How War and Recession Could Affect Tourism

Despite all the pandemics and the ups and downs of economic situations, tourism always comes out of the storm. Tourism is also about selling illusions that become realities.

Experts predict a robust economic recession at the world level due to the Russian situation with Ukraine, the latent situation in the East, and the rise in prices of essential food products.

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Effects of the Russian War in Ukraine

The side effects of Russia’s invasion of Ukraine are increasing the pace of the slowdown in global economic growth, which is now projected to slow to 2.9 percent by 2022.

The war is driving commodity prices higher, adding to supply disruptions; increasing food insecurity and poverty; exacerbating inflation; contributing to tighter financial conditions; increasing economic vulnerability; and intensifying policy uncertainty.

The outlook is subject to several downside risks, including intensifying geopolitical tensions, increasing adverse drivers of stagflation, growing financial instability, continued supply pressures, and worsening food insecurity. These risks underscore the importance of implementing a robust macroeconomic and structural policy response at the global and national levels.

Russia’s military offensive in Ukraine represents a downside risk for international tourism. It has exacerbated already high oil prices and transportation costs, increased uncertainty, and caused a disruption of travel in Eastern Europe.

The expectation for 2023 is that the global tourism recovery slows as demand softens due to an economic downturn and the ongoing energy crisis in Europe. Recovery to pre-pandemic levels is delayed until 2025 in terms of sectoral revenues.

Good News on the Board

Economist Intelligence Unit (EIU) recently -last week- released its Tourism in 2023 report. This report assesses the growth prospects, top risks, and critical trends facing the sector next year. The report finds that global tourism arrivals will increase by 30 percent in 2023, following growth of 60 percent in 2022, but will remain below pre-pandemic levels. The economic downturn, sanctions on Russia, and China’s zero-covid strategy will delay recovery.

Ana Nicholls, director of Industry Analysis at the EIU, says:

“The tourism industry saw a strong recovery during 2022, and we expect that to continue in 2023, particularly if China starts lifting its zero-covid policy as expected. But the industry certainly won’t be immune to the economic slowdown. Costs have risen sharply for fuel, electricity, food, and staffing, and companies will have to pass those costs onto consumers who are already hurting from the higher cost of living. As a result, EIU has pushed back its forecast for a full recovery in international arrivals. We now don’t expect them to get back to 2019 levels until 2024, although the Middle East is one region that will be ahead of the curve.”

Key trends to watch in 2023 include:

—International tourism arrivals will rise by 30 percent in 2023, following 60 percent growth in 2022, but they will still need to return to pre-pandemic levels.

—The economic downturn sanctions on Russia and China’s zero-covid strategy will be among the factors weighing on the industry.

—Hotels, restaurants, and airports will struggle to cope with labor shortages, wage demands, and high food and energy prices.

—International airlines are expected to return to profitability, benefiting from continued pent-up demand.

—The impact of climate change on the industry will become more apparent, with high temperatures, water shortages, and floods forcing tourism destinations to take action.

And in Mexico

“The most important thing is to recover certain states and cities that today are not fully recovered, such as the business cities of Monterrey, Guadalajara, and the Mexican capital,” which they are pushing with some initiatives. “Today for today, we are happy because we are already hovering around the 2019 figures,” highlights the National Tourism Business Council.

On the other hand, he pointed out that security is an issue that, although it is not a debt only of this government, it is a debt that the authorities have with this industry and citizens. “Mexico has a complicated perception of security, focused in certain parts, which has extended to the whole territory,” he said and pointed out that this issue has to be solved by the government.

Although the CNET participates in the tourist security roundtables and other roundtables on the same subject at a national level, it is an issue that has no answer and is getting worse every day.

The different problems we have in the economy with inflation, when talking about the lags of the pandemic and the war conflict between Russia and Ukraine that has been going on for more than 400 days. “Inflation in all senses is skyrocketing, and economists are talking about a recession,” he stressed while assuring that these are red lights for tourism.

“This country requires mobility to boost tourism, and mobility requires competitiveness, and competitiveness requires airports and airlines.”

The also CEO of Grupo Presidente pointed out that Mexico is far from being a sustainable destination. However, it is in the first position in Natural and Cultural Resources. He pointed out that its potential is enormous. However, it would be necessary to work on specific issues to be more sustainable.

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