Tourism's Engine

Restarting Tourism’s Engine

In these times, traveling for pleasure is not what it used to be. Interested in hiking the Inca Trail to Machu Picchu? Or visiting the historic neighborhoods of Buenos Aires? Or is your ideal vacation to relax on a beach in the Caribbean?

Until early 2020, making such plans come true was relatively straightforward. If you had some time and enough money, it was as easy as packing your luggage and, in the case of international visits, having a passport to travel to your chosen destination.

Then the COVID-19 pandemic entered our lives and dashed the wanderlust of millions of travelers around the world with new movement restrictions, forced confinements and a massive closure of bars, museums, hotels and restaurants. More than six months after the global pandemic was declared, even those who are able to travel have to follow strict biosecurity protocols, such as undergoing PCR tests before departing or wearing face masks throughout their flights. Upon arrival, they may face restrictions at their destination, such as being quarantined or finding themselves unable to return to their country of origin. For many tourists, the new complications associated with traveling are compounded by the fear of contagion and all the changes it has brought to our daily lives, a feeling that will be difficult to reverse even after a vaccine against COVID becomes available

The Present and the Future

While travelers bear with the frustration of seeing their horizons curtailed, one of the most important economic sectors of Latin America and the Caribbean faces  its deepest-ever crises. To put it in context, last year tourism contributed 8% of Latin American GDP and represented nearly 14% of GDP in the Caribbean, making the subregion the most dependent one on tourism in the world.

“We have gone from talking about overcrowding problems in some destinations to a scenario of practically zero demand in recent months,” says Adela Moreda, a leading specialist in the tourism sector at the Inter-American Development Bank (IDB). During the first semester of 2020, the Caribbean experienced a 58% drop in international tourist arrivals compared with the same period the previous year. “The estimates are devastating. The contraction of tourism could lead to the potential loss of more than $110 billion of GDP in the entire region.”

Impact of COVID on tourism


Moreda and her team, with support from the University of Las Palmas de Gran Canaria, have developed a predictive model of international tourism demand to help the governments of the region prioritize investments in the sector, based on real demand from source countries. The innovative model compares the demand that would have occurred in 2020 and 2021 if the pandemic had not existed with current results in the present context, considering, among other variables, the evolution of the pandemic, the reduction in income and a travel sentiment index that gauges tourist confidence to travel.

"Now, more than ever, decision makers must show critical thinking skills to relaunch a strengthened tourism sector," says Moreda. "With this type of instrument and a collective effort, we are optimistic about the resilience of the sector."

At the forefront of that collective effort is Mahmood Patel, owner of the Ocean Spray hotel in Barbados, as well as hundreds of thousands of tourism entrepreneurs in the region who have seen their businesses jeopardized. Patel also represents a wave of tourism entrepreneurs who are thinking about how to emerge stronger from this crisis.

“Before tourism, in Barbados we depended on sugar cane: we grew it, we exported it and then we imported everything else,” explains Mahmood. “And then we evolved from that to tourism, but unfortunately our product also became a type of crop, basically 'sun, sea and sand,' and we did not have the imagination to build other types of tourism or create links between tourism and agriculture, or tourism and culture, history, etc.”

A Recovery Based on Public-Private Collaboration

Right now, the priority for business people like Mahmood — owners mostly of micro, small and medium-sized enterprises in the hospitality industry, medium and long-distance transport, and travel agencies — is to generate a minimum cash flow to guarantee the survival of their businesses. As many of them do not have large savings and have not been able to diversify their sources of income, access to new lines of credit or government aid has become an essential lifeline.

In Argentina, for example, where tourism represents 9.2% of GDP, it is estimated that 8% of tour operators are thinking of closing and 75% of them are not in a position to pay salaries and fixed expenses in the short-term.

Faced with this situation, the Argentine Ministry of Tourism and Sports, with support from the IDB, has created the Tourist Assistance and Training Fund (FACT, for its acronym in Spanish), which hopes to benefit more than 2,500 businesses with economic incentives to pay salaries and provide training to approximately 37,000 workers for six months. The beneficiary companies must also commit to making quality improvements in their services that respect the new biosecurity and social distancing regulations, in collaboration with local tourist entities.

“In addition to the aid from this fund, the ministry is promoting a pre-sale program to generate demand so that, as soon as tourism can resume, demand is assured. We are also offering help to tourism providers and a program to improve tourism infrastructure called Plan 50 Destinations,” said Gabriela Cheli, coordinator of the FACT Fund at the Ministry of Tourism and Sport.

For its part, IDB Invest, the arm for the private sector of the IDB Group, is working with the governments of the region and local banks in the creation of tourism credit facilities to support the reactivation of the sector in the Caribbean and Central America, the most affected regions. “Recovering from this crisis requires the support of governments, as the private sector cannot do it alone,” said Rogerio Basso, IDB Invest's head of tourism. "We are injecting liquidity into the hotel sector and strengthening the solvency of their businesses so that they can recover expeditiously."

Time to Innovate

Tourism entrepreneurs that have managed to stay afloat are already thinking about how they will adapt their business models to thrive in the new normal. Many are adjusting their operations and marketing to reflect their commitment to biosecurity protocols and cleanliness standards. Some hoteliers are even evaluating the need to adapt the physical design of their facilities to respect social distancing in common areas such as swimming pools, bars and restaurants.

Most encouragingly, visionaries such Mahmood are seeing this epidemic as an opportunity to literally reinvent tourism. Six years ago he created Coco Hills Forest, the only project in Barbados combining agroforestry and ecotourism. Across 53 acres of forest, the project cultivates more than 50 varieties of fruit trees and 80 different types of plants that delight the eye and the palate. This type of proposition responds to new trends and preferences among travelers.

“COVID-19 has given us the opportunity to use this agritourism project as a platform to strengthen other sectors. For example, we can help feed the local community and create a more resilient and sustainable model of existence,” says Mahmood. “We really don't need glass, concrete and steel tourism; I think that's a thing of the past. So I'm optimistic that this pandemic, as bad as it is, could also create a paradigm shift in the way we look to the future."

The IDB, through its innovation laboratory IDB Lab and in collaboration with the World Tourism Organization, recently launched the Beyond Tourism innovation challenge to identify business models such as Mahmood's that can revitalize and transform the sector. The challenge has received more than 200 proposals in two categories: the development of digital skills of the tourism workforce and environmental sustainability.

“The idea of the challenge was to re-imagine tourism,” says Dora Moscoso, coordinator of the IDB Lab challenge. “We have seen many proposals to accelerate the digital transformation of the sector, such as innovations to use virtual reality in the tourism marketing. Another example is tourism that helps preserve biodiversity, such as when tourists participate in conservation efforts. They take photos of flora and fauna that are uploaded to the cloud and, through artificial intelligence, we can see how these species evolve over time, especially those that are in at risk of extinction.”

While the pandemic has emptied our beaches and temporarily closed our museums, it is not the first time that tourism has suffered unexpected setbacks in our region. Our dreams of traveling will remain alive as the sector adapts to the new normal and encourages new approaches and public-private collaboration. The hope is that, very soon, we will be able to travel to the Jesuit Missions of Paraguay, the lush rainforests of Brazil, or the fine sandy beaches of the Bahamas.

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