How could Swine Flu affect Australia’s travel and tourism industry – a view about the unquantifiable ”X” factors we are all facing

When SARS was in its infancy in 2003, Tim Harcourt Chief Economist at the Australian Trade Commission said, “Every year economic forecasters have to contend with an “X Factor”, and I am sure that it is fair to say that this year we are already not only dealing with two “X Factors” and let’s call the first the global economic crisis and the second, the “X+1 Factor” the dramatic increases in the cost of fuel.

Now though we are dealing with another potentially cataclysmic factor, let’s call it the “X+2 Factor” – the outbreak of Swine Flu in Mexico and its rampaging and potentially devastating progress throughout the world.

As Tim Harcourt also said in 2003, “How many more can there be?” “Sure, we can all do our trend forecasts, factor on tax changes and other once-off policy related factors, seasonally adjust here and there, nip and tuck and so on.”

“And just when we economists think we have a handle on everything – whoosh! – in comes “Factor X” and wipes out all our neat little certainties and sensible predictions.”

“Some times it’s a financial effect – like the crash in 2001 or the share market in 1987, on other occasions it’s a major unprecedented shock – like September 11.”

So, here we are in 2009 and in this case X Factor and X+1 Factor having already turned the economic world and in our case the world of travel and tourism upside down, with X+2 Factor [and perhaps even a X +3 Factor and more] going to have potentially cataclysmic effects.

One begins to wonder if we are experiencing the 21st Century equivalent of the Plagues of Egypt, which as they appeared in the Bible, were rivers and other water sources turning to blood killing all fish and other water life; frogs; lice or gnats, wild animals, livestock disease, unhealable boils, hail mixed with fire; locusts; darkness; and death of the first-born of all Egyptian families….hey, anything could happen!

Unlike the Iraqi conflict, which had a significant build up allowing economists to factor in key effects, SARS came straight out of the blue, as did the world economic collapse [although some would argue that it was predictable], but here we are now reeling from the effects of swine flue, when we have only just recovered from being bombarded with avian flu, which never really appeared to have materialised globally as swine flu appears to have done.

At the time of SARS, Tim Harcourt said that in many ways the fear of SARS was bigger than the virus itself, with Governments scared that people’s reactions to SARS would cause more damage to the economy than the virus could itself – no matter what progress is made on the medical side of the issue and it has to be said he was correct.

An ABC report yesterday says that the Swine Flu outbreak is already starting to have an impact on international travel and on trade, with some economists forecasting a hit to stock markets of up to 7% as a result of the World Health Organisation’s decision to upgrade the threat alert to level four, with the tourism industry in the front line when international travel gets restricted.

The ABC also says that Australian tourism took a battering during the SARS crisis six years ago, but that the industry is confident that measures put in by the Federal Government since the bird flu scare will help stave off another drop, with the overall economic downturn of greater concern to tourism operators.

Matthew Hingerty, CEO of the Australian Tourism Export Council at their conference in Darwin said yesterday that he’s closely monitoring the Swine Flu developments, with measures put in place after the SARS crisis in 2003, including a plan to keep tourism operators informed about any developments associated with health scares. He also said that the industry was holding a phone hook-up with the Federal Government later that day, with Mr Hingerty remaining confident the industry is prepared.

He added that if Swine Flu continues to grow there will be an impact, but the jury is out as to how much of that will be negative and how much of it could potentially be positive. He also said that Australians are great travellers in particular and if they decide not to travel offshore to a particular market they’ll switch, but the lesson is that the travel doesn’t disappear globally, with once the disaster or the issue is over, travel coming back.

Getting back to SARS as the closest comparison to Swine Flu, SARS became publicly recognised at the end of February 2003 and by mid June 2003, the SARS virus had infected around 8,500 people worldwide and caused around 800 deaths, with by mid-June 2003, close to 63% of cases occurring in China, with 85% in China and Hong Kong combined.

The Federal Government says that SARS heavily reduced domestic and international travel and tourism in East Asia, with tourist arrivals, airline travel and hotel occupancy rates plummeting, with several economies in Asia Pacific already weak following the Bali bombing on 12 October 2002 and the events of September 11. Australian tourism saw a substantial decline in inbound and outbound tourism and travel as a result of SARS, although the war in Iraq also compounded that decline.

IATA has said that Swine Flu could have a significant impact on air traffic, with IATA Director General Giovanni Bisignani saying, “It’s still too early to judge what impact Swine Flu will have on the bottom line, but it’s sure that anything that shakes the confidence of passengers has a negative impact on the business.” “And the timing could not be worse, given all of the other economic problems airlines are facing.”

