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Coronavirus Pandemic Is an Unprecedented Crisis that Impacts the Tourism Industry 

Executive Summary of Australian Hotel Industry and The Impact of Covid -19

COVID -19 has impacted the economic activities across the globe. The pandemic has put a halt to domestic as well as international travel. The accommodation, food, and beverages as well as the hospitality sector that are associated with the tourism sector are adversely impacted. Not only, tourism contributes positively to the GDP of a nation but also provides huge employment. The aim of this study is to examine the effect of coronavirus on the tourism industry of Australia. Moreover, how the Accommodation, Travel, Food, and Beverage sector that are associated with the tourism and hospitality industry are impacted is elucidated. In addition to this, possible solutions to revive this sector is discussed in detail.

Table of Contents

Introduction.

Background.

Challenges faced by the Accommodation, Travel, Food & Beverage sector

Steps were taken by the Australian Government to boost the Tourism industry.

Solutions.

Conclusion.

Reference.

Introduction to Australian Hotel Industry and The Impact of Covid -19

COVID -19 began as a health crisis has turned into an economic crisis. In order to prevent transmission of the virus, countries across the globe have imposed restrictions on travel. Consequently, international tourism has been put to a halt while domestic tourism is slashed as a result of lockdown imposed by the government. Earlier, the tourism sector contributed significantly to the Gross Domestic Product (GDP) of the nationemployment to a huge number of people in Australia (Tourism Research Australia, 2020a). However, the pandemic has negatively impacted the tourism sector and other sectors that are allied with it. The aim of this study is to examine the effect of coronavirus on the tourism industry of Australia. Moreover, how the accommodation, Travel, Food, and Beverage sector that are associated with the tourism and hospitality industry are impacted is elucidated. In addition to this, possible solutions to revive this sector is discussed with the help of the applied creativity and innovation model.

Background of Australian Hotel Industry and The Impact of Covid -19

According to the Tourism Research Australia (2020a) report, in the year 2018-19, the tourism industry in Australia contributed approximately $60.8 billion to the domestic GDP, in addition to this, it provided employment to 6666,000 individuals. In the year 2018-19, the tourism industry was the fourth - largest contributor to the exports of the nation, bringing $39.1 billion worth of exports (Tourism Research Australia, 2020a).

In 2018 - 2019, Australia welcomed 8.6 million international visitors, 113.3 million domestic overnight trips, 227.3 million domestic day trips, and 9.9 million worth of domestic outbound trips (Tourism Research Australia, 2020a). Approximately, 1.4 million visitors from China traveled to Australia, highest when compared to other countries' visitors (Tourism Research Australia, 2020a). In addition to this, the accommodation sector also witnessed a surge. The supply of room augmented to 296,452 while the occupancy declined by 1.4 points (Tourism Research Australia, 2020a). The tourism industry has positive spillover impacts as it promotes regional development along with it the provides foreign exchange as international tourist buys the domestic currency in exchange for their currency to travel in Australia.

Challenges Faced by The Accommodation, Travel, Food & Beverage Sector

The pandemic has impacted the tourism industry due to closure of the international borders, airplanes are grounded, businesses witnessing slump, hotels are closed, and a drastic decline in the demand of domestic travel. The Accommodation, Food and Beverage industry that are a part of the tourism and hospitality industry are plunging. Social distancing practices, a significant increase in concerns about health as well as safety and a fear of infection is making the recovery too slow in this sector (Tourism Research Australia, 2020b). As per the International Air Transport Association, the number of air passengers traveling is not expected to reach the same level till 2023 -2024 as they were in the year 2019 (Tourism Research Australia, 2020b).

The coronavirus pandemic resulted in the supply shock, the workers in the forms were producing lower units of output, however, due to contractions in economic activities and rising unemployment rate, the purchasing power of people has reduced significantly. Consequently, the pandemic has resulted in demand shock too; now the purchasing and consumption pattern of people is altering.

There has been a transformation in the consumption habits of people, the home-cook, convenient meal consumption has augmented. The food and service providers have to ensure the safety of the products even in their supply chains. They have to take into consideration how, what and when the food is supplied (KPMG, 2020). Moreover, the reduction in income of the household will lower the travel propensities and will reduce luxury traveling (Tourism Research Australia, 2020b). Furthermore, overnight trips in April declined by 86% when compared to April 2019. In may the flexibility in lockdown measures was seen which improved the sector slightly (Tourism Research Australia, 2020c).

