The coronavirus is slamming the US travel industry, with experts predicting it will wipe out more than $10 billion in spending from Chinese visitors

02/18/2020 | Business Insider USA | David Slotnick

Johannes Eisele/AFP via Getty Images

While the vast majority of coronavirus cases have been found in China and Asia, the US travel industry is also steeling itself to be ravaged by the rogue virus.

A new report from consulting firm Tourism Economics has put some estimated numbers to that ravaging, saying it expects the US to lose about 1.6 million visitors from mainland China as a result of the coronavirus, translating to a 28% drop for 2020. The report tallied expected losses from Chinese visitor spending at $10.3 billion more than half of which are expected occur this year.

Travel and spending from Chinese visitors in America is massive, with China being the third-largest source of overseas travel to the United States behind the UK and Japan , according to the US Travel Association , an industry-advocacy organization. Each Chinese visitor to the US spent an average of $6,500 in 2018, according to the latest data available, which a spokesperson for US Travel characterized as "among the highest of all international visitors."

In 2018, Chinese travelers spent a total of $34.6 billion to the US economy, including $17 billion in travel-specific spending. Visitors spent an average of 12 nights in the country, and the majority were in the US for vacation or visits to friends and family.

This trend appeared to continue in 2019, with data from the National Travel and Tourism Office showing 2.5 million Chinese visitors in the first the first 10 months of the year accounting for roughly 7% of all overseas visits.

Analysts looking at the possible industry impact of the coronavirus have referred back to the 2003 SARS outbreak and 2015 MERS episode . However, the scale and spread of the Wuhan coronavirus have both dwarfed SARS , suggesting that the impact could be longer lasting and more severe.

During the SARS outbreak, the US experienced a 30% decrease in visitors from China, and a 10% fall in travelers from the rest of Asia, according to the Tourism Economics report. It took three years for the market to fully recover.

Additionally, the impact is expected to be worse than during SARS because there are more Chinese travelers than in there were in 2003 according to the Tourism Economics report, visits from China to the US have grown 1,270% since 2002. Then, the Chinese market only represented 1% of all overseas visitors to the US and 3% of visitor spending, compared to 7% of visitors and 16% of spending in 2019.

"Given the massive increase in the Chinese travel market, the impact in absolute terms will be much larger than from the SARS crisis," the report said.

While visits impacted by the current coronavirus are expected to ramp back up in 2021, the report projects that it will take about four years to fully recover. An expected 4.6 million hotel room nights will be lost this year 8.1 million total through 2024 the report said, with states and cities around the country feeling the impact.

Notably, the projections do not include possible losses from other markets in Asia. If the virus continues to spread outside of China, the impact could be significantly worse.

The total impact could be enough to affect the nation's gross domestic product: The travel and tourism industries represented 2.8% of the GDP in 2017, according to the Department of Commerce . UBS economists warned that the virus' effect on the world economy is driving growth near negative levels for the first quarter of 2020.

US airlines have largely tried to contain the damage by preemptively suspending routes to China and reconfiguring capacity to Asia. However, this capacity decrease will still lead to decreased revenue, and the UN's International Civil Aviation Organization forecasted that the global airline industry's revenue could take a $5 billion hit in just the first quarter.

According to a report from Hopper , the travel booking app, demand for travel from the US to China dropped more than 58% compared to 2019 at its lowest point so far this year. The good news for US airlines is that overall travel demand among Americans continues to grow, although there's a shift toward interest in domestic travel over international destinations.

The economic pain of the coronavirus is expected to reverberate through the entire travel industry, as shown by the Tourism Economics report. The ban on foreign citizens who have been in China within the previous two weeks, combined with plummeting demand for business travel to and from the region, presents an impending disaster for industries that rely on airlines, hotels, museums, conference organizers, and other types of companies in the US that rely on travel from the region.

The coronavirus, which originated in Wuhan, China, and was first identified and reported in late 2019, has infected more than 73,000 people and killed at least 1,875 around the world. Cases have been found in at least 26 other countries.

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