Double click here to edit new Home Header component
Investment Bank
How can we help?
Parsys 1
Man wearing personal protective equipment handles a packaged loaf of bread next to a nearly empty shelf in a grocery store
Parsys 2

Jetting off to an exotic locale used to require little more than a credit card, a passport and a few minutes on the internet. COVID-19 put an end to that.

The pandemic may have permanently impaired the ability of people to move across international borders without friction, whether for work or leisure, according to our Research analysts in the recently published 2021 Equity Gilt Study.

As the world starts to adjust to new constraints, the travel sector – an industry that accounts for about 10% of the global economy – may never be the same again. Our analysts highlight three main areas of change.

Flying becomes more expensive and bureaucratic

Before the pandemic, air travel volumes had been rising faster than global GDP. Scheduled passenger trips jumped from 1bn in 1990 to over 4.5bn in 2019, according to the International Civil Aviation Organization (ICAO), then collapsed to fewer than 2bn as borders slammed shut.

Hopes for a swift resumption of the pre-pandemic trend have been repeatedly dashed. Travellers may be facing a period of persistent disruption as governments maintain restrictions to limit the spread of the virus. Vaccines will likely be the visas of the future, but questions over which doses a traveller has received, and how long ago, may still ensnare them in a web of border controls.

Such vaccine requirements are not new: vaccination against yellow fever has long been a requirement for travellers to and from affected areas. But it will likely prove challenging to achieve global consensus over which COVID vaccines meet the criteria for travel. The EU’s Green Digital Certificate, for example, is set to recognise mainly EU-approved vaccines – which do not include Chinese vaccines.

Low-cost airlines are likely to suffer. Before the pandemic, such carriers had been instrumental in making air travel more affordable, spontaneous and accessible, as they unlocked tourism growth beyond the major hubs. Now, the costs associated with vaccinations and testing may limit spur-of-the-moment trips, and could end up pushing the affordability of air travel back out of reach for the mass market.

Business travel could be permanently reduced

Spending related to business trips accounted for 21% of the global travel and tourism industry’s revenues in 2019 (according to OECD data), with a contribution higher than 30% in countries such as Canada, the UK, Japan and the US. But last year global spending on business travel more than halved, according to the Global Business Travel Association. That was a much heavier hit than the 10.9% contraction in 2001 or the 7.5% drop in 2009.

Our analysts expect this $1.3trillion market to be among the last to recover, especially for long-haul journeys. Companies were quick to curb international travel as the pandemic took hold and they will likely be cautious when it comes to restarts, taking account of higher costs and the risks of entering uncertain environments.

For their part, business travellers will likely reassess how much flying they really need to do, considering the time and energy involved, and the ease of conducting virtual meetings from the comfort of their homes and offices. These are behavioural changes that may be difficult to reverse.

Tremors from restricted business travel are likely to be felt far and wide. Key sectors, such as financial services, business consulting and higher education, rely on the ability of staff to move freely across borders. The loss of air travel, hotel lodging and any ancillary tourism activity such as retail services creates the risk of economic scarring, especially in countries that act as international hubs or have large service sectors with international reach.

The aviation industry will be squeezed too. Corporate travellers make up just 12% of airline passengers, but are twice as lucrative as non-business passengers, and account for nearly 75% of airline profits in some cases.

COVID-19 has caused the deepest and most drawn-out shock to aviation

Source: CEIC, Haver Analytics, Barclays Research

Domestic tourism may pick up, but international flows may never be fully restored

The ICAO estimates that domestic travel this year will be down 25-33% on 2019 levels – a smaller drop than the 63-75% decrease for international travel. That implies a boost for in-country tourism, especially in developed markets. Indeed, in the US, weekly average spending by travellers had come close to pre-COVID levels by January 2021, even as international arrivals sat at 20% of previous levels.

Share of domestic travel and tourism spending increased during pandemic

Source: CEIC, Haver Analytics, Barclays Research

However, as the travel and tourism sector shrinks, countries that typically welcome more foreign travellers are likely to be distressed. In Thailand, for example, where hospitality accounted for 6.1% of GDP in 2019, the overall output of hotels and catering services slumped by 38% in 2020, according to Haver Analytics.

Retailers, too, may struggle to adapt to the loss of tourist traffic. Over the past decade, spending related to international travel almost doubled, against a 40% rise in global GDP. Perhaps the most visible feature of the boom: the Chinese luxury shopper. On average, Chinese tourists spent nearly half of their pre-COVID travel budgets on retail, according to Oliver Wyman.

The grounding of these and other travellers has thus caused severe economic damage for magnets such as Bali, Phuket, Dubai, Singapore and Antalya. Retailers could try to compensate by expanding overseas. But it is unclear whether people will be willing to buy as much at home as they would on the road, especially given the lack of incentives such as duty-free shopping.

All told, the changes look set to hit poorer countries the hardest. The IMF warned in April of “persistent losses” for tourism-dependent emerging markets. For many, it won’t be easy to fill the big gaps left by globe-trotters.

Read the full report

Authorised clients of Barclays Investment Bank can log in to Barclays Live to read the full reports.

Important content disclosuresImportant content disclosures
Parsys 3
Parsys 4

About the experts

Rahul Bajoria is a Director and Chief Economist for India and the Antipodeans, based in Mumbai. Rahul joined Barclays as part of the graduate class of 2009 in Singapore, covering economies across the Asia-Pacific region. Prior to joining Barclays, he completed his Master’s Degree in Economics at the National University of Singapore, where his primary focus was on time series econometrics and financial volatility models. Rahul has also worked at INSEAD (Singapore) and NUS Business School, looking at issues around productivity and growth, and last year, he published “The Story of the Reserve Bank of India,” an in-depth history of India’s central bank.

Brian Tan is a regional economist based in Singapore, covering emerging Asia economies. Prior to joining Barclays in 2018, he spent four years as a Southeast Asia economist at Nomura and four years at Citibank, where he focused on the economies of Malaysia and Singapore. Brian holds a Bachelor of Social Sciences (Hons) degree from the National University of Singapore, where he read economics.

Angela Hsieh is a regional economist based in Singapore, covering emerging Asian economies. Angela joined Barclays in November 2014. Prior to that, she worked as a research analyst in the Fixed Income and Economics Research team at Credit Suisse based in London. In her previous role, Angela conducted macro thematic research on demographics and pensions. Angela holds a bachelor degree in Economics and a master degree in Finance from the London School of Economics.

Shreya Sodhani is a research analyst based in Singapore, covering India, the Asean countries, Australia and New Zealand. She joined Barclays in 2018 and holds a Master’s in Business Management from the Indian Institute of Management, Ahmedabad. Shreya also holds an honors degree in Economics from St. Xavier's College, Kolkata.

Parsys 5

Related content

3 Point Perspective


The post-COVID economy 

Parsys 6
Parsys 7
Parsys 8
Parsys 9
Parsys 10
Parsys 11
Parsys 12
Parsys 13
Parsys 14
Parsys 15
Parsys 16
Parsys 17
Parsys 18
Parsys 19
Parsys 20
iParsys for Double Pixel component