The year 2020 changed the entire structure of the sector. The social, health and economic crisis caused by COVID-19 along with bushfires has adversely impacted the tourism sector of Australia. The accommodation and food service industry witnessed a decline in employment opportunities by 25.6% in the period mid-March and early April ( ustralian Bureau of Statistics, 2020a). Tourism filled jobs in Australia witnessed a decrease of 3% from March 2019 to March 2020.

Table: Movement in Tourism Filled jobs by the tourism industry, percentage change from Mar’19- Mar’20

Category

Mar'19- Mar’20

Accommodation 

-12.40%

Cafes, restaurants, and takeaway food services

-2.10%

Clubs, pubs, taverns, and bars

-2.20%

Rail transport 

-6.90%

Road transport and transport equipment rental

-2.60%

Air, water and other transport 

2.60%

Travel agency and information center services

-0.90%

Cultural services 

-4.80%

Casinos and other gambling services 

0.00%

Sports and recreational activities

-15.90%

Retail trade 

-0.80%

Education and training 

1.80%

All other industries

2.90%

Tourism Total

-3.00%

Source: Australian Bureau of Statistics (2020b)

Steps Taken by The Australian Government to Boost the Tourism Industry

The Australian government has been actively taking measures to recover the tourism sector, as a part of this, the government has established the Next national long-term tourism strategy that is named as Tourism 2030 (OECD, 2020a). The main focus is on making the industry resilient to fluctuations in the long run. Moreover, the short term measures pertain to ensuring the survival of businesses in this industry by providing them with the liquidity flow. The Australian government has announced a regional Tourism Bushfire Recovery grant program that provides grants amounting to $10 million as a part of the recovery package to stimulate tourism in the areas impacted by the bushfire (Australian Trade and Investment Commission, n.d.). The domestic Airline industry is supported as Worth AUD 715 million taxes and fees are allowed to defer (OECD, 2020a). The government is making possible easier availability of credit to the exporters who were profitable prior to the pandemic, by means of COVID-19 export Capacity facility; as a result, they can have access to credit from AUD 250,0000 to amount AUD 50 million (OECD, 2020a).

Fee waivers are provided to Commonwealth National parks; The government is waiving of AUD 11.2 million worth of entry fee to Uluru-kata Tjuta, Booderee, and Kakadu National parks till December 31, 2020 (OECD, 2020a). More number of people will be encouraged to travel to these places as there are no entry fees.

In order to ensure the overall development of the economy, the government has initiated a JobKeeper payment program, this program entails providing subsidy to the businesses that were highly impacted by COVID-19 to compensate the cost of wages to employees (OECD, 2020a). This will reduce the level of unemployment in the economy and increase household incomes.

Tourism is one such sector that was highly impacted by the crisis and a huge number of application to avail this facility from this sector has been witnessed. When the government provides a subsidy to business through the Jobkeeper program, then the employers retain their employees, the employees get a salary, this will augment the purchasing power, they will buy food and beverages then this expenditure by the employee will be income for the food and beverages organization, this will continue. Hence, initial spending has a chain reaction and impacts multiple industries, this is denoted by the multiplier effect. Multiplier effect indicates how an initial change in a variable causes a chain reaction and generates aggregate effects on the economy (Mankiw, 2016).

The National Tourism Incident Communication plan (NTICP) was established to monitor the impact of bushfire on tourism and later incorporated the impact of the COVID-19 crisis on the tourism sector. The committee works closely with the Department of Health (OECD, 2020a).

The government along with the tourism and allied industry are focusing on providing training to expand the skillset and knowledge base of the workforce in this industry to revive this industry.

As per Horwarth HTL Sentiment Survey (2020), the Jobkeeper payment subsidy saw a 91% participation by the participating properties, of which 89% properties that support accommodation in capital cities while 92% were the regional properties as well as 94% comprised of leisure market properties.

Solutions of Australian Hotel Industry and The Impact of Covid -19

The applied creativity and innovation process is associated with finding, establishing, and examining various challenges and then overcoming these challenges by providing unique solutions by practicing deliberate creative thinking (Werner & Tang, 2017). The crisis is a challenge for the economy and providing solutions to the problem that ensures increasing the pace of recovery of the tourism and allied sector. Since tourism is in itself comprises of many industries the collaboration of activities of different tourism authorities and provide a holistic approach to ensuring the promotion of the entire industry. Reduction of red- tapism and increased coordination between the private sector as well as the public sector will reduce the cost and increase the investment. 