Far Northern Queensland economist Bill Cummings said there could yet be benefits to the battling tourism industry, with the outbreak of the potentially deadly Swine Flu in the Americas, potentially redirecting more travellers to the Far North for their next holiday, with about 100 deaths reported in Mexico and the USA and cases reported in Auckland, New Zealand, leading to fears travellers may cancel their holidays.

In July 2004, Queensland Tourism Industry Council CEO, Daniel Gschwind a keynote speaker at that year’s Tourism Futures Conference said that it was only a matter of time until another SARS-type event threatened the world and the tourism industry needed to be better prepared to respond next time around, with the global tourism industry caught completely unprepared by SARS and needing to heed the lessons taught by the event.

He said, “SARS cost the Australian tourism industry alone over $1 billion even though there wasn’t a single case detected here,” adding, “The mass global hysteria caused by SARS had a devastating effect and served to teach us a valuable, an expensive lesson on how international tourism and health agencies needed to cooperate better during times of crisis.”

“Each year thousands more people are affected by diseases such as malaria, influenza and dengue fever, but these thankfully don’t even make a blip on our radar as far as deterring travellers.

Mr Gschwind said it was the fear of the unknown and the range of conflicting information that had made the SARS effects so far-reaching and by the time accurate and consistent information was distributed on the cause and spread of SARS, thousands of travellers – especially in Australia ‘s high-yield Asian markets such as Japan – were staying away in droves.”

“In this day and age health and safety issues are highly prominent in peoples’ minds when they think about travelling,” Mr Gschwind said.

“There is a very fine balance between care-free leisure time and risky pursuits which are also part of the travelling experience.” “It is important that we provide appropriate information about taking sensible, precautionary measures while travelling, without resorting to scaremongering.”

Mr Gschwind said, “One positive outcome from the SARS experience had been that the nations involved had been compelled to work together, with international tourism and health agencies now working more closely together and communication channels were more open than ever before”, adding, “SARS exposed our vulnerabilities and we need to educate ourselves on what types of risks are out there that may affect our business in the future,” an

“Australia is no longer an isolated island and it is only a matter of time until the next SARS-like event happens and we need to be ready.”

Mr Gschwind’s predictions have sadly come to fruition with Swine Flu already potentially in Australia.

An AFP report today describes Swine Flu as having created a “perfect storm” for an Australian tourism industry already reeling from the global recession and facing its worst downturn in 20 years, with analysts fearing the swine flu will be more devastating to tourism than the SARS crisis, when many international visitors shunned Australia because of the long flights needed to reach Down Under, with tens of thousands of jobs could be at risk in the tourism sector, which generates 24 billion dollars (17.3 billion US) a year from international visitors, making it Australia’s third-largest export earner.

Tourism and Transport Forum executive director Olivia Wirth said, “It is indeed a perfect storm,” adding, “It’s too early to tell the full impact of swine flu but if it’s anything like the SARS virus there are very, very tough times ahead.

She added, “Australia’s vulnerable because we’re a long-haul destination and anything that acts as a barrier to people getting on a plane and coming here is going to hurt us.”
Deutsche Bank analyst Cameron McDonald told the Melbourne Age that psychological factors played a major role in how such crises hit travel and tourism, saying, “We’ve had the experience of SARS, and we saw that it’s not necessarily just people falling sick, because fear takes over too,”

Tourism Australia’s official forecasts released in December predicted 2009 would see the industry’s worst downturn in 20 years, with international visitor numbers down nearly 4% ], but now with swine flu, it is not know if they well be further revising those estimates downwards, with forecaster Bernard Salt saying, “There is no doubt that tourism operators who are heavily reliant on international tourism are in for a tough time in 2009, particularly in the first half of the year.”

On a lighter note, Australian Tourism Export Council Managing Director said it was not all doom and gloom, saying, “I’ve yet to have one member report a cancellation due to swine flu,” adding, “We’ve become very adept at responding to these crises in recent years, we’re battle-hardened and better prepared for something like this than we ever have been.”

We can all only hope that he is right!

At the moment, the number of Australians being tested for swine flu has been revised down, with a spokeswoman for Federal Health Minister Nicola Roxon saying this morning that ninety one people displaying flu symptoms were being checked for the potentially deadly virus, but so far there have been no confirmed cases of the virus in Australia. Eleven New Zealanders are being treated for the disease, with three of those cases confirmed yesterday as swine flu.

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