INTERNATIONAL. The travel retail industry is reeling. The SARS virus, which is now being referred to as the “first global epidemic of the 21st century” continues to spread around the world, devastating the travel business in its wake.
Yesterday the World Health Organization (WHO) reported 158 new cases and 12 new deaths. As of April 24, a cumulative total of 4439 cases with 263 deaths had been reported from 26 countries. Yesterday’s deaths occurred in Canada (2), China (4), Hong Kong SAR (4), and Singapore (2). Bulgaria reported its first case yesterday.
Words like “paranoia”, “hysteria”, “panic” and “outrage” are dotted across newspaper headlines the world over. “The SARS time bomb” screamed a giant headline in yesterday’s Daily Mail in the UK, typifying the media hype that is simultaneously highlighting and feeding the consumer panic.
The travel and tourism business is at the commercial epicentre of the SARS crisis. Unlike other industries, business that is lost cannot be regained. Unlike, say, a deferred furniture or computer purchase, an airline seat cancelled is lost forever. So is the resultant duty free spend that traveller may have made.
The Moodie Report has spoken to many retailers, airports and suppliers in recent days. All are shocked by the speed of the commercial decline. Most are deeply worried about where it will lead. No-one knows when it will end.
“The recovery will be much, much slower than the slump,” one leading beauty house told The Moodie Report.
Travel and tourism accounts for around 11% of world output and is currently down by over 30% in much of East Asia. In Hong Kong, some luxury hotels are running at 10% occupancy or less. As reported previously, duty free sales in Hong Kong airport are off by 80% in some cases. Japanese retailers say business is down 30-35% and falling further. Singapore Changi is in freefall with reports of sales being halved.
Duty free suppliers, too, are being affected on all levels. Executives based in the worst-affected countries are having meetings cancelled by retailers based in other locations. Many retailers – DFS Group and Nuance-Watson HK, in particular – have asked for extended credit terms, possibly for a protracted period. Orders are being reduced and cancelled. Perishable confectionery is stuck on the shelves or in warehouses.
China, the great hope of the travel and travel retail businesses for the first quarter of the 21st century, is rapidly becoming a no go zone. East Asia was the fastest-growing part of the world economically and is slowing to a halt. Canada, which has seen a devastating outbreak of SARS, fortunately confined largely to Toronto, was hitherto the fastest-growing member of the G7 countries. All these economies and all the related travel and tourism businesses are hurting badly.
Cathay Pacific Airways has been forced to cancel 45% of its normal weekly schedule as passenger numbers fall to a catastrophic one-third of normal levels. Analysts forecast the carrier would suffer one of the biggest losses in its history this year as a result of the impact of SARS on passenger numbers.
It all adds up to a crisis of the worst order, the biggest the duty free and travel retail industry has faced in its 56-year history.
For a daily update on the SARS crisis, including latest WHO statistics and the impact on travel and travel retail, see the feature on our home page.
