Travel plans have been dialed back across China after the country banned outbound tour groups since Monday in a bid to circumscribe the spread of the novel coronavirus.  

China has confirmed 4,515 cases of patients infected with the new coronavirus as of January 28, with the death toll resulting from the contagious virus standing at 106.

Global tourism

The Wall Street Journal reported last week that worldwide travel destinations hinge increasingly on Chinese tourism, particularly during the Lunar New Year. But this year has been an entirely different case.

Regions reliant on tourism, especially Chinese tourists, like Hong Kong, Thailand, Vietnam, Singapore and the Philippines seem most at risk of spillover effects from the virus, said Louis Kuijs, Head of Asia Economics at Oxford Economics, in an email to Reuters.

Japanese Economic Revitalization Minister Yasutoshi Nishimura warned Tuesday that corporate profits and factory production could be dented by the coronavirus outbreak in China that has rattled global markets and chilled confidence.

An industry survey shows the Chinese tourists constitute 30 percent of all tourists visiting Japan in 2019 and spent nearly 40 percent of the total sum foreign tourists used.

Japan Times noted on January 22 that Japan is the most popular tourist destination for Chinese visitors. 

Thailand's Tourism & Leisure equity index nosedived some six percent last week. The country's Tourism Minister Phiphat Ratchakitprakarn proclaimed in a Sunday briefing that the fallouts of China's restrictions on outbound groups rest with the duration. The loss of revenue could settle at 50 billion baht (1.6 billion U.S. dollars) if it lasts for three months. 

Chinese tourists, more often than not go abroad in group tours, spent about 18 billion U.S. dollars in Thailand last year, occupying more than a quarter of all foreign tourists' spending, reported Thai government data.

Singapore also said on Monday that the coronavirus outbreak will impair its economy this year.

Time heals

The capital market is now voting with its feet to respond to the novel pneumonia. From January 20 through 21, the prices of catering and tourism stocks plummeted for two consecutive days in the A-share market to end up with a steep decline of more than six percent, riding into one of the sectors with most lackluster performance. 

On past form, the flu-like epidemic falling under emergencies will take a toll on market sentiment in the short term, but the investment logic in the capital market will not be rewritten in the long run.

Tourism is an environmentally sensitive industry susceptible to shocks and impacts from emergencies at home and abroad, which can lead to severe recessions by forming an alleged tourism crisis. Compared with other crises, infectious diseases falling into natural and man-made disasters have the most severe impact on the tourism industry at large.

A concrete example might be the SARS epidemic in 2003, whereby the growth rate of domestic tourist flows fell by 13 percentage points year-on-year to settle at negative 0.9 percent, and the growth rate of travel agency's revenue went down by 28 percent. In terms of outbound travel, the average loss of passenger flow between China and the United States reached 20.2 percent, with the decrease in China's passenger flow to the United States being as high as 38.9 percent, said Guotai Junan Securities in its latest report. 

James Liang Jianzhang, co-founder and executive chairman of China's largest online travel agency Ctrip, said in an interview with People's Daily that the impact of the novel coronavirus outbreak should not be underestimated, but the tourism industry will notch up a strong recovery after the crisis.

The proportion of China's service industry in GDP has skyrocketed by more than 20 percentage points from 2003, and tourism has grown nearly tenfold, said him.

Liang also mentioned: "In the first month following the disappearance of SARS, the tourism industry ushered in 'retaliatory growth.' By July and August of that year, Ctrip's business volume had rebounded significantly, even exceeding the pre-SARS level in December. That same year, Ctrip rang the opening bell in Nasdaq."