue is significant. Normally, cargo transport accounts for about one-eighth of total airline revenue, but this year it is expected to make up about one-quarter.

The tourism industry is also urging governments to reopen borders despite the resurgence of COVID-19 to ensure the industry's survival. More than 20 travel and tourism organizations and unions across Europe recently sent an open letter to the European Union (EU) Commission leadership, requesting that travel restrictions aimed at curbing COVID-19 spread be replaced with other measures. They emphasized that over 27 million Europeans work in the tourism sector and asked for support to sustain their businesses.

The hotel industry is facing similarly difficult circumstances. According to Forbes, the combined market capitalization of the world's five largest hotel chains, including Hilton and Marriott, was $79.2 billion in September, down $25.2 billion from earlier this year. With a significant drop in customers, many employees lost their jobs, and numerous hotel owners face foreclosure threats from commercial real estate lenders. Notably, the Palmer House Hilton Hotel in Chicago, with a 145-year history, is at risk of foreclosure.

In response, some hotels have sought survival strategies by focusing on the decrease in business travelers and the rise of remote work. France's Accor Hotels and the Netherlands-based citizenM launched marketing campaigns offering rooms as remote workspaces for customers needing a place to work from home. Gerab Bouchane, Chief Development Officer (CDO) of Accor, which owns the Sofitel and Ibis brands, explained, "It is a fully equipped space that is not a small apartment and is free from children or family distractions."