Executive Summary
Travel bans were a means of slowing the spread of the COVID-19 virus and its variants from 2020 to 2021. However, the closing of borders worldwide exacted a heavy toll on travel services and the industries that directly and indirectly serve the business travel and tourism sectors, ultimately lowering regional GDP’s. According to the World Travel and Tourism Council (WTCC), global spending on travel and tourism nearly halved in 2020. Millions of jobs were also lost in travel, tourism, and adjacent sectors as businesses attempted to cope with the sudden halt in activity.
More than a year after the official start of the global pandemic, international travel bans remain largely in place, with nearly every economy still mandating some form of restriction on foreign travelers. Continued concerns about the spread of COVID-19, emergence of new variants, and challenges to vaccination campaigns—due to logistical challenges or hesitancy—are prompting governments to maintain travel bans that restrict the movement of people across borders.
The forecast for global GDP growth by The Conference Board suggests that travel services, which were gutted by travel bans, may only recover to 50 percent of 2019 levels by the end of 2021. A full recovery of the sector might add 0.7 percentage points to our current 2021 global GDP forecast of 5.3 percent year-on-year to reach 6.0 percent. However, if travel bans persist, the consensus of economists who expect faster growth for the global economic recovery may be too optimistic.
Insights for What’s Ahead
The next level of global trade risks includes not only the threat of more tariffs and sanctions but also restrictions on the free movement of goods, services, cash, and people around the world, reflecting in part the ongoing effects of the pandemic. We discussed how the pandemic has increased protectionist sentiments around international trade, including global supply chains, travel, and foreign investments, in the 3Q 2021 StraightTalk® Powering Growth: Postpandemic Recovery & Risks. In this piece we dive deeper into travel bans as the latest front for international trade friction and risks to the future of globalization.
Should restrictions on international people flows remain in place, global growth may struggle to achieve prepandemic levels. Global trade in travel services may be depressed, and travel sectors, including airlines, hotels, cruise lines, rental cars, tour and travel agencies, and luxury goods producers might find the economic recovery more protracted than anticipated. Moreover, the roughly 334 million people globally who are dependent upon trade in travel servicese sector may face may additional layoffs and, potentially, permanent job losses as their industries shrink.
- Businesses are opting to cut business travel and may continue to do so—due in part to ongoing concerns about coronavirus infections but also to the potential savings from conducting business virtually. Nonetheless, the persistence of global travel bans may reinforce this trend. Indeed, 63 percent of governments have either total or partial bans on foreign visitors, and it is not clear when these prohibitions will be lifted. Moreover, reduced business travel might spill over into other industries that thrive on in-person connections that drive innovation and/or sales and customer relationships.
- Travel bans on foreign tourists are an even greater risk to economies. Their spending accounts for 87 percent of total global exports of travel services—the services exported from an economy to visiting nonresident travelers. Not only are industries directly involved in tourism negatively affected by travel bans, but so are industries indirectly linked to tourism including entertainment and amusement venues and the industries (e.g., food services) that service them. State and local governments that benefit from tourism will also lose tax revenue.
- Travel ban uncertainty creates different glidepaths to recovery for the travel and tourism services trade, and consequently for global GDP growth as a whole. The path of recovery for travel and tourism activity remains uncertain given the tangle of government restrictions on foreign visitors around the world. Ideally, international people flows would return to prepandemic levels by the end of this year or early next. However, as coronavirus variants spread, such a return to normalcy will be determined by the degree to which travel bans are lifted and people feel comfortable traveling.
- Travel bans may also sour foreign relations between economies that choose to reopen borders quickly and those that do not.