The government needs to focus on rejuvenating the sentiments of consumers in the housing markets and other markets of the economy (OECD, 2020b) so that the recovery of the economy can increase at a rapid pace. As the investment in the economy will improve, the purchasing power of businesses and households will augment. This will have a multiplier effect on the economy as people will start to travel domestically and all the other associated sectors will see a boom. 

Another solution to this problem is providing a framework of revenue pooling structure for the hospitality industry (Constantin, Saxon, & Yu, 2020 The revenue pooling will help the small and medium enterprises to administer their variable cost and provide them with investment to move forward, instead of opening all the hotels in a particular, the subset of the hotel could operate, as a result, the occupancy of the hotel will increase and cost and revenue will be divided (Constantin, Saxon, & Yu, 2020). The government can act as a mediator between organizations and needs to be actively involved.

Conclusion on Australian Hotel Industry and The Impact of Covid -19

The coronavirus pandemic has distorted the economic activities across the globe. The crisis has hit the tourism industry adversely; not only international traveling but also domestic traveling is curtailed. The tourism industry in Australia positively contributes to the Australian GDP and provides employment to various individuals. Australia was experiencing growth in tourism and associated industries however due to coronavirus the tourism industry witnessed a downfall. The accommodation, travel, food, and beverage industry were significantly impacted, the demand fell in these sectors, as a consequence of these industries laid- off workers. The government has been taking measures to boost the economy and provide specific aid to sectors that are highly impacted by the crisis. In addition to this, the government can encourage coordination between the public and private partnerships in this segment. Another solution would be to pool revenues that will boost the Small and medium enterprises. More efforts like boosting confidence in the economy can fasten the pace of the recovery and promote holistic growth in all these sectors. 

Reference for Australian Hotel Industry and The Impact of Covid -19

Australian Bureau of Statistics. (2020a). Measuring the impacts of COVID-19, Mar-May 2020. Retrieved from https://www.abs.gov.au/ausstats/abs@.nsf/mf/1394.0

Australian Bureau of Statistics. (2020b). Tourism satellite accounts, quarterly tourism labor statistics, Australia, experimental estimates, March 2020. Retrieved from https://www.abs.gov.au/ausstats/abs@.nsf/mf/5249.0.55.005

Australian Trade and Investment Commission (n.d.).Regional tourism bushfire recovery grants. Retrieved from https://www.austrade.gov.au/Australian/Tourism/Tourism-and-business/Grants/regional-tourism-bushfire-recovery-grants

Constantin, M. Saxon, S. & Yu, J. (2020). Reimagining the $9 trillion tourism economy-what will it take? Retrieved from https://www.mckinsey.com/industries/travel-logistics-and-transport-infrastructure/our-insights/reimagining-the-9-trillion-tourism-economy-what-will-it-take#

Horwarth HTL Sentiment Survey (2020). Australian hotel industry and the impact of COVID -19 (second version). Retrieved from https://www.hospitalitynet.org/news/4098820.html

KPMG (2020). Post COVID-19: Australia’s food and agribusiness sector outlook. Retrieved from https://home.kpmg/au/en/home/insights/2020/06/post-covid-19-australia-food-agribusiness-sector-outlook.html

Mankiw, N. G. (2016). Principles of macroeconomics. United States: Cengage Learning.

OECD. (2020a). The tourism policy response to the coronavirus (COVID-19). Retrieved from https://read.oecd-ilibrary.org/view/?ref=124_124984-7uf8nm95se&title=Covid-19_Tourism_Policy_Responses

OECD. (2020b). Australia Economic Snapshot- June 2020. Retrieved from http://www.oecd.org/economy/australia-economic-snapshot/

Tourism Research Australia (2020b). Moving forward, the role of domestic travel in Australia’s tourism recovery. Retrieved from https://www.tra.gov.au/ArticleDocuments/185/Moving-Forward-2020.pdf.aspx

Tourism Research Australia (2020c). National Visitor Survey (NVS) monthly snapshot. Retrieved from https://www.tra.gov.au/domestic/domestic-tourism-results/monthly-nvs

Tourism Research Australia. (2020a). State of the industry 2018-19. Retrieved from https://www.tra.gov.au/Economic-analysis/state-of-the-industry

Werner, C. & Tang, M.L. (2017). Handbook of the management of creativity and innovation: theory and practice. Singapore: World Scientific Publishing Company

